Employing the patent data over 1977-2011, this study explores the factors determining innovative activities in the US ethanol industry. We take into account both demand-side and supply-side factors, the latter of which is represented by constructed knowledge stocks, to quantify the effects of price- and policy-induced innovations. We quantify the citation generation process using patent citations and construct the simple and weighted stocks of knowledge with weights of patent productivity. We confirm that both the supply-the demand-side factors, such as knowledge stock, crude oil price and government R&D expenditure, have positive and statistically significant effects on the technological innovations of biofuels in the United States.


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