Geographic Distance between Co-inventors and Firm Performance: The Moderating Roles of Inter-firm and Cross-country Collaborations

Abstract

Firms use strategic collaborations to reduce costs and increase productivity through shared technological capabilities, knowledge and resources. However, technological collaboration over geographic distance involves the risks of facing communication problems including vulnerability to the language difference, cultural issues, and political barriers. Consequently, firms engaging in technical collaborations across different locations often face higher communication (and other distance-related) costs, which in turn could affect their financial performance. This paper investigates the relationship between inventor distance and firm performance by employing panel fixed effect quantile regression techniques with interaction variables on a sample of 556 firms. The study finds empirical evidence that the geographic distance between collaborating inventors has a positive effect on firm performance. This effect is stronger in companies that engage in inventor collaborations across international borders and weaker in multi-national corporations that rely only on intra-firm inventor collaborations.