Reversed Citations and the Localization of Knowledge Spillovers

Spillover of knowledge is considered to be an important cause of agglomeration of inventive activity. Many studies argue that knowledge spillovers are localized based on the observation that patents tend to cite nearby patents disproportionately. Specifically, patent citations are interpreted as mapping the transmission of knowledge from the cited invention to the citing invention. The localization of patent citations is therefore taken as evidence that such knowledge transmission is also localized. Localization of knowledge transmission, however, may not be the only reason for why patent citations are localized. Using a set of citations that are unlikely to be associated with knowledge transmission from the cited to the citing invention, we present evidence that challenges the view that localization of citations is driven by localized knowledge transmission. Though localized knowledge transmission may well exist, it is unlikely to be captured by patent citations