One of the puzzles of economic history is why, given that Orville and Wilbur Wright invented the airplane and received a patent, why did the US economy almost immediately fall behind in actual manufacturing of airplanes?
The standard answer has been to blame the patent system: in particular, the Wright brothers put a huge amount of time and energy into trying to defend their 1906 patent for a flying machine against Glenn H. Curtiss and others who were seeking to manufacture planes. The argument goes that both firms put so much time into the patent battles that they lost their focus on actually manufacturing planes. An example of this argument from a 2014 opinion piece in the Wall Street Journal is here.
(Ironically, the Curtiss-Wright company would later be formed in 1929 from the merger of these two firms.)
In \”Blaming Wilbur and Orville,\” Tom D. Crouch reviews a couple of recent books on the Wright brothers and the shortcomings of the Wright Company in the Summer 2015 issue of the Business History Review (89:2, pp. 339-343). He writes:
\”That America had fallen far behind Europe in aviation by 1917 is beyond doubt. Every American airman who flew into combat in the “war to end all wars” did so in an airplane entirely designed and almost entirely built in Europe, except for those naval aviators operating Curtiss flying boats in search of enemy U-boats. …
In fact, while there was much concern at the time, little solid evidence exists to indicate that the patent suits had any serious impact on American aviation. How then are we to explain the fact that the nation that had given birth to the airplane had fallen so far behind?
The answer lies in a 1913 congressional study of aeronautical expenditures by the nations of the world. Germany led the world, with $28,000,000 spent on aviation between 1908 and 1913. France, Russia, Italy, and Austria followed close behind, with England in sixth place with a total national expenditure of $3,000,000 for aeronautics. Having spent only $435,000 for all flight-related activity during that five-year period, the United States was in thirteenth place, behind Japan, Chile, Greece, and Brazil. (All figures are from Aeronautics in the Army, hearing before the Committee on Military Affairs, U.S. House of Representatives, sixty-third Congress, first session, 1913.) In addition to official appropriations, several leading aeronautical powers had also established national subscriptions that provided an additional $7,100,000 in private financial support for their aeronautical industries. Once again, Germany led the way, with $3,500,000 in private funds, followed by France ($2,500,000), Italy ($1,000,000), and Russia ($100,000). According to official U.S. government estimates, the other nations of the world had spent a total of $93,620,000 in public and private funds on aviation between 1908 and 1913.
That money was spent on direct purchases of aircraft and engines and on government-sponsored research and development programs. Each of the European powers that went to war in 1914 already maintained sophisticated aeronautical research laboratories. In the United States, the National Advisory Committee for Aeronautics was not authorized by Congress until 1915, and its first flight laboratory was not established until 1917.
In America, … flying was the domain of aerial showmen out to thrill the crowds at local meets and air shows with old-style pusher biplanes. In Europe, on the other hand, rich prizes were established to promote improvements in airframe and engine technology. Competition encouraged the development of aircraft that could fly higher, faster, and farther. … With war clouds glowering on the horizon, European nations had invested heavily in a set of new technologies with military potential. Americans, an ocean away from potential conflict, did not see the need to support the embryonic industry. … [T]he failure of other American aircraft builders to keep up with advances in Europe had little to do with the patent wars and everything to do with a limited market and the low level of public and private investment in flight technology.
I think the overall lesson here is that patents matter, and so do resources expended in fighting over patents. However, a more fundamental determinant of who ultimately wins in market competition isn\’t about who gets the first patent, but who makes the continual investments in production and in follow-up improvements.