Seeking Technology from Different Sources: Evidence from Firm Location Decisions

Abstract

Do firms take advantage of differences in innovation across locations? Recent research establishes that firms, motivated by geographic differences in technological capabilities, locate close to innovation sources to seek technology. We explore which technology sources attract firms and how firm-specific technical capabilities affect preferences for technological sources. Using foreign firms entering the US from 1985-1994, we find that firms are more attracted to locations with high levels of industrial and academic activity measured as patent stocks. Governmental activity does not have any effect in location decisions. Interestingly, while technologically lagging firms favor locations with any level of academic or industrial activity, technologically advanced firms avoid locations with low levels of industrial and academic activity and are indifferent to locations with high levels of both.

Keywords: knowledge exploration, technology spillovers, FDI, location choice

JEL Classification: F23, R30, L21