In addition to artifacts of the citation process, the numbers in Figure 1 contain effects operating along the institutional and technological dimensions that interact non-randomly with geography. Not surprisingly, the probability that an inventor will cite another inventor employed by the same firm is much higher than the probability of citing a random inventor employed elsewhere. And, inventors employed by the same firm are more likely to live in the same country than random inventors employed by different firms. Hence the higher citation frequency for U.S. to U.S. than for Japan to U.S. is partly due to a higher citation frequency within firms, combined with a geographic localization of employees within firms. While for some purposes it might be appropriate to include this “firm self-citation” effect within what we call the geographic localization effect, for other purposes we may want to separate the two. Similarly, though ultimately less important empirically, an inventor is much more likely to cite previous patents that are in closely related technological fields to her own, and one might expect that inventors working in the same field are more likely to live in the same country. Again, we would like to be able to measure the geographic localization effect while controlling for technological localization effects. The econometric model that we develop below is meant to allow us to sort out and measure each of these different effects.

We are in the final stages of collecting from commercial sources a complete database on all U.S. patents granted since 1963. It includes data for each patent indicating the nature of the organization, if any, to which the patent property right was assigned; the names of the inventors and the organization, if any, to which the patent right was assigned; the residence of each inventor; the date of the patent application and the patent grant; a detailed technological classification for the patent; and miscellaneous other information. A file indicating all of the citations made by U.S. patents since 1977 to previous U.S. patents complements the data on individual patents. Using the citation information in conjunction with the detailed information about each patent itself, we have a rich mine of information about individual inventive acts and the links among them as indicated by citations made by a given patent to a previous one.