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Borders and Distance in Knowledge Spillovers : Dying over Time or Dying with Age ? – Evidence from Patent Citations

This paper uses a gravity framework to investigate the effects of distance as well as subnational and national borders in knowledge spillovers. Drawing on the NBER Patent Citations Database, we construct a data set to examine patent citations data at the metropolitan level within the U.S. as well as the 38 largest patent-cited countries outside the U.S. Three key findings are documented. First, we find strong subnational localization effects at the Metropolitan Statistical Area and state levels: more than 90% of intranational border effects stem from the metropolitan level rather than state. This is consistent with the artifact of geographic aggregation at the state level for trade flows as in Hillberry and Hummels (2008). Second, border and distance effects decrease with the age of cited patent, which implies that new knowledge faces the largest barriers to diffusion. However, over time, the measured effects of border and distance increased due to two potential reasons: the increased proportion of new knowledge flows and the increased proportion of self-citations over time. Finally, we find that (assignee) self-citations and aggregation bias are two sources of overestimated aggregate border effects of knowledge spillovers. While self-citations are only 11% of total citations, they account for approximately 50% of MSA and national border effects. Decomposing the data along geographic, age or industrial dimensions contributes to the reduction of border effects.