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Growth Through Inter-sectoral Knowledge Linkages

Author

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  • Jie Cai
  • Nan Li

Abstract

The majority of innovations are developed by multi-sector firms. The knowledge needed to invent new products is more easily adapted from some sectors than from others. We study this network of knowledge linkages between sectors and its impact on firm innovation and aggregate growth. We first document a set of sectoral-level and firm-level observations on knowledge applicability and firms’ multi-sector patenting behaviour. We then develop a general equilibrium model of firm innovation in which inter-sectoral knowledge linkages determine the set of sectors a firm chooses to innovate in and how much R&D to invest in each sector. It captures how firms evolve in the technology space, accounts for cross-sector differences in R&D intensity, and describes an aggregate model of technological change. The model matches new observations as demonstrated by simulation. It also yields new insights regarding the mechanism through which sectoral fixed costs of R&D affect growth.

Suggested Citation

  • Jie Cai & Nan Li, 2019. "Growth Through Inter-sectoral Knowledge Linkages," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 86(5), pages 1827-1866.
    • Handle: RePEc:oup:restud:v:86:y:2019:i:5:p:1827-1866.
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    File URL: http://hdl.handle.net/10.1093/restud/rdy062
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    Cited by:

    1. Huang, Jingong & Xie, Taojun, 2023. "Technology centrality, bilateral knowledge spillovers and mergers and acquisitions," Journal of Corporate Finance, Elsevier, vol. 79(C).
    2. Salome Baslandze, 2015. "The Role of the IT Revolution in Knowledge Diffusion, Innovation and Reallocation," 2015 Meeting Papers 1488, Society for Economic Dynamics.
    3. Salome Baslandze, 2016. "The Role of the IT Revolution in Knowledge Di ffusion, Innovation and Reallocation," 2016 Meeting Papers 1509, Society for Economic Dynamics.
    4. Yu, Nanpeng & Zhang, Shaorong & Qin, Jingtao & Hidalgo-Gonzalez, Patricia & Dobbe, Roel & Liu, Yang & Dubey, Anamika & Wang, Yubo & Dirkman, John & Zhong, Haiwang & Lu, Ning & Ma, Emily & Ding, Zhaoha, 2025. "Data-driven control, optimization, and decision-making in active power distribution networks," Applied Energy, Elsevier, vol. 397(C).
    5. Fronzetti Colladon, Andrea & Guardabascio, Barbara & Venturini, Francesco, 2025. "A new mapping of technological interdependence," Research Policy, Elsevier, vol. 54(1).
    6. Jesús Fernández-Villaverde & Yang Yu & Francesco Zanetti, 2025. "Defensive Hiring and Creative Destruction," NBER Working Papers 33588, National Bureau of Economic Research, Inc.
    7. Zenou, Yves & Huang, Jingong, 2020. "Key Sectors in Endogeneous Growth," CEPR Discussion Papers 15281, C.E.P.R. Discussion Papers.
    8. Liu, Zihua & Zhou, Sili, 2022. "Political favoritism towards resource allocation: Evidence of grants by natural science foundation in China," Emerging Markets Review, Elsevier, vol. 51(PA).
    9. Tomoya Mori & Shosei Sakaguchi, 2019. "Creation of knowledge through exchanges of knowledge: Evidence from Japanese patent data," Papers 1908.01256, arXiv.org, revised Aug 2020.
    10. Wang, Yafei & Shi, Ming & Liu, Junnan & Zhong, Min & Ran, Rong, 2025. "The impact of digital-real integration on energy productivity under a multi-governance framework: The mediating role of AI and embodied technological progress," Energy Economics, Elsevier, vol. 142(C).
    11. Ayerst, Stephen & Ibrahim, Faisal & MacKenzie, Gaelan & Rachapalli, Swapnika, 2023. "Trade and diffusion of embodied technology: an empirical analysis," Journal of Monetary Economics, Elsevier, vol. 137(C), pages 128-145.
    12. Hur, Wonchang, 2024. "Entropy, heterogeneity, and their impact on technology progress," Journal of Informetrics, Elsevier, vol. 18(2).
    13. Higham, Kyle & Contisciani, Martina & De Bacco, Caterina, 2022. "Multilayer patent citation networks: A comprehensive analytical framework for studying explicit technological relationships," Technological Forecasting and Social Change, Elsevier, vol. 179(C).

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    Keywords

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    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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