Reversed citations and the localization of knowledge spillovers

Abstract

Spillover of knowledge is considered to be an important cause of agglomeration of inventive activity. Many studies argue that knowledge spillovers are localized based on the observation that patents tend to cite nearby patents disproportionately. Specifically, patent citations are typically interpreted as marking the transmission of knowledge from the cited invention to the citing invention. The localization of patent citations is therefore taken as evidence that such knowledge transmission is also localized. Localization of knowledge transmission, however, may not be the only reason that patent citations are localized. Using a set of citations that are unlikely to be associated with knowledge transmission from the cited to the citing invention, we present evidence that challenges the view that localization of citations is driven by localized knowledge transmission. While we are silent on the question of whether knowledge transmission is localized, to the extent that such localization exists, we argue that it is unlikely to be captured by patent citations.