Hybrid Innovation in Meiji Japan

Japan’s hybrid system during the Meiji era of technological modernization provides a useful laboratory for examining whether complementary mechanisms to patents induce innovation. Patents were introduced in 1885 and by 1911 1.2 million mostly non-pecuniary prizes were awarded at 8,503 competitions. Prizes increased patent outcomes by 35 percent, a conservative causal estimate based on the timing of patents and prizes and the boost to patents observed in prefectures adjacent to those with prizes, relative to control prefectures without prizes. However, linking competition expenditures with the market value of patents to determine cost-benefit reveals the financial cost of the inducement was high. JEL: O31, O33, 034, 038