effect on the behavior of inventors, who responded to the opportunities for gain represented by the growth of the market for inventions and began to specialize in, and become more productive at, invention. The greater complexity of technology and the rising fixed costs of inventive activity made such specialization increasingly desirable, but inventors required some assurance that they would be able to extract a return to their efforts by ceding the products of their creativity before they could comfortably concentrate their resources and energies on invention. The increased volume of trade in patents provided that assurance.

The market for technology did not, however, develop uniformly across the nation. As the regional breakdowns indicate, patents were more likely to be assigned where patenting rates had long been high—the East North Central, the Middle Atlantic, and especially New England. In these areas, high patenting rates seem to have made investment in institutions that facilitated trade in technology a more attractive proposition, and the resulting greater ability to market inventions served to stimulate more invention. Hence regions that started out as centers of patenting activity tended to maintain their advantage over time.

It was primarily in these regions, moreover, that the market for technology continued to evolve and mature. Although the volume of trade in patents was already high by 1870, over the next 40 years the nature of that trade changed in important ways. As time went on, for example, inventors on average were able to dispose of their patents earlier than before, selling an increasing proportion in advance of issue. Another change was in the identity of the assignee. While at first patentees often chose to assign partial patent rights to local businessmen to raise capital for the support of inventive activity or commercial development, they increasingly opted for relinquishing all stake in their inventions, assigning complete rights over to a company or another party. This might seem to suggest that the change in behavior was produced by inventors becoming employees of firms, but we do not think that this was mainly what was going on. The number of employment relationships between assignees and patentees was undoubtedly increasing during the late-nineteenth and early-twentieth centuries, but the contractual mobility revealed by our examination of individual patentees over their careers suggests that productive inventors were still free agents for the most part. Rather, it appears that the growth of intensely competitive national product markets, coupled with the existence of the patent system, created a powerful incentive for firms to become more active participants in the market for technology. This greater concern on the part of firms to obtain the rights to the most advanced technologies further enhanced the evolution of institutions conducive to trade in intellectual capital, and the growing market for technology elicited a supply response from independent inventors. Inventors who assigned to companies were the most specialized and productive of all.

Of course, the development of this market did not solve all of the information problems associated with trade in technology nor make transactions involving patents frictionless. Anecdotal evidence suggests that many difficulties remained— that inventors were not always able to find buyers for their patents at remunerative prices or mobilize capital to support their inventive activity. Many would later decide it advantageous to exchange their independence for financial security and a supportive intellectual environment. At the same time, more and more companies would find it desirable to augment their internal technological capabilities, increasing their employment of inventors and sometimes creating formal research divisions. It is important, however, not to let our familiarity with large firms and their extensive research facilities obscure our understanding of the history of technological change. During the nineteenth century, it was primarily the development of institutions that facilitated the exchange of technology in the market that enabled creative individuals to specialize in and become more productive at invention.

We acknowledge the excellent research assistance of Lisa Boehmer, Nancy Cole, Homan Dayani, Yael Elad, Gina Franco-Cruz, Svetlana Gacinovic, Jennifer Hendricks, Charles Kaljian, Anna Maris Lagiss, David Madero Suarez, Huagang Li, John Majewski, Yolanda McDonough, and Edward Saldana. We are also grateful for valuable advice and comments from B.Zorina Khan and David Mowery. The work has been supported by grants from the National Science Foundation (SBR 9309–684) and the University of California, Los Angeles, Institute of Industrial Relations.

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