Demand Shocks, Procurement Policies, and the Nature of Medical Innovation: Evidence from Wartime Prosthetic Device Patents / Jeffrey Clemens, Parker Rogers.

Format:

Book

Author/Creator:

Clemens, Jeffrey.

Contributor:

National Bureau of Economic Research.

Rogers, Parker.

Series:

Working Paper Series (National Bureau of Economic Research) no. w26679.

NBER working paper series no. w26679

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Demand Shocks, Procurement Policies, and the Nature of Medical Innovation

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

We analyze wartime prosthetic device patents to investigate how procurement policy affects the cost, quality, and quantity of medical innovation. Analyzing whether inventions emphasize cost and/or quality requires generating new data. We do this by first hand-coding the economic traits emphasized in 1,200 patent documents. We then train a machine learning algorithm and apply the trained models to a century's worth of medical and mechanical patents that form our analysis sample. In our analysis of these new data, we find that the relatively stingy, fixed-price contracts of the Civil War era led inventors to focus broadly on reducing costs, while the less cost-conscious procurement contracts of World War I did not. We provide a conceptual framework that highlights the economic forces that drive this key finding. We also find that inventors emphasized dimensions of product quality (e.g., a prosthetic's appearance or comfort) that aligned with differences in buyers' preferences across wars. Finally, we find that the Civil War and World War I procurement shocks led to substantial increases in the quantity of prosthetic device patenting relative to patenting in other medical and mechanical technology classes. We conclude that procurement environments can significantly shape the scientific problems with which inventors engage, including the choice to innovate on quality or cost.

Notes:

Print version record

January 2020.