Job Market Paper 

Pre-Grant Patents and Innovation Diffusion

Abstract:Are pre-grant patent effective forward-looking “news” signals for global innovation diffusion? To address this question, I use a novel 1980–2019 panel of pre-grant patent filing counts and trade data for 21 economies (17 OECD + 4 BRICS) to construct an import–share–weighted index of filed patents. I instrument this index with a Bartik shift–share of partner-country filed patent counts to isolate exogenous trade-driven shocks, and build an analogous granted-patent index for comparison. Panel local projections show that trade-driven pre-grant shocks, while slower to materialize, generate larger long-run TFP gains than granted-patent shocks and produce stronger, more immediate equity-market reactions across countries. At the sector level, shocks to the filed-patent index boost manufacturing TFP and R&D capital within one year and sustain growth thereafter; heterogeneous analysis shows that countries with more R&D-intensive manufacturing sectors experience even larger TFP gains. At the industry level, I use the quality-adjusted cited patent index by LaBelle et al. (2023) and interact it with value-added intensity to investigate the role of pre-grant cited patents across industries under their value-added structure in signaling future innovation diffusion. The average responses of labour productivity across manufacturing industries reveal that textiles and chemicals, which are more citation-driven, exhibit gradual but persistent gains. By contrast, machinery shows stronger and more immediate effects as it is more trade-driven. These results at the industry level further demonstrate the power of pre-grant patents as better forward-looking measures into the timing, channels, and heterogeneity of global innovation diffusion compared to granted patents.

Presented at (*: scheduled): *National Institute of Economic and Social Research Brown Bag Seminar, NWSSDTP PhD Conference (2025); Macroeconomics Research Unit Seminar Series, University of Kwazulu-Natal (2025)

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