Does micro-geographical proximity matter for knowledge spillovers? Evidence from the quasi-natural experiment of university relocation in China

With the rapid development of knowledge economy, much attention has been paid to establishing university-based innovation zones, which are often believed to facilitate knowledge spillovers from universities to enterprises. However, relatively little is known about the impact of micro-geographical proximity between universities and firms on knowledge spillovers. This paper employs university relocation as a quasi-natural experiment to explore the effective scale and the causal impact of geographical proximity on knowledge spillovers of 98 Chinese universities, as represented by patent citations. Empirical results, based on difference-in-difference strategy and an instrumental variable approach, suggest that university relocation significantly promotes knowledge spillovers to both local and non-local firms. Moreover, universities that have established their new campuses in areas with more local enterprises tend to generate more knowledge spillovers after relocation. The effect of micro-geographical proximity is further verified through a comparative analysis of two specific cases.