Physically Proximate or Culturally Cohesive? Geography, Ethnic Ties, and Innovation in China

Recent scholarship suggests that collaboration between a firm’s headquarters personnel and indigenous overseas inventors enhances innovation by the latter. We explore how headquarters inventors’ physical proximity and intrafirm ethnic networks influence this knowledge spillover. Data from 104 U.S. multinational firms show that collaboration between inventors in the U.S. and on-site collaboration in China increase the number of inventions created by indigenous Chinese inventors. A cohesive intrafirm ethnic Chinese collaboration network strengthens knowledge spillover.