DP12268 Network-Mediated Knowledge Spillovers: A Cross-Country Comparative Analysis of Information Security Innovations

Author(s): Lee Branstetter, Neil Gandal, Nadav Kunievsky
Publication Date: September 2017
Keyword(s): Information Security, Knowledge Spillovers, patents
JEL(s): O31, O33, O57
Programme Areas: Industrial Organization
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12268

A large and growing literature has used patent and patent citation data to measure knowledge spillovers across inventions and organizations, but relatively few papers in this literature have explicitly considered the collaboration networks formed by inventors as a mechanism for shaping and transmitting these knowledge flows. This paper utilizes an approach developed by Fershtman and Gandal (FG 2011) (and applied to Open Source Software) to examine the incidence and nature of knowledge flows mediated by the collaboration networks of inventors active in the information security industry. This is an industry in which a number of nations outside the United States, including Israel, have emerged as important centers of innovation. Israeli prominence in this sector is often attributed, in part, to a dense network of personal collections and collaborations that has its genesis in elite intelligence units in the Israeli Defense Forces, through which many Israeli information security inventors and entrepreneurs receive their first exposure to this domain. Using data from U.S. PTO patent grants in information security, we find that the quality of Israeli information security inventions is systematically linked to the structure of the collaborative network generated by Israeli inventors in this sector. Using the FG (2011) model, this suggests that there are knowledge spillovers from the network. In some other nations, invention quality is less closely linked to the collaboration networks of inventors. This research highlights the importance of direct interaction among inventors as a conduit for flows of frontier scientific knowledge.