Does access to internet promote innovation? A look at the U.S. broadband industry

Access to the Internet is an essential determinant of innovation, which has received little attention in the literature. This paper emphasizes the role of Internet accessibility in lowering information costs and therefore boosting regional innovation activity. We construct a simple theoretical model...

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Bibliographic Details
Published in:Growth and change 2019-12, Vol.50 (4), p.1423-1440
Main Authors: Xu, Xu, Watts, Alison, Reed, Markum
Format: Article
Language:English
Subjects:
Access
Broadband
Discovery
Economic theory
Innovations
Internet access
Internet service providers
Regression analysis
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Summary:Access to the Internet is an essential determinant of innovation, which has received little attention in the literature. This paper emphasizes the role of Internet accessibility in lowering information costs and therefore boosting regional innovation activity. We construct a simple theoretical model to illustrate the positive impact of decreased discovery costs, proxied by the accessibility of the Internet, on innovation. To test this hypothesis, we exploit a county‐level data set in the U.S. and run three types of regression with and without instruments: OLS, negative binomial, and Poisson. Within each method, we employ four levels of download speeds. We find a positive relationship between the access to the Internet and the number of patents filed in that specific county. This effect is particularly strong in the case of access to download speeds of 10 Mbps. Our analysis suggests that access to the Internet lowers information disseminating costs and therefore encourages more patents filed in the county. The results also indicate that access to the Internet matters more than faster Internet speed for innovation. Policy implications for these results suggest that if there were a minimum Internet access initiative, there could potentially be a significant increase in innovation by the U.S.
ISSN:0017-4815
1468-2257
DOI:10.1111/grow.12334