From wires to Partners: How the Internet has Fostered R&d Collaborations among Firms

This paper studies how IT investments shape the geography of firm innovation. We focus on the role of investments by US firms in basic internet technology on the organization of innovation. We combine establishment-level IT investment data with data on US patenting activity at the MSA level. Our difference-in-difference econometric estimation approach compares the citationweighted count of co-invented patents among two firm locations before basic Internet technology diffused (i.e., 1992) to the count of patents after its diffusion (i.e., 1998). Our results show that when two firm locations adopt Internet technology, the number of cross-location collaborative patents between them increases compared to an otherwise identical pair without Internet technology. We further find that the link between Internet adoption and cross-location patenting is greatest for firm pairs that have previously been successful innovators, have not collaborated before, and which have different research foci.