If those who discover new ideas could appropriate all the benefits, then, at least in principle, market mechanisms could efficiently determine investments in science. But private and collective incentives diverge in the presence of externalities. We just do not know in advance where, when, or for whom research results will become valuable. Because predicting or charging for such applications can be difficult, markets tend to underallocate and misallocate support for basic research. This grant supports efforts by economists Ufuk Akcigit of the University of Pennsylvania and Daron Acemoglu of Harvard University to study economic spillover effects associated with technological progress through the examination and modeling of innovation networks. Using patent, citation, and other data, the team will construct new theoretical models of innovation spillovers, conduct detailed empirical analyses, and evaluate the counterfactual effects of various innovation policies. Additional topics to be studied include the role of innovation policy in an open economy; the roots of major real-world innovations that led to significant spillovers; and the role networks play among inventors and financial institutions in generating spillovers.