Diversity and the technological impact of inventive activity: evidence for EU regions

Diversity has been considered as a prerequisite for turning prevailing technological trajectories into new and unexpected directions. However, little evidence exists on the exact nature of the more direct relationship between diversity and the impact of technologies. One main contribution of this paper is therefore to investigate the relationship between technological diversity and the impact of inventions across EU regions. Using EPO patent data, a set of measures is created considering different notions of diversity and different levels of technological aggregation, as allowed by the hierarchical structure of the International Patent Classification (IPC). The technological impact of inventions is captured by two citation-based indicators measuring an average and a high impact. For both measures we find that diversity is typically detrimental, or at best neutral, for the impact of new technologies, except when a very fine-grained technological detail is taken into account. However, in the latter case, nearly opposite results are found, namely, positive effects from related variety and, particularly for high technological impact, from combination of relatively distant technologies. Therefore, an important contribution of this paper is to show that these effects are very sensitive to the aggregation level used, and hence that policymakers should gain a very detailed understanding about the relations among technologies before implementing either specialization or diversification strategies.