Innovation Convergence

Summary

This paper examines convergence in innovation using patenting data for two-digit manufacturing industries across 32 countries (1976–2006). The authors find that patenting rates converge over time: industries or countries with fewer initial patents grow faster. Beyond counts, patent quality (citations and citations per patent) and efficiency (patents per worker) also converge. The pattern holds broadly across countries, industries and time periods, and country-level evidence suggests the convergence trend continued through 2020. Importantly, stronger financial development, greater international financial integration and higher institutional quality are associated with faster convergence, especially where financial liberalisation policies are present. The findings point to the financial and institutional environment as key drivers of innovation growth and productivity.

Key Points

Patenting rates show systematic convergence: lower initial patenting is followed by faster patent growth.
Convergence occurs both within countries (across industries) and within industries (across countries).
Measures of patent quality (citations) and innovation efficiency (patents per worker) also converge.
Convergence is robust across time periods in the sample; country-level series indicate continuation to 2020.
Financial development, international financial integration and strong institutions accelerate convergence.
Financial liberalisation policies amplify the role of finance and institutions in promoting catch-up in innovation.
Policy implication: improving financial systems and institutions can help lagging sectors and countries close innovation gaps, supporting productivity growth.

Context and relevance

The study connects literature on productivity convergence, technology diffusion and finance. It speaks to debates on whether poorer or less-innovative industries and countries can catch up, and shows that the channels of finance, openness and institutions matter for both the quantity and quality of innovation. For policymakers and researchers interested in growth, industrial policy, or the macroeconomic effects of financial reform, the paper provides empirical evidence linking financial/institutional settings to innovation convergence.

Why should I read this?

Short and simple: if you care about how countries and sectors catch up in innovation, this paper nails the link to finance and institutions. It isn’t just about more patents — it’s about better and more efficient innovation, and how the right financial and policy environment speeds up catch-up. Saves you the slog: better finance + stronger institutions = faster innovation convergence. Read it if you want the evidence, not just the slogan.

Author note

Punchy take: Bryan Hardy and Can Sever deliver a crisp empirical package. The results matter — they tell policymakers that tinkering with financial openness or institutional reform can have real effects on where and how innovation happens. If this rates as ‘must-read’ for your briefings, it should.