Discussion Papers
Innovation and Entrepreneurship Research
Innovation and Entrepreneurship Research
Physical Constraints on Markets for Ideas
(2022). Physical Constraints on Markets for Ideas.
This paper analyzes how travel time between contracting parties slows down transactions on markets for ideas. We put forward a model of buyer-seller trade over ideas and test the model’s predictions on a novel dataset of patent sales and licensing deals in France. To address endogeneity concerns, we construct an instrument that exploits the 1982 Deferre law, which marked the beginning of territorial decentralization in France, and the introduction of high-speed train lines. We also instrument travel time with horseback travel time around 1780. We find robust evidence that travel time delays transactions on markets for ideas to a sizeable extent, especially for deals involving SMEs and first-time buyer-seller dyads.