The effect of applied research institutes on invention: Evidence from the Fraunhofer centres in Europe

Abstract This study examines the impact of the Fraunhofer Society, Europe’s largest network of applied research institutes, on patent applications. A difference-in-differences strategy was employed exploiting the establishment of five new Fraunhofer centres in the 2000s. The panel includes 65,963 European applicants (both firms and independent inventors) between 1980 and 2019. The results show that establishing a centre increases patent output by at least 13%, robust to using applicants of cities that established a centre by the end of the 2010s as an alternative control group. The effect is driven by an increase in applicants’ productivity and not by agglomeration dynamics.