Patents rates are a useful indicator of innovative activity

The US is increasingly becoming a knowledge-based economy, and as a result, the markers of wealth are shifting from the kinds of tangible assets that characterized the old industrial economy (like huge factory complexes) to much more intangible assets (the creativity and innovativeness of workers and organizations). Most of our statistical measures of economic activity were crafted for our machine-age economy, so its often a challenge to come up with measures of the new, intangible wealth that characterizes today’s economy.

One useful indicator of innovative capacity is patenting. The US government awards patents for novel ideas, and patent records record not only the name of the inventor, but her location as well. As a result, its possible to map and tabulate the density of patenting in different states and metropolitan areas.  The US Patent and Trademark Office provides a periodic tabulation of patent data, and you can also drill down to particular patent categories to identify the kinds of technologies that are present in a particular location, and even track down the number of patents awarded to particular firms or inventors.

To rank metro areas by innovativeness, we’ve computed the number of patents issued per 100,000 population for each of the nation’s metropolitan areas with more than a million population. San Jose–home of Silicon Valley–is far and away the most prolific patenter among US metro areas (it has about 770 patents per 100,000, a number that flows off the chart).  Other tech centers are also leaders in patents per capita including San Francisco, San Diego, Austin, Seattle, Raleigh and Boston.


As the data show, the distribution of patenting activity is highly skewed to tech centers.  The typical large metropolitan area has just 40 patents per 100,000 workers.  (The gray bar on the chart shows the inter-quartile range; about half of all metro areas get between 20 and 60 patents per 100,000 workers. The least patent-intensive metros include a group of mostly Southern cities (Virginia Beach, Birmingham, and New Orleans).

To be sure, there are important limits to patents as an indicator. Patenting is extremely common in some industries (like biotechnology and semiconductors), where the ownership of intellectual property is both an important source of competitive advantage (and a bevy of patents is an important source of trading stock for working out cross licensing agreements for firms with complementary technologies).  In some industries, patenting is rare, or unknown altogether. New styles and designs for apparel, for example, are seldom patented.