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Is Distance Dying at Last? Falling Home Bias in Fixed Effects Models of Patent Citations

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  • Griffith, Rachel
  • Lee, Sokbae
  • Van Reenen, John

Abstract

We examine the 'home bias' of international knowledge spillovers as measured by the speed of patent citations (i.e. knowledge spreads slowly over international boundaries). We present the first compelling econometric evidence that the geographical localization of knowledge spillovers has fallen over time, as we would expect from the dramatic fall in communication and travel costs. Our proposed estimator controls for correlated fixed effects and censoring in duration models and we apply it to data on over two million citations between 1975 and 1999. Home bias declines substantially when we control for fixed effects: there is practically no home bias for the more 'modern' sectors such as pharmaceuticals and information/communication technologies.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6435.

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Date of creation: Sep 2007
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Handle: RePEc:cpr:ceprdp:6435

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Keywords: fixed effects; home bias; knowledge spillovers; patent citations;

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References

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  1. Head, Charles Keith & Mayer, Thierry & Ries, John, 2007. "How Remote is the Offshoring Threat?," CEPR Discussion Papers 6542, C.E.P.R. Discussion Papers.
  2. Peter Thompson & Melanie Fox Kean, 2004. "Patent Citations and the Geography of Knowledge Spillovers: A Reassessment," Working Papers 0401, Florida International University, Department of Economics.
  3. Sokbae 'Simon' Lee, 2003. "Estimating panel data duration models with censored data," CeMMAP working papers CWP13/03, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  4. Joel Horowitz & Sokbae 'Simon' Lee, 2002. "Semiparametric estimation of a panel data proportional hazards model with fixed effects," CeMMAP working papers CWP21/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
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  6. Rachel Griffith & Stephen Redding & John Van Reenen, 2004. "Mapping the Two Faces of R&D: Productivity Growth in a Panel of OECD Industries," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 883-895, November.
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  18. Wooldridge, Jeffrey M., 2007. "Inverse probability weighted estimation for general missing data problems," Journal of Econometrics, Elsevier, vol. 141(2), pages 1281-1301, December.
  19. Rachel Griffith & Rupert Harrison & John Van Reenen, 2004. "How Special is the Special Relationship? Using the Impact of US R&D Spillovers on UK Firms as a Test of Technology Sourcing," CEP Discussion Papers dp0659, Centre for Economic Performance, LSE.
  20. James Harrigan & Carolyn Evans, 2004. "Distance, Time and Specialization," Econometric Society 2004 North American Winter Meetings 640, Econometric Society.
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  25. Branstetter, Lee G., 2001. "Are knowledge spillovers international or intranational in scope?: Microeconometric evidence from the U.S. and Japan," Journal of International Economics, Elsevier, vol. 53(1), pages 53-79, February.
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