Abstract
Although the distribution of valuable inventions is highly skewed, the economics of superstars and increasing returns may increase inequality in inventor innovative activity. This paper develops a theoretical model to identify the relationship between increasing returns and inventor innovative inequality. Specifically, increased value of the dominant product, greater inventive value on the dominant product, and network effects increase innovative inequality, while the increased tendency for successful entrepreneurs to erode the incumbents position would decrease innovative inequality. Patent data from the United States Patent and Trademark Office (USPTO) is used to show that innovative inequality across inventors and patent assignees is increasing within software technologies, relative to other technologies over time. The empirical results are robust to controlling for a variety of characteristics of the industry life cycle.
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