The authors test whether a measure of patent activity in the United States is a reliable proxy for innovative activity. They introduce a production function for patented inventions based on knowledge, firm size, and the ease of appropriability. The results are then compared with those from their 1988 paper using a direct measure of innovative activity. Patents are found to vary with company R&D, total R&D, and skilled labor in the same manner as does innovative activity. In general, the results support the validity of patent counts as a measure of innovative activity.
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Ács et al. (1989) studied this question.
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