Climbing atop the Shoulders of Giants: The Impact of Institutions on Cumulative Research

Jeffrey L. Furman and Scott Stern

American Economic Review, 2011, vol. 101, issue 5, 1933-63

Abstract: While cumulative knowledge production is central to growth, little empirical research investigates how institutions shape whether existing knowledge can be exploited to create new knowledge. This paper assesses the impact of a specific institution, a biological resource center, whose objective is to certify and disseminate knowledge. We disentangle the marginal impact of this institution on cumulative research from the impact of selection, in which the most important discoveries are endogenously linked to research-enhancing institutions. Exploiting exogenous shifts of biomaterials across institutional settings and employing a difference-in-differences approach, we find that effective institutions amplify the cumulative impact of individual scientific discoveries. (JEL D02, D83, I23, O30)

Date: 2011
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