Working Paper: NBER ID: w12823
Authors: Ajay Agrawal; Devesh Kapur; John McHale
Abstract: We examine how the spatial and social proximity of inventors affects knowledge flows, focusing especially on how the two forms of proximity interact. We develop a knowledge flow production function (KFPF) as a flexible tool for modeling access to knowledge and show that the optimal spatial concentration of socially proximate inventors in a city or nation depends on whether spatial and social proximity are complements or substitutes in facilitating knowledge flows. We employ patent citation data, using same-MSA and co-ethnicity as proxies for spatial and social proximity, respectively, to estimate the key KFPF parameters. Although co-location and co-ethnicity both predict knowledge flows, the marginal benefit of co-location is significantly less for co-ethnic inventors. These results imply that dispersion of socially proximate individuals is optimal from the perspectives of the city and the economy. In contrast, for socially proximate individuals themselves, spatial concentration is preferred - and the only stable equilibrium.
Keywords: knowledge flows; ethnic inventors; spatial distribution; social proximity; colocation
JEL Codes: O33; R12; Z13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| colocation (L24) | probability of citation being actual citation (A14) |
| coethnicity (J15) | probability of citation being actual citation (A14) |
| colocation and coethnicity (R23) | knowledge flows (O36) |
| colocation (L24) | knowledge flows for noncoethnic inventors (O36) |
| coethnicity (J15) | knowledge flows for coethnic inventors (O36) |
| interaction of colocation and coethnicity (R23) | knowledge flows (O36) |