The Causal Effect of Foreign Ideas on U.S. Innovation

A new study analyzes the influence of foreign ideas on technological innovation in the United States over the past 137 years. Researchers constructed a "genealogy" of technologies by examining the full text of 13 million patents filed between 1887 and 2024, tracing the origins of new technologies to earlier ones. The findings reveal four key insights into the role of foreign ideas in U.S. innovation.

First, foreign ideas are ubiquitous in U.S. technologies. Four-fifths of American technologies incorporate at least one foreign input, with the most productive technologies relying on foreign inputs to a greater extent. Second, these foreign influences have a substantial causal impact on U.S. innovation. By using the historical migration patterns of immigrants as a source of exogenous variation in local exposure to foreign knowledge, the study found that U.S. counties more exposed to ideas from a particular country absorbed more technologies from that country and subsequently invented more U.S. technologies building on those foreign inputs.

Third, foreign ideas not only affect the quantity of innovation but also its direction. Counties with a higher presence of a given foreign technology were more likely to pioneer new technologies whose foreign inputs were already familiar to them. Furthermore, the changing origins of foreign ideas have accompanied the shift of American innovation from the historical heartland toward the coasts.

Fourth, the effects of foreign ideas persist over time, with counties that absorbed more foreign ideas decades ago now hosting more jobs related to those ideas, as well as more workers involved in the U.S. technologies derived from them.

The study, authored by Tarek Alexander Hassan, Aakash Kalyani, and Juan Cruz Lopez Del Valle, sheds light on the pervasive and consequential role of foreign ideas in shaping the trajectory of U.S. technological innovation.