Emerging Tech

Communicating Technical Knowledge

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Executive Summary

In patent theory, the cost of communicating technical knowledge is small. In human capital theory, it is large. But evidence suggests that these costs are actually endogenous. Firms invest in reducing communication costs, but only when technology is sufficiently advanced. This can make competition different for early stage technologies: patents do not increase innovation incentives, employee mobility matters and inventors might choose to freely exchange knowledge. Behavior and optimal policy differ then. Endogenous communication costs help explain changes in patent propensity, in the geographic localization of innovation and why successful developing countries have difficulty moving to the innovation frontier.

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