Knowledge Diffusion in the U.S. Supply Chain Network

This paper documents a positive impact of customer innovation on supplier innovation across US sectors. This result is robust with respect to innovations of other firms within the same industry (industry spillovers) as well as within the same regions (geographical spillovers). Our exploration of this transmission reveals that the relationship is more evident for suppliers with higher absorptive capacities and is not impacted by supplier industry competition. In addition to internal research and development, the results indicate that knowledge spillovers within the supply chain are an essential mechanism for levering innovative performances across all the U.S. industries