Spreading big ideas? the effect of top inventing companies on local inventors

carlo menon;

The article investigates whether the patenting activity of the most inventive companies has any causal effect on the number of patents granted to other local inventors in the same metropolitan area in USA. Economic theory predicts that positive agglomeration economies may be counterbalanced by upward pressure on wages, which are stronger
within technological classes in the short term. The empirical analysis exploits the panel structure of the dataset to account for various fixed effects, and adopts an instrumental variable approach to prove causality. The results show that the effect is overall positive and stronger with a time lag. In addition, the effect is not bounded
within narrow technological categories, suggesting that Jacob-type knowledge spillovers across sectors tend to prevail over other source of agglomeration economies within sectors, including sharing and matching mechanisms. The implications for local development policy are discussed.