1. Introduction
While R&D activity takes place in many countries,
the development and commercialization of
“new-to-the-world” technologies has been concentrated
historically in relatively few countries. For
∗ Corresponding author.
E-mail address: furman@sloan.mit.edu (J.L. Furman).
example, during the 1970s and the early 1980s, two
countries, United States and Switzerland maintained a
per capita “international” patenting rate well in excess
of all other advanced economies. The variation among
advanced economies in their ability to innovate at
the global frontier raises an empirical puzzle: if inventors
draw on technological and scientific insights
from throughout the world, why does the intensity of
innovation depend on location?