Digital technology adoption and knowledge flows within firms: Can the Internet overcome geographic and technological distance?

Abstract

Under what conditions does digital technology adoption increase cross location knowledge flows within firms? We investigate this question by studying the impact of adopting basic Internet access on cross-location knowledge flows within the same firm. We construct a large data set of Internet adoption and patent citations among dyadic pairs of firm-locations between 1992-1998. We find that when both locations in the pair adopt basic Internet there is an increase in the likelihood of a citation between the citing and (potential) cited location. In contrast, we find no significant effect of Internet adoption at only the citing location. We further study how this effect varies according to the proximity of the research activities between the source and recipient of knowledge and specialization of the research activities within the recipient. We find that the likelihood of a citation increases more after dyadic Internet adoption when the pair is working in similar research areas and when the research areas in the citing location are less specialized. These results, which are robust to a range of robustness analyses, suggest that digital technologies such as Internet connectivity are able to facilitate knowledge flows between locations only when they share a common knowledge base.

ICT, Collaboration, and Science-Based Innovation: Evidence from Bitnet

“…In line with our results, Kleis et al (2012) find a positive effect of general IT investments on firm innovation. We provide new evidence for a positive impact of ICT on the productivity of inventors in a setting where the change in communication costs due to ICT is likely larger than in the later years studied in Forman and van Zeebroeck (2012).…”

“…One reason why BITNET may lead to more patenting is easier team formation (Agrawal and Goldfarb, 2008;Ding et al, 2010;Forman and van Zeebroeck, 2012). For example, e-mail and discussion forums made it easier to identify potential collaborators with complementary capabilities.…”

“…Our findings contribute to the literature on ICT and knowledge production by showing a large positive effect of ICT on science-based patenting. The most closely related paper is Forman and van Zeebroeck (2012) that analyzes the effect of basic internet on the productivity of inventors in firms. They do not find any effect.…”

“…This paper also extends the literature on the effect of ICT on productivity and growth to innovation. Recently, there have been contributions on the impacts of ICT on knowledge spillovers, firm productivity, and firm organization (Huang et al, 2016;Saunders and Brynjolfsson, 2016;Forman and McElheran, 2019;Forman and van Zeebroeck, 2019). On the macro level, Czernich et al (2011) show that increases in broadband penetration raise annual per capita growth in OECD countries.…”

The Interaction between Internet, Sustainable Development, and Emergence of Society 5.0

“…They will enable the advanced processing and dissemination of knowledge at local and global levels while incorporating conscious intellectual activities. For example, advanced web applications and multimedia search engines will be developed to make knowledge available to both human users and devices or things [133,134].…”