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Industry Localization, Distance Decay, and Knowledge Spillovers: Following the Patent Paper Trail

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  • Octávio Figueiredo

    (Universidade do Porto)

  • Paulo Guimarães

    (American University of Sharjah)

  • Douglas Woodward

    (University of South Carolina)

Abstract

This paper investigates the hypothesis that knowledge spillovers increase where industries are localized. At the same time, we take a fresh look at the role of distance in knowledge diffusion. Our unique database combines U.S. county-level patent citation data with county-level establishment and employment data. Relying on a cited-citing gravity equation with high-dimensional fixed effects that control for multiple sources of observed and non-observed heterogeneity, we implement a Poisson pseudo-maximum-likelihood estimator. Our results confirm the negative role of distance uncovered in Jaffe, Trajtenberg & Henderson's (1993) pioneering work. We also find that knowledge spillovers correlate positively with industry localization and that the agglomeration of an industry can offset the effect of distance. Our approach to estimate the Poisson regression with two high-dimensional fixed effects may prove equally useful in applications to a variety of other problems in economics.

Suggested Citation

  • Octávio Figueiredo & Paulo Guimarães & Douglas Woodward, 2014. "Industry Localization, Distance Decay, and Knowledge Spillovers: Following the Patent Paper Trail," FEP Working Papers 521, Universidade do Porto, Faculdade de Economia do Porto.
  • Handle: RePEc:por:fepwps:521
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    8. Claire Brunel & Thomas Zylkin, 2022. "Do cross‐border patents promote trade?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(1), pages 379-418, February.
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    10. Christian Rammer & Jan Kinne & Knut Blind, 2020. "Knowledge proximity and firm innovation: A microgeographic analysis for Berlin," Urban Studies, Urban Studies Journal Limited, vol. 57(5), pages 996-1014, April.
    11. Wang, Jiating & Cai, Siyuan, 2020. "The construction of high-speed railway and urban innovation capacity: Based on the perspective of knowledge Spillover," China Economic Review, Elsevier, vol. 63(C).
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    14. Cirlene Maria de Matos & Eduardo Gonçalves & Ricardo da Silva Freguglia, 2021. "Knowledge diffusion channels in Brazil: The effect of inventor mobility and inventive collaboration on regional invention," Growth and Change, Wiley Blackwell, vol. 52(2), pages 909-932, June.
    15. Marcos Y. Nakaguma & Brandon J. Restrepo, 2018. "Restricting access to alcohol and public health: Evidence from electoral dry laws in Brazil," Health Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 141-156, January.
    16. Zhang, Hongyan & Zhang, Lin, 2023. "Public support and energy innovation: Why do firms react differently?," Energy Economics, Elsevier, vol. 119(C).
    17. Amitrajeet A. Batabyal & Hamid Beladi, 2022. "The Response of Creative Class Members to Regions Vying to Attract Them With Subsidies," International Regional Science Review, , vol. 45(5), pages 581-600, September.
    18. Leal, Ana R. & Husted, Bryan W. & Flores Segovia, Miguel Alejandro, 2021. "Environmental performance spillovers among Mexican industrial facilities: The case of greenhouse gases," Journal of Business Research, Elsevier, vol. 135(C), pages 711-720.
    19. Ascani, Andrea & Balland, Pierre-Alexandre & Morrison, Andrea, 2020. "Heterogeneous foreign direct investment and local innovation in Italian Provinces," Structural Change and Economic Dynamics, Elsevier, vol. 53(C), pages 388-401.
    20. Li Fang, 2020. "Agglomeration and innovation: Selection or true effect?," Environment and Planning A, , vol. 52(2), pages 423-448, March.
    21. Pfaffermayr, Michael, 2020. "Constrained Poisson pseudo maximum likelihood estimation of structural gravity models," International Economics, Elsevier, vol. 161(C), pages 188-198.

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    More about this item

    Keywords

    Knowledge Spillovers; Agglomeration; Gravity Equation; High-Dimensional Fixed Effects; Poisson Regression.;
    All these keywords.

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R39 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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