Demand Shocks, Procurement Policies, and the Nature of Medical Innovation: Evidence from Wartime Prosthetic Device Patents

We analyze wartime prosthetic device patents to investigate how demand and procurement policy can shape medical innovation. We use machine learning tools to develop new data describing the aspects of medical and mechanical innovations that are emphasized in patent documents. Our analysis of historical patents yields three primary facts. First, we find that the U.S. Civil War and World War I led to substantial increases in the quantity of prosthetic device patenting relative to patenting in other medical and mechanical technology classes. Second, we find that the Civil War led inventors to focus broadly on improving aspects of the production process, while World War I did not, consistent with the United States applying a more cost-conscious procurement model during the Civil War. Third, we find that inventors emphasized dimensions of product quality (e.g., a prosthetic’s appearance or comfort) that aligned with differences in buyers’ preferences, as described in the historical record, across wars. We conclude that procurement environments can significantly shape the scientific problems with which inventors engage, including the choice to innovate on quality or cost.