This essay is based on the working paper “The Research University, Invention and Industry: Evidence from German History” by Jeremiah Dittmar, Ralf R. Meisenzah.
Can universities drive major changes in industrial activity? European universities were established in the Middle Ages, but for centuries they focused heavily on nonscientific knowledge and did not drive industrial activity.
The development of the modern research university in historical Germany provides perhaps the most striking model of the potential role research universities can play in driving economic growth.
The modern research university developed in Germany during a period of political turmoil. The French Revolution and subsequent Napoleonic invasion delivered a profound shock to German society and politics. One aspect of the larger response was the development, in early 1800s’ Germany, of a new model of research-oriented university. This reconceptualized university explicitly aimed to push out the frontier of knowledge and was broadly proscientific, promoting the natural sciences, technical subjects, and rigorous inquiry. This model of the modern research university became a significant factor in the larger transformation of German society before it spread internationally in the mid-to-late 1800s, including to the United States.
The role of the German model of research university in long-run economic development has received remarkably little attention from economists. The conventional narrative suggests that industrialization took off in Germany after the 1840s with the coming of the railroad and the subsequent development of heavy industry, the chemicals sector, and Germany’s distinctive modern banking system. However, very little quantitative evidence on German economic development has been collected from periods before the middle 1800s. Indeed, quantitative evidence on patterns of innovation and industrial activity during the era when universities were transformed has been largely unexplored.
Our research gathers evidence on innovation and industrial activity across thousands of towns within Germany and documents a major pivot point in economic development.
Our research first studies patterns of innovation. Today economists frequently mine evidence from patent records for evidence on the nature and pattern of innovation, however no large-scale patent records exist in Germany until the late 1800s. To study innovation, we first collect large-scale evidence on major scientific and technological breakthroughs from the history of science and technology literature and gather evidence on the lives, educations, and locations of inventors and scientists.
While German society was certainly not stagnant before the changes in universities, we observe major shifts in scientific output that break from previous trends and coincide with expansions in university research collections observed between the 1790s and the 1810s.
We observe a sharp increase in technological and scientific creativity clustering around universities that predates other major changes in the economy. This increase in scientific and technical creativity dates from the early 1800s. Significantly, it substantially predates and indeed anticipates other major changes in the economy by decades, such as the build-out of the railroad network and the reduction of internal taxes that fostered the development of integrated markets.
The geographic pattern in innovation also points to the importance of research universities. We observe clusters of technical knowledge forming around universities even when we compare cities in the same territories and regions, indicating that these differences in question are driven by universities and not by regional differences in policy or legal institutions across within Germany. We also find a dramatic increase in the share of inventors and scientists receiving university educations.
To trace how these changes related to Germany’s industrial transformation, we gather novel evidence on the spread of factories and manufacturing plants across several thousand cities and towns. We find industrial activity shifting toward, and increasing sharply in, towns nearer to universities. Moreover, these clusters became most pronounced in more knowledge-intensive industries, which used technologies and ideas produced by university inventors. We also trace the industrial history of manufacturing firms and find that factories in towns nearer to universities were more likely to adopt cutting-edge mechanized technologies. Further, we find that firms located in towns near universities were much more likely to win competitive international prizes for innovation at the first world’s fair, the famous Crystal Palace Exhibition of 1851 in London.
This research has several historical and conceptual implications for understanding the mechanics of long-run growth. First, and most obviously, the evidence indicates that research universities played a leading role in the transformation that took Germany from relative backwardness to the being on the world frontier in technology and knowledge-intensive industry. The economic changes running through and located around universities significantly predate other major changes in society that have long been considered potential core determinants of Germany’s path to modern, capitalist economic growth. The evidence this research examines thus provides a substantially new view and narrative concerning one of the major and exemplary paths to capitalist modernity.
Second, the evidence points to the complex interplay between supply and demand side factors in the economic growth. The advent of research universities in Germany undoubtedly promoted the supply of scientific and technological knowledge, of highly trained graduates, and—not insignificantly—of talented technicians who attended university workshops and seminars outside degree programs. But in so doing, the university promoted a greater and broader responsiveness to latent and developing demands for knowledge and human resources. In this deeper sense, the supply side implications of the university interacted with demand, leading to new forms of what economists call induced technical change.
Third, the advent of the research university in Germany was an important component of a larger social and political trajectory. In the nineteenth century, in the wake of the French Revolution, Germany embarked on a distinctive and knowledge-intensive path of economic growth. Germany experienced what historians refer to as a “revolution of the mind,” neither a bourgeois revolution on the French model nor the halting expansions of democratic rights observed in the United Kingdom. While our research focuses on the rise of Germany’s knowledge-intensive economy in the 1800s, the convulsions in German society in the twentieth century—resulting from war, inflation, and the rise of Fascism—point to the potential fragility of science-based growth and to the underlying importance of the political economy environment in economic development.
Read the full working paper here.
Jeremiah Dittmar is an Associate Professor at the London School of Economics, Centre for Economic Performance, and CEPR.
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