The Percolation of Knowledge across Space

65 Pages Posted: 29 Jul 2017 Last revised: 16 Jul 2020

See all articles by Pierre Cotterlaz

Pierre Cotterlaz

Sciences Po - Department of Economics

Arthur Guillouzouic

Institut des politiques publiques (PSE); Sciences Po - Department of Economics

Date Written: July 1, 2020

Abstract

This paper sheds new light on the negative effect of spatial distance on knowledge flows. We show that it is rooted in the dynamics of the innovation network formation over firms' life-cycles: young and small firms have contacts near them, and progressively expand their network. Using patent citations, we show that knowledge percolates: firms disproportionately cite new patents from prior contacts, and form links with contacts of their contacts. A network formation model that builds on these facts yields two predictions which are met in the data: firm sizes follow a Pareto distribution, and larger firms cite further away. Combining these two facts naturally explains an effect of distance and implies that small firms are its main contributors.

Keywords: knowledge diffusion; innovation networks; spatial frictions; patent citations

JEL Classification: L14; O33; R12

Suggested Citation

Cotterlaz, Pierre and Guillouzouic, Arthur, The Percolation of Knowledge across Space (July 1, 2020). Available at SSRN: https://ssrn.com/abstract=3010092 or http://dx.doi.org/10.2139/ssrn.3010092

Pierre Cotterlaz

Sciences Po - Department of Economics ( email )

28, rue des Saints-Pères
Paris, Paris 75007
France

Arthur Guillouzouic (Contact Author)

Institut des politiques publiques (PSE) ( email )

48 boulevard Jourdan
Paris, 75014
France

Sciences Po - Department of Economics ( email )

28, rue des Saints-Pères
Paris, Paris 75007
France

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