The Material Basis of Innovation Value (draft coming soon)
New substances and materials provide new elements for the recombination of technological innovation, achieving new technical functions. This study uses rare earth elements as an example to explore the relationship between the use of these materials and patent value, measured by citation counts, thereby revealing the crucial role of material usage changes in the process of technological evolution. Our study finds that, overall, using rare earth elements significantly enhances patent value. By constructing an instrumental variable using exogenous global rare earth deposit geographic information, we confirm that this effect is significant. Furthermore, we discover that this effect follows a cycle, reflecting the presence of a “material usage lifecycle” in frontier technology dynamics. This lifecycle consists of an initial period (increasing returns), a maturity period (peak value), and a decline period (diminishing marginal returns) for the utilization of a new material. At the scale of technological subgroups, we find that there is a specific time window for rare earth materials to enhance patent value. Furthermore, using the event study of the 2010 rare earth crisis caused by China’s supply disruption, we find that the value-added effect of materials on technological innovation is significantly influenced by material availability.