Knowledge flows between universities and industry: the impact of distance, technological compatibility, and the ability to diffuse knowledge

This paper uses citations to university-issued patents to investigate the knowledge flow from 91 US research universities to businesses assigned to 142 US cities or metropolitan areas (MSAs) from which they filed their patent applications. The citation of university patents depends on the various types of separation between the universities (origin) and businesses (destination) measured by distance, technological compatibility, and the presence of a state or local border. The analysis also accounts for university and citing region fixed effects. We use these to report original measures of the ability of universities to diffuse knowledge and the capacity of firms in MSAs to absorb university knowledge. We find that citations to university patents are significantly higher for universities in the same location as the citing firms, and the same location effect is greater for public than private universities. The distance indicator variables show that citations at distances beyond 50 miles are not different from citations beyond 2000 miles. Technological compatibility of university and industry patents has a large impact on university patent citations and exhibits considerably variation across university–MSA/city pairs. MIT has the largest fixed effect (diffusion) estimate, and its value is more than twice the diffusion estimate of Stanford, the university with the second highest value. The academic quality of universities and characteristics of their technology transfer office are found to positively impact the ability of universities to diffuse knowledge.