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

Author Info

  • Rachel Griffith
  • Sokbae Lee
  • John Van Reenen

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 Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0818.

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Date of creation: Aug 2007
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Handle: RePEc:cep:cepdps:dp0818
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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

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Find related papers by JEL classification:
  • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
  • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
  • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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