Essays on High-Value Patenting in Germany in an International Perspective 1880-1932

The aim of this doctoral thesis is to look at the worldwide relevance of high-value patents granted in Germany between the enactment of the first nationwide German patent law in 1877 and 1932. This patent act enabled both, national and foreign patentees to reap the fruits of their intellectual investment by restraining competitors to adapt the patented invention. Much research is done on patents and their economic effects within national borders at macro and micro levels. But the cross-border importance of patent protection for domestic and foreign inventors and economies is still underrepresented in the literature especially for pre- and post-WWI Germany. Accordingly, this thesis is an attempt to close the gap in the literature by analysing the determinants of foreign high-value patents in Germany for the periods 1880-1914 and 1919-1932. Therefore, we study the potential influence of patent laws, institutional quality, and primary and secondary schooling. Controls for distance and industrial structure are included. We analyse how and why international patenting in Germany changed in the interwar period comparing it the pre-WWI phase. Which factors caused the decline in foreign high-value patents and which countries significantly reduced their patenting activities in Germany? We contrast the patenting behaviour of WWI opponents and analyse the differences in relation to Germany’s confederates and neutral states. In addition, we explore the impact of a newly developed human capital measure based on adjusted patents and primary school enrolment rates, on long-run economic growth in the respective counties. This new measure of human capital takes into account its technical component, to the hypothesis that human capital levels in 1910 had a strong persistent effect on national income until the late 20th century (and perhaps even longer). Which factors caused the growing international competitiveness of German mechanical engineering industry in the pre-World War I period? We elucidate whether or not the international market success of machine builders in the German Empire was determined by technological creativity and the availability of a comparatively cheap labour force. Based on an unbalanced panel, we therefore investigate the influence of demand, labour costs and technological creativity on export performance of thirty-two different machinery types. We find robust evidence that the development of export-import ratios in mechanical engineering was positively influenced by the growth of patent stocks that represent the new knowledge being available for German machine builders. In addition, we present some evidence for the assumption that the growing international competitiveness of German mechanical engineering was also caused by decreasing relative unit labour cost.Based on firm-specific data on foreign direct investment of 377 German companies from 1873 to 1927, we study firm characteristics that caused FDI, preferred host countries, and whether FDI was successful in terms of enhancing corporate profitability. Large companies with high profitability conducted more FDI. Market size and similarity of the respective host country triggered horizontal FDI. However, wage gaps and differences in human capital stimulated FDI flows; hence, incentives for vertical FDI existed. Considering endogeneity between FDI and profitability, we uncover that FDI did not enhance profitability, and profitability did not drive FDI. Interestingly, FDI was driven by the company’s past FDI transactions.