Replication data for: The Social Return of Research and Development Spending: Flux in Technology and Product Space Over Time

Abstract: To what extent is a firm's performance influenced by the R &D activity of its neighbors? As Bloom et al. (2013) explains, the key empirical challenge of this question is in separately quantifying the positive effect of knowledge diffusion from the negative effect of market rivalry. Bloom et al. (2013) address this challenge by assessing firm closeness along two separate dimensions: in product space (using sales activity broken down by industry) and technology space (using patenting activity across technology fields). We extend these findings by generati ng a time-varying measure of firm distances in technology space. We conclude that the strength of the positive effect of technology spillover derived in Bloom et al. (2013) hinges on the assumption that firm distances are static. In addition, we identify a source of asymmetry in the measurement error of distances in technology and product space. We find that after rescaling the market rivalry effect with our estimate of measurement error, the market rivalry effect overpowers that of technology diffusion so that firms must be closer in technology space than they are in product space for their R &D spending to net a positive effect on their peers