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Proximity and Knowledge Spillovers: Evidence from the Introduction of New Airline Routes

Author

Listed:
  • John (Jianqiu) Bai

    (D’Amore-McKim School of Business, Northeastern University, Boston, Massachusetts 02115)

  • Wang Jin

    (Stanford Digital Economy Lab, Stanford Institute for Human-Centered Artificial Intelligence, Stanford University, Stanford, California 94305)

  • Sifan Zhou

    (Department of Public Finance, School of Economics, Xiamen University, Xiamen, Fujian 361005, China; Wangyanan Institute for Economic Studies, Xiamen University, Xiamen, Fujian 361005, China)

Abstract

This paper examines the causal relationship between proximity and knowledge diffusion by estimating the elasticity of core-based statistical area (CBSA) pair-level citations to variations in travel time induced by the introduction of new flight routes. The findings reveal that decreasing travel time between U.S. cities by 20% increases knowledge flow by 0.5%, which corresponds to an increase of over 15,000 citations at the aggregate level. Rather than boosting within-firm knowledge transfer, travel time reduction leads to a rise in knowledge spillovers primarily across firm boundaries, particularly among those that form joint ventures, have block holdings in each other, or form supply chain relationships. These effects are stronger among city pairs located farther away from each other, with higher absorptive capacity, in complex technology classes, and for newly developed technologies. Additional mechanism tests suggest that the most likely channel through which travel time reduction impacts knowledge spillover is by influencing the transfer of tacit knowledge via facilitating cross-CBSA inventor flow and information acquisition.

Suggested Citation

  • John (Jianqiu) Bai & Wang Jin & Sifan Zhou, 2024. "Proximity and Knowledge Spillovers: Evidence from the Introduction of New Airline Routes," Management Science, INFORMS, vol. 70(11), pages 7464-7485, November.
    • Handle: RePEc:inm:ormnsc:v:70:y:2024:i:11:p:7464-7485
    DOI: 10.1287/mnsc.2021.01717
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