Time is the enemy: The speed of proximity-based knowledge diffusion

Abstract

Does knowledge spread more quickly when firms are geographically closer? Focusing on knowledge diffusion from multinational enterprises (MNEs) subsidiaries in the context of the US semiconductor industry, our analysis suggests that the broader MNE patents are, in terms of the knowledge sources they draw on, the slower the speed of knowledge diffusion to more spatially proximate firms, compared to more distant ones. Moreover, our findings suggest that this outcome could be attributed to a greater reliance on knowledge sources that are internal to the MNE network or located geographically distant. We provide interpretative cues for these findings and provide policy recommendations in line with our results.