Martin Watzinger

We analyze the effects of the 1984 breakup of the Bell System on the rate, diversity, and direction of US innovation. In the antitrust case leading to the breakup, AT&T, the holding company of the Bell System, was accused of using exclusionary practices against competitors. The breakup was intended to end these practices. After the breakup, the scale and diversity of telecommunications innovation increased. Total patenting by US inventors related to telecommunications increased by 19%, driven by companies unrelated to the Bell System. Patenting by Bell's successor companies decreased, but not the number of top inventions.

We investigate how firms generate value by building on scientific discoveries. Analyzing U.S. patents, we show that patent value decreases with distance-to-science. We identify a science premium: patents that directly build on scientific publications are 5.0%–18.3% more valuable than those not directly based on science. This premium can be even larger, ranging from 4.0%–42.3%, when accounting for firms' varying R&D strategies and their relative advantages.

We study the employment effects of countercyclical public investments using the German stimulus program during the Great Recession. Exploiting variation in the program's allocation across counties, we find that the stimulus created jobs in the construction sector and reduced unemployment. The effects materialized quickly and were concentrated in regions with slack labor markets.

We measure the spillovers of venture capital by exploiting the introduction of the Small Business Innovation Research program in the US in 1982 as a natural experiment. We find that additional VC-backed startups in a technology class increase the number of patents of incumbent firms in the same technology class. The spillovers are driven by knowledge spillovers rather than market demand effects.

We examine how the disclosure of technical knowledge in patents affects subsequent innovation. We exploit the staggered opening of Patent and Trademark Depository Libraries (PTDLs) across US states, which reduced the cost of accessing patent documents. The opening of a PTDL increases local patenting by 17% on average, with effects concentrated in technology classes with more prior art available through the library.

We analyze the effects of one of the most important antitrust rulings in US history: the 1956 Consent Decree against the Bell System. The decree required Bell to license all its existing patents royalty-free. We find that this led to a substantial increase in innovation by firms outside the Bell System in fields where Bell had been active. The number of patents increased and new innovators entered the field. Our results suggest that compulsory licensing can be an effective tool to promote innovation in markets with a dominant firm.

We study how labor market tightness affects the ability of firms to create jobs. Using plant-level data from Germany, we find that firms in tight labor markets create fewer jobs in response to positive demand shocks than firms in slack labor markets. This heterogeneity matters for the aggregate effects of demand-side policies.