Published: June 1, 2020 By

When a financial crisis hits, small business dreams, retirement goals and countless other mainstays of the American economy can be dashed overnight. But for inventors and entrepreneurs looking to create the next big product, hard times hold both challenges and opportunities.

Inventors tend to keep patenting new ideas through economic crises, though they may not get to be the next Jeff Bezos or Mark Zuckerberg, according to new research from CU Boulder’s Leeds School of Business, Columbia Business School and Northwestern University’s Kellogg School of Management.

“The ideas themselves find a way forward,” said study co-author Asaf Bernstein, an assistant professor of finance at Leeds. “But we see more inventions inside of firms and big companies.”

The working paper looks at historical patent filings across the U.S. It finds the nation’s invention productivity can weather financial downturns surprisingly well. 

Headshot of Asaf Bernstein.

Asaf Bernstein, assistant professor of finance at the Leeds School of Business (CU Boulder).

“When there is a disruption, it’s relatively short-lived,” Bernstein said. 

The study found that patents fell dramatically in response to the 1918 influenza pandemic but bounced back the following year. Areas harder hit by the Great Depression earned a similar number of future patent citations as areas with less severe financial woes.

The mechanism of that resilience, however, could be a downside for those looking to strike it rich on a big idea. Inventors tended to move into big, established companies in response to events like the Great Depression and the 1918 flu. 

The impacts could also be somewhat permanent, as the researchers found that these crises changed the innovation landscape for as long as 80 years.

What happens now?

Academics like Bernstein often avoid trying to predict the future.

“It’s always tricky,” Bernstein said. “But now we’re looking at an unprecedented crisis.”

The paper’s findings hold some lessons for the COVID-19 economic meltdown.

For people with big ideas, the research could represent a light in the dark.

“Innovators and entrepreneurs might fear that if they move into firms that would be the end of their ability to innovate,” said Bernstein. “What we find is that working for a big company is not a death knell for your ideas.”

For larger companies, this could be a time to think about hiring, instead of downsizing.

“Larger businesses could have an opportunity to get good, smart talent who may otherwise work on their own,” Bernstein said.

For technology enthusiasts bemoaning that the 2020s might be a lost decade of cool new gadgets, Bernstein offers something for them, too.

“Big ideas seem to find their way.”