Olav Sorenson, Jan W. Rivkin, and Lee Fleming
Because knowledge plays an important role in the creation of wealth, economic actors often wish to skew the ﬂow of knowledge in their favor. We ask, when will an actor socially close to the source of some knowledge have the greatest advantage over distant actors in receiving and building on the knowledge? Marrying a social network perspective with a view of knowledge transfer as a search process, we argue that the value of social proximity to the knowledge source depends crucially on the nature of the knowledge at hand. Simple knowledge diffuses equally to close and distant actors because distant recipients with poor connections to the source of the knowledge can compensate for their limited access by means of unaided local search. Complex knowledge resists diffusion even within the social circles in which it originated. With knowledge of moderate complexity, however, high-ﬁdelity transmission along social networks combined with local search allows socially proximate recipients to receive and extend knowledge generated elsewhere, while interdependencies stymie more distant recipients who rely heavily on unaided search. To test this hypothesis, we examine patent data and compare citation rates across proximate and distant actors on three dimensions: (1) the inventor collaboration network; (2) ﬁrm membership; and (3) geography. We ﬁnd robust support for the proposition that socially proximate actors have the greatest advantage over distant actors for knowledge of moderate complexity. We discuss the implications of our ﬁndings for the distribution of intra-industry proﬁts, the geographic agglomeration of industries, the design of social networks within ﬁrms, and the modularization of technologies.