Localization of knowledge-creating establishments

This study investigates the localization of establishment-level knowledge creation using data from a Japanese patent database. Using distance-based methods, we obtain the following results. First, Japanese knowledge-creating establishments defined by patenting experience are significantly localized at the 5% level, with a localization range of approximately 80 km. Second, localization is observed for all patent technology classes, and the extent of localization has a positive relationship with the level of technology measured by R&D investment. Finally, the extent of localization is stronger for establishments that are more productive in terms of both the number of patents and the number of citations received, i.e., quantitatively and qualitatively. These results indicate that geographical proximity is important for knowledge spillover, particularly for establishments that demand external knowledge intensively.