Technological Opportunity and the Locus of Innovation: Airmail, Aircraft, and Local Capabilities

This paper explores how innovation is jointly shaped by exposure to technological opportunities and local capabilities. We exploit a quasi-natural experiment, the establishment of the United States Post Office’s Airmail routes, to analyze how a new technological opportunity spurred innovations in aircraft technology between 1915 and 1935. Using a novel dataset of historical patents, we find that the introduction of an airmail route into a county results in a 93% increase in aircraft-related patents in that county, on average. We also explore the role of local capabilities and find that different types of local knowledge have a heterogeneous effect on patent quality. We find that treated areas with more users and tinkerers produce more low-quality patents, whereas treated areas with more specialists and workers with higher education produce more high- quality patents. This research contributes to existing literature by refining our understanding of how technological opportunities lead to advances in early-...