i (2)
Knowledge is inherently nonrival in its use, and hence its creation and diffusion are likely to lead to spillovers and increasing returns; it is this nonrival property of knowledge that is at the theoretical heart of models that produce endogenous growth from research. But to the extent that the knowledge or technology flow is embodied in a purchased piece of equipment, it may not produce a spillover, or, if it does, the spillover may take the form of a pricing or pecuniary externality rather than a technological one (Griliches, 1979).
Knowledge spillovers are much harder to measure than technology transfer, precisely because they tend to be disembodied. In previous work (Jaffe and Trajtenberg, 1996; Jaffe, Henderson and Trajtenberg, 1993), we have looked at citations made by patents to previous patents as a “window” on the process of knowledge flow. Jaffe, Henderson and Trajtenberg, 1993, showed that patent citations do appear to be somewhat localized geographically, implying that a region or country does utilize knowledge created within it somewhat more readily than do more remote regions. In Jaffe and Trajtenberg, 1996, we went further, looking in detail at citations from other countries’ patents to those of the U.S. We showed there that there is a clear time path to the diffusion of knowledge, in which domestic inventors’ citation probabilities are particularly high in the early years after an invention is made.

While this previous work indicates the usefulness of patent citations for exploring knowledge flows, it also highlights the need for careful attention to the details of the patenting and citation processes. In particular, changes in citation practices, truncation biases, technology field effects, and the presence of large numbers of “self-citations” must all be taken into account in using citation data to examine knowledge flows.