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No2024-08–July
WorkingPaper
ThePercolationofKnowledge
\hacrossSpace
PierreCotterlazArthurGuillouzouic
Highlights
Weshowthatthenegativeeffectofgeographicaldistanceonknowledgeflowsstemsfromhowfirmsgain
sourcesofknowledgethroughtheirexistingnetwork.
Inaggregate,thedistanceelasticityofpatentcitationsflowshasremainedconstantsincethe1980s,despite
theriseoftheinternet.
Atthemicrolevel,firmsdisproportionatelyciteexistingknowledgesources,andpatentscitedbytheir
sources.
Weintroduceamodelfeaturingthelatterphenomenon,andgeneratinganegativedistanceelasticityin
aggregate.
Whilethedistanceeffectshouldhavedecreasedwithconstantcountrycomposition,theriseofEastAsianeconomies,associatedtolargedistanceelasticities,compensatedlowerfrictionsinothercountries.
CEPIIWorkingPaper ThePercolationofKnowledgeacrossSpace
Abstract
Thispapershowsthatthenegativeeffectofgeographicaldistanceonknowledgeflowsstemsfromhowfirmsgainsourcesofknowledgethroughtheirexistingnetwork.Westartbydocumentingtwostylizedfacts.First,inaggregate,thedistanceelasticityofpatentcitationsflowshasremainedconstantsincethe1980s,despitetheriseoftheinternet.Second,atthemicrolevel,firmsdisproportionatelyciteexistingknowledgesources,andpatentscitedbytheirsources.Weintroduceaframeworkfeaturingthelatterphenomenon,andgeneratinganegativedistanceelasticityinaggregate.ThemodelpredictsPareto-distributedinnovatorsizes,andcitationdistancesincreasingwithinnovatorsize.Thesepredictionsholdwellempirically.Weinvestigatechangesoftheunderlyingparametersandgeographicalcompositioneffectsovertheperiod.Whilethedistanceeffectshouldhavedecreasedwithconstantcountrycomposition,theriseofEastAsianeconomies,associatedtolargedistanceelasticities,compensatedlowerfrictionsin
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