Response to the innovation of the Covid crisis: a new ebook

Carsten Fink, Ian Menier, Andrew A. Tool, Reinhold Wiegler 13 July 2022

On March 11, 2020, the World Health Organization declared Kovid-19 as a global epidemic. COVID-19 has not only caused massive damage to public health worldwide, it has also provoked major economic catastrophes worldwide (e.g. Benassi-Cuer and Vader de Mauro 2020). The fall in global GDP in 2020 has become the largest annual decline since WWII (Gopinath 2021, IMF 2021).

Previous crises have shown that innovators, despite their long-term focus, are not free from short-term disruptions. During the global financial crisis of 2007-2008 and the subsequent Great Depression, for example, companies reduced access to money for innovation (Lee et al. 2015) and were less capable and willing to invest in innovation (Archebugi et al. 2013). Fiscal contraction in the general economy, as a result, puts pressure on overall demand and public budgets to support research (Cruz-Castro and Sanz-Menendez 2016). At the same time, crises can also be a catalyst for innovation, as they change the immediate and future technological needs of society. This was evident in the case of innovative activity during WWII, which led to major research efforts to develop military technology and medicine to support war in the United States and laid the foundations for many post-war innovations and innovation policies (Gross & Sampat 2020).

How did the innovation system respond to the Covid-19 crisis? A new ebook from CEPR, the European Patent Office (EPO), the US Patent and Trademark Office (USTPO) and the World Intellectual Property Organization (WIPO) is the first step towards understanding what has happened in different parts of the world and how different it is. The actors in the innovation ecosystem – private and non-profit organizations, government and individuals – have been coordinated (Fink et al. 2022).


Download Resilience and Intelligence: The Response to Global Innovation COVID-19 Here


Impact around the world: Many similarities, some differences

The first part of the e-book provides insights into the short-term response of inventors worldwide and nationally, as captured by intellectual property (IP) application trends in the first two years of the epidemic. It paints a broad picture of the revelation of the crisis in the IP world, from which several important lessons can be learned.

First, the impact of the epidemic on filing patents, trademarks, and other IP rights was less severe than previous crises such as the dotcom bubble burst in the early 2000s or the Great Depression. Patent filing around the world hit negatively, but the fallout proved shallow and short-lived – usually limited to weeks and months after the epidemic began in March 2020 (see Figure 1 for international patent applications).

Figure 1 International patent application in times of crisis

Comments: International patent applications refer to applications filed at the international level under the Patent Cooperation Agreement (PCT). The figures presented are the monthly 3-month moving average growth rate compared to the same period of the previous year. Patent calculations are based on the international filing date of PCT applications, either at the national / regional patent office or directly at WIPO.
Formula: WIPO IP Statistics Database

Yet the crisis has left its mark on patent effectiveness across economics and technology. China and the Republic of Korea stand as the least affected economies, seeing continued growth in patents.1 The fast-growing fields of patenting include health-related technologies (pharmaceuticals, biotechnology, medical technology) and digital technologies (such as digital communications, computer technology). Already in the run-up to 2020, the urgent need created by the epidemic has fueled innovation in both of these areas. In contrast, the Covid-19 crisis has exacerbated the relative decline of patents in traditional technology sectors such as mechanical engineering.

China and the Republic of Korea have largely benefited from this trend, thanks to their specialization in digital innovation. Both countries have seen the sustainable activity of large responsible agencies as well as local start-ups in the sector during the epidemic. In contrast, the relative specialization of Germany and Japan in more traditional engineering-based industries may explain why the crisis had a more pronounced negative impact on the patent filing of these two countries.

Other indicators ensure the overall resilience of innovative activity. Evidence from the United States shows that companies’ research and development spending has been less volatile than actual capital investment. However, the crisis seems to have severely affected some sections of small, budget-limited innovators. US and European SMEs often had to reduce their investment in patented innovations and reported a lack of funding for such investments. Evidence from Brazil also reveals that patentings among individual small-entrepreneurs, micro-enterprises and small businesses have declined more than large companies, with one notable exception: there was considerable adoption of utility models by local micro-entrepreneurs as the epidemic unfolded.

More broadly, many of the contributions to the e-book prove to be inspired by the vibrant entrepreneurship caused by the crisis and the rapid adoption of digital technology. This is evident in the trademark filing trend – capturing the commercialization of new products and services. Figure 2 illustrates the evolution of international trademark filing among the three crises discussed earlier. The COVID-19 crisis stands to show the shallowest decline, followed by a tremendous boom in international trademark applications in almost a year of crisis. Healthcare products and ecommerce-related products and services, broadly reflecting the patenting focus, were a key driver behind this recovery, even though the specificity of different product groups differed economically.

Figure 2 International trademark application in times of crisis

Comments: International trademark applications refer to applications filed under the WIPO’s Madrid system. The figures are presented according to the Madrid filing date.
Formula: WIPO IP Statistics Database

The more obvious way to become an entrepreneur – presented in the contributions of the Republic of Korea (Chapter 8) and Australia (Chapter 10) – ensures an increase in business entry and startup activity in 2021. The Spanish flu pandemic of 1919 (Beach et al. 2020) highlights how social disruption creates the momentum for start-ups for entrepreneurs who are willing and able to take risks amid high overall uncertainty.

Responses to innovation ecosystems

The second part of the e-book sheds light on how different parts of the innovation ecosystem have responded to the COVID-19 epidemic. A focus science sector. Survey evidence from the US (Chapter 12) revealed that the total research time for all academic researchers was significantly reduced, but these losses were not uniform across the scientific field of study or the type of researchers. Researchers with women researchers and children have suffered the most, and this crisis could permanently change their scientific career opportunities. The chapter argues that the policy responses of academic institutions may prove insufficient to address these adverse outcomes and may even reinforce them.

The second focus is on how biomedical innovation has responded to the ecosystem crisis. Among other contributions, Chapter 15 tells the story of the MRNA Covid-19 vaccine. This highlights the difficulty of getting financial support at an early stage for innovation. Only a handful of stubborn scientists, start-up entrepreneurs, angel investors, and policy executives from the U.S. Defense Advanced Research Projects Agency were willing to fund high-gain mRNA technology for high risk in the early years. Apparently, COVID-19 vaccines based on mRNA technology made significant contributions to overcoming the effects of COVID-19, but society could easily have missed them.

Policy adoption and attitude

Overall, the ebook concludes that the global innovation system has proven to be resilient to the Kovid-19 epidemic, and its intelligence has contributed a lot to tackling it. Policy support was helpful for both.

Financial support measures have reduced demand shocks, helped businesses stay afloat, and kept employees employed (Gourinchas et al. 2021). The destruction of productive elusive capital could have been worse. Monetary policy support, in turn, enables the continued availability of funding for innovation and fuels the entrepreneurial wave described above (WIPO 2021). As the financial situation has tightened recently (by 2022), the availability of risk capital has declined sharply. This raises the question of whether the relaxed financial situation and fiscal policies during the crisis created a sustainable dimension to the ‘innovative surge’.

A second step is that policymakers should not allow the intelligence of innovation systems. As already mentioned, mRNA technology can be easily missed by a short-sighted, risk-resistant innovation support system. In order to be able to rely on innovation systems to provide quickly powerful solutions to social challenges, a long-term, proactive approach to innovation policy should be taken, supporting new ideas that are likely to be groundbreaking in their early high-risk stages. Continuous investment in scientific research is crucial in building the underlying knowledge of technological progress.

Of course, the crisis is not over at this time and our understanding of its implications will remain incomplete for some time. Although most countries have taken many public health measures to prevent epidemics, the Covid-19 mutation is still spreading around the world. Future transmission wave management may cause less disruption than in the first two years of the epidemic – thanks in large part to recent innovations in biomedical and digital solutions. However, it will certainly leave a mark on the innovation system.

Further research is needed to deepen our understanding of how inventors responded to the crisis. Complete bibliographic details of patent applications are usually published with a delay of only 18 months. Thus, bibliographic data has recently become available for patents for innovation after the onset of the epidemic. Future studies can thus shed more light on how different innovation stakeholders will respond, including the impact on individual innovators and the impact on collaboration across institutions and countries.

References

Archebugi, D, A Filipetti and M Frenz (2013), “The Impact of the Economic Crisis on Innovation: Evidence from Europe”, Technological forecasting and social change 80 (7): 1247-1260.

Beach, B, K Clay and MH Savedra (2020), “Lessons for the 1918 Influenza Epidemic and COVID-19”, NBER Working Paper No. 27673.

Bénassy-Quéré, A and B The Weather of the Moon (2020), Europe at the time of Kovid-19CEPR Press.

Cruz-Castro, L and L Sanz-Menendez (2016), “The Impact of the Economic Crisis on Public Research: The Spanish Budget Policy and Research Institute”, Technological forecasting and social change 113 (B): 157-167.

Djankov, S and U Panizza (2020), COVID-19 in developing economiesCEPR Press.

Fink, C, Y Ménière, AA Toole and R Veugelers (2022), Resilience and Intelligence: The Response to Global Innovation COVID-19CEPR Press.

Gopinath, G (2021), “A Race as a Recovery Divide between Vaccines and Viruses”, IMF Blog, 26 January.

Gourinchas, PO, S Kalemli-Ozcan, V Penciakova and N Sander (2021), “Fiscal Policy in the Age of COVID: Does it get in all cracks? ‘”, NBER Working Paper No. 29293.

Gross, DP and BN Sampat (2020), “Organizing Crisis Innovation: Lessons from II World War”, NBER Working Paper No. 27909.

IMF (2021), World Economic Outlook: Managing Divergent RecoveryApril.

Lee, N, H Samin and M Cowling (2015), “Access to funding for innovative SMEs since the financial crisis”, Research policy 44 (2): 370-380.

Endnote

1 As a precaution, it is important to note that China’s innovation performance analysis in Chapter 7 of the e-book does not consider the most recent COVID-19 wave in 2022 and its response to China’s economy and innovation system.

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