The Impact of Institutions on Innovation*
The Impact of Institutions on Innovation* Alexander Donges, Jean-Marie A. Meier, Rui C. Silva October 27, 2017 Abstract We study the impact of inclusive institutions on innovation using novel, hand- collected, county-level data for Imperial Germany. Exploiting the timing and geography of the French occupation of different German regions after the French Revolution as an instrument for institutional quality, we find that the number of patents per capita was more than twice as high in counties with the longest occupation as in unoccupied counties. Conservative social norms and low financial development weaken the impact of institutions on innovation. The results suggest that innovation is a quantitatively plausible channel for the previously documented effect of institutions on economic pros- perity. Keywords: Innovation, Patents, Institutions, Institutional Reform, Economic Growth. JEL classification: O31, O43, N43, N13, K40, P16. *Meier would like to thank the Deloitte Institute of Innovation and Entrepreneurship at London Business School for providing financial support. We thank Taylor Begley, Bo Bian, Rajesh Chandy, Jo~aoCocco, Xavier Duran, Maximilian Eber (discussant), Julian Franks, Francisco Gomes, Juanita Gonzalez-Uribe, Walker Hanlon, Sebastian Hohmann, Giampaolo Lecce (discussant), Stefan Lewellen, Anton Lines, Maria- Teresa Marchica (discussant), Elias Papaioannou, Florian Ploeckl, Raghavendra Rau, David Schoenherr, Max-Stephan Schulze, Felix Selgert, Henri Servaes, Janis Skrastins, Jan Starmans, Jochen Streb, Carsten Trenkler, Paolo
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