Ties that Bind: Residual Spillovers When an Inventor Moves

Study Hints at Why TBED Is Good National Investment

Much can be made about the spillover benefits of having a strong research university or cluster of similar technology companies locally. As a result many research institutions and technology-based economic development (TBED) professionals support the creation of endowed chairs and centers of excellence to lure top researchers, hoping for long-term economic benefits from the investment. The heightened interest that most states and universities have placed on becoming a biotech leader, for example, has many policy analysts expecting the end result will simply be to increase the asking price of the top life science researchers.

But does this TBED strategy result in the same net loss or zero gain on the macro level that is encountered from the traditional economic development recruitment approach commonly referred to as smokestack chasing? Put another way, is all lost when a key researcher or inventor moves outside the local community?

New research published through the National Bureau of Economic Research (NBER) suggests not. In fact, Gone But Not Forgotten: Labor Flows, Knowledge Spillovers, and Enduring Social Capital reports patent citations occur disproportionately more often in locations where an inventor was living prior to being issued the patent.

The result is that while the new home of the inventor will accrue the expected benefits of proximity, there are additional "residual" benefits for the originating community so that not all is lost. Residual spillovers arise from local familiarity with the inventors' research and the social and professional relationships maintained after the inventor moves on.

Statistical evidence based on patent citations is presented within the study that is consistent with the idea that investments in social capital help to facilitate communication between individuals, who were previously situated in the same location but are now geographically separated. The authors find evidence of what they term a “prior location premium.” As a result, the prior location may retain some degree of favored access to the knowledge generated by the departed inventor.

The authors also find the proportionate increase in knowledge spillovers attributed to co-location is greater for spillovers across technology fields than for spillovers within technology fields. Researchers who are interested in related problem areas are likely to correspond with each other via means such as conferences, publications and trade shows such that being located in the same area is less important for assisting in knowledge spillovers. The report posits that both current and prior co-location increase the likelihood of cross-field spillovers, proportionately, than within-field spillovers.

While additional research is warranted, the policy implications for local TBED groups might suggest encouraging greater social and professional interaction among the local research and technical communities.

Gone But Not Forgotten: Labor Flows, Knowledge Spillovers, and Enduring Social Capital can be purchased at: http://papers.nber.org/papers/W9950