Cross-firm inventors and social networks: localised knowledge spillovers revisited

The paper explores the role of inventors’ mobility and social networks in generating localized knowledge flows. Using a sample of Italian inventors, we replicate Jaffe’s, Trajtenberg’s, and Henderson’s [1993] test on patent citations and find similar results. We then control for the role of “crossfirm inventors” (inventors who move across, or do research for different companies), who generate personal self-citations and help creating social links across companies by entering various teams of inventors, which in turn will cite each others’ patents. When controlling for personal self-citations, no localization of knowledge flows remains to be seen at the city or province level. What remains of localization effects at the regional level diminishes sensibly after controlling also for the social ties between inventors from cited, citing, and control patents. Knowledge flows thus appear to be localized to the extent that crossfirm activity of inventors and the resulting social networks are also localized. The weight of personal self-citations suggests that frequent interpretations of localized knowledge flows as spillovers, that is externalities, may be misplaced