26 Sep 2016Working Paper Summaries

Technological Leadership (de)Concentration: Causes in ICTE

by Yasin Ozcan and Shane Greenstein

The market structure for the Information and Communications Technology equipment industry has undergone enormous changes in the last four decades. This paper characterizes long-term trends by analyzing the concentration in patents from 1976 to 2010 and comparing measured changes against popular assumptions about the size and scale of changes in innovation.

Author Abstract

Using patents as indicators of inventive activity, this article characterizes the concentration of origins of invention from 1976 to 2010 and how these have changed over time. The analysis finds pervasive deconcentration in virtually every area related to ICT, but it can explain only a small part of this trend. Deconcentration happens despite the role of lateral entry by existing firms. New firm entry drives part of the deconcentration, but this alone cannot explain the change. A single supply factor in the market for ideas, such as the breakup of AT&T, cannot explain the trend, either. Finally, 11% of patents change hands through mergers and acquisitions activity, but this does not make up for the declines in concentration in the origins of invention.