We return to the theoretical foundations of absorptive capacity and test the idea that personal experience in a field makes it easier for firms’ inventors to recognize and build upon local knowledge spillovers from other firms in that field. We propose a new empirical model of localized knowledge diffusion, which 1) measures a firm’s absorptive capacity by its inventors’ prior experience in a field, 2) uses a death instrument to exogenously vary the availability of knowledge of the same collaborative patent in different regions, and 3)estimates the difference in citation likelihood from all subsequent inventors across both regions, as a function of a potentially citing inventor’s prior experience in the field. Consistent with the original theory, firms whose inventors have prior experience in a field are more likely to use locally available spillovers from other firms. No such localization occurs for within firm knowledge diffusion. The effects are stronger for collaborative inventors and more recent knowledge. (with Benjamin Balsmeier and Sonja Lück)
Contact person: Marina Chugunova
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