Demand Shocks, Procurement Policies, and the Nature of Medical Innovation: Evidence from Wartime Prosthetic Device Patents

Abstract

We analyze wartime prosthetic device patents to investigate how demand and procurement policy can shape medical innovation. We use machine learning tools to develop new data describing the aspects of medical and mechanical innovations that are emphasized in patent documents. Our analysis of historical patents yields three primary facts. First, we find that the U.S. Civil War and World War I led to substantial increases in the quantity of prosthetic device patenting relative to patenting in other medical and mechanical technology classes. Second, we find that the Civil War led inventors to focus broadly on improving aspects of the production process, while World War I did not, consistent with the United States applying a more cost-conscious procurement model during the Civil War. Third, we find that inventors emphasized dimensions of product quality (e.g., a prosthetic's appearance or comfort) that aligned with differences in buyers' preferences, as described in the historical record, across wars. We conclude that procurement environments can significantly shape the scientific problems with which inventors engage, including the choice to innovate on quality or cost.

Medicare and the Rise of American Medical Patenting: The Economics of User-Driven Innovation

“…Surprisingly little research has focused on innovation related to medical equipment and devices. 2 A notable exception is Clemens and Rogers (2020), who analyze the effects of Civil War and World War I era demand on prosthetic device innovation. The literature's nearly exclusive focus on pharmaceutical innovation leaves a substantial gap, as pharmaceuticals account for a modest share of overall health sector spending and spending growth.…”

Public Procurement and Innovation for Human-Centered Artificial Intelligence

“…Present concerns with directional innovation and industrial policies are based on recognition that government intervention was in the past important for the development of important technologies, such as "jet engines, radar, nuclear power, the Global Positioning System (GPS), and the internet" (Bloom et al, 2019, p.166). Clemens and Rogers (2020) studied how government procurement influenced innovation in prosthetics during the U.S. Civil War and World War I, conclude that the nature of government procurement can influence significantly whether innovation will be on costs or quality -which is a finding with much relevance for the challenge of HCAI which is primarily a challenge relating to the quality of the technology. Another oft-quoted example of government steering the development of new technologies is of the USA's efforts during the Second World War, which started with the creation of the National Defense Research Committee (NDRC) in 1940.…”

Innovation for hire: a descriptive study of federal acquisitions and contractor R&D

“…Slavtchev and Wiederhold (2016) model returns to innovation as a function of government purchasing and find that private-sector returns to innovation increase with the extent of high-tech goods the government purchases; they conclude that procurement incentivizes private-sector firms to increase their innovation as the government demands more proprietary goods and services. Clemens and Rogers (2020) expand the relationship between characteristics of the government's purchasing and innovation and find that the government's demand function affects incentives to innovate, including incentives to trade-off cost versus quality. Brogaard et al (2016) and Decarolis et al (2019) find that the extent and success of patent activity increases with government contracts.…”