We examine how the spatial and social proximity of inventors affects knowledge flows, focusing especially on how the two forms of proximity interact. We develop a knowledge flow production function (KFPF) as a flexible tool for modeling access to knowledge and show that the optimal spatial concentration of socially proximate inventors in a city or nation depends on whether spatial and social proximity are complements or substitutes in facilitating knowledge flows. We employ patent citation data, using same-MSA and co-ethnicity as proxies for spatial and social proximity, respectively, to estimate the key KFPF parameters. Although co-location and co-ethnicity both predict knowledge flows, the marginal benefit of co-location is significantly less for co-ethnic inventors. These results imply that dispersion of socially proximate individuals is optimal from the perspectives of the city and the economy. In contrast, for socially proximate individuals themselves, spatial concentration is preferred - and the only stable equilibrium.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
12823.
Length: Date of creation: Jan 2007 Date of revision: Handle: RePEc:nbr:nberwo:12823
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Find related papers by JEL classification: O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography) Z13 - Other Special Topics - - Cultural Economics - - - Social Norms and Social Capital; Social Networks Economic Anthropology
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