K nowledge, once generated, spills only imperfectly among firms and nations. We posit that since institutions and labor networks vary by region, there should be regional variations in the localization of spillovers. We investigate the relationship between the mobility of major patent holders and the localization of technological knowledge through the analysis of patent citations of important semiconductor innovations. We find that knowledge localization is specific to only certain regions (particularly Silicon Valley) and that the degree of localization varies across regions. By analyzing data on the interfirm mobility of patent holders, we empirically show that the interfirm mobility of engineers influences the local transfer of knowledge. The flow of knowledge is embedded in regional labor networks. (Knowledge; Spillovers; Mobility; Regions; Networks) Ideas, because they have no material content, should be the least spatially-bounded of all economic activities. Being weightless, their transport is limited only by the quality and availability of communication. Since ideas serve both as the inputs and outputs in their own production, their location need be constrained neither by the happenstance of the spatial distribution of raw materials, energy, and labor, nor by that of demand and markets.Yet, there is good reason to believe that the production of ideas may be, contrary to its economics, prescribed within spatial boundaries. In his comparative analysis of nations published in Industry and Trade (1920), Alfred Marshall noted that economic activity was drawn to regions rich in the "atmosphere" of ideas. Vibrant regions are those that produce knowledge externalities that denote the spillover of ideas from innovating firms to other firms. 1 The existence of these stable regions implies that these externalities are also localized; that is, they do not spill perfectly over spatial borders. Yet, the economic treatment of externalities largely assumes them to be "there"-such as embodied in capital goods-rather than a property that itself deserves to be explained. Knowledge externalities, however, are not simply generated by a given technology. The relationship among firms, universities, star scientists, and engineers strongly conditions the extent by which knowledge spills over. The importance of regions in economic development has been a persistent, though often lost, theme in economic sociology. Jane Jacobs (1969) put forth an argument that the growth of cities is based on a positive cycle of linkages among industries; the social and economic linkages among diverse activities gen- 1 We use externalities and knowledge spillovers interchangeably to denote the benefit of knowledge to people, or to firms, not responsible for the original investment in the creation of this knowledge.2 See Allison and Long (1987) for evidence that institutional affiliation provides a significant spur to productivity; also Crane (1965) on invisible colleges, and Brown and Deguid (1991) on communities of practice.

Recent research suggests that, due to organizational and relational constraints, firms are limited contextually---both geographically and technologically---in their search for new knowledge. But distant contexts may offer ideas and insights that can be extremely useful to innovation through knowledge recombination. So how can firms reach beyond their existing contexts in their search for new knowledge? In this paper, we suggest that two mechanisms---alliances and the mobility of inventors---can serve as bridges to distant contexts and, thus, enable firms to overcome the constraints of contextually localized search. Through the analysis of patent citation patterns in the semiconductor industry, we first demonstrate both the geographic and technological localization of knowledge. We then explore if the formation of alliances and mobility of active inventors facilitate interfirm knowledge flows across contexts. We find that mobility is associated with interfirm knowledge flows regardless of geographic proximity and, in fact, the usefulness of alliances and mobility increases with technological distance. These findings suggest that firms can employ knowledge acquisition mechanisms to fill in the holes of their existing technological and geographic context.Knowledge, Alliances, Mobility, Patents, Localization

To investigate the conditions under which learning-by-hiring (or the acquisition of knowledge through the hiring of experts from other firms) is more likely, we study the patenting activities of engineers who moved from United States (U.S.) firms to non-U.S. firms. Statistical findings from negative binomial regressions show that mobility is more likely to result in interfirm knowledge transfer when (1) the hiring firm is less path dependent, (2) the hired engineers possess technological expertise distant from that of the hiring firm, and (3) the hired engineers work in noncore technological areas in their new firm. In addition, the results support the idea that domestic mobility and international mobility are similarly conducive to learning-by-hiring. Thus, our paper suggests that learning-by-hiring can be useful when hired engineers are used for exploring technologically distant knowledge (rather than for reinforcing existing firm expertise) and also for extending the hiring firm's geographic reach.

This paper studies the influence of external knowledge on innovation in subsidiaries of multinational firms. The focus on subsidiaries is especially interesting since they are simultaneously embedded in two knowledge contexts: (a) the internal multinational corporation (MNC) comprised of the headquarters and other subsidiaries; and (b) an external environment of regional or host country firms. We develop hypotheses to suggest that the extent of influences of these contexts on subsidiary technological innovation depends on the characteristics of the knowledge network (technological richness and diversity) and the knowledge linkages of the subsidiary with other entities. The study uses patent citation data pertaining to innovations by foreign subsidiaries of U.S. semiconductor firms to test these hypotheses. The paper finds that (a) the technological richness of the MNC, (b) the subsidiary's knowledge linkages to host country firms, and (c) the technological diversity within the host country have a positive impact on innovation.

Do multinationals go abroad to acquire technological knowledge? Do they also contribute knowledge locally? We investigate the learning and contribution patterns of multinational firms in the U.S. semiconductor industry through the analysis of citations to their patents and through field interviews. We find that the knowledge used in innovation by foreign subsidiaries in U.S. regions is predominantly local (at the regional and country level). In fact. foreign firms use regional knowledge significantly more than similar domestic firms. In the case of European and Korean firms. foreign investment is directed towards offsetting home country technological weaknesses. The study finds that foreign firms also contribute to local technological progressa significant proportion of the citations to their patents are local. Local learning without contributing may not be possible.

Subsidiaries of multinational firms play an important role in the globalization of innovation, yet we have an incomplete idea of the influences on their innovative activity. Drawing on prior research in international business and strategy, we identify two sets of factors that influence the absorption and utilization of knowledge in multinational corporation subsidiaries: (a) the range of external and internal knowledge sources available; and (b) the subsidiary capabilities associated with knowledge absorption and utilization. We find that knowledge absorbed from the host country is useful to subsidiary innovation. We also find support for the role of subsidiary capabilities: both sourcing capability and combinative capability have a significant influence on the scale and quality of innovation. Journal of International Business Studies (2008) 39, 901–919. doi:10.1057/palgrave.jibs.8400383

Are multinational corporations (MNCs) superior to strategic alliances and markets in facilitating the flow of knowledge across borders? If so, what are the sources of this superiority? Despite their central importance to the theory and practice of international management, these questions have not been directly tested. Our paper seeks to address this gap in empirical research. Drawing upon recent research on multinational corporations and the knowledge-based view of the firm, we develop hypotheses regarding the relative superiority of alternative institutional arrangements as regards cross-border knowledge building. Analysis of patent citations by semiconductor companies points to the superiority of multinational firms over both alliances and markets in cross-border knowledge building. Interviews with engineers and managers in MNCs point to the intertwining of codified and tacit knowledge and; therefore, the need for both formal and informal mechanisms for successful knowledge building. Our findings suggest that the superiority of MNCs stems from the firms' ability to use multiple mechanisms of knowledge transfer flexibly and simultaneously to move, integrate, and develop technical knowledge. Our research, therefore, suggests that the challenge of knowledge management for MNCs extends beyond the creation of international information systems, to the design of organizational structures, systems, and culture capable of supporting the flow of knowledge.

An important area of investigation in the field of entrepreneurship examines how people and organizations exploit technological opportunities. Prior research suggests that alliances, the mobility of experts, and the informal mechanisms associated with geographic co-location can present firms with useful opportunities to source technological knowledge. This paper uses insights from strategic management and organizational theory to suggest that organizational size may have an important impact on the extent of external learning, since it differentially affects the likelihood of learning via formal and informal mechanisms. Examining a cross-section of semiconductor startups, we find that external learning increases with startup size. With regard to the specific mechanisms of learning, we find that firms learn from alliances regardless of their size. For the informal mechanisms of mobility and geographic co-location, however, learning decreases with firm size. These results suggest that as startups grow, they may have increasing opportunities to access and exploit external knowledge, but their motivation (and hence ability) to learn from more informal sources may decrease.