Do emerging countries prefer local knowledge or distant knowledge? Spillover effect of university collaborations on local firms

This study compares the university spillover effect of two types of knowledge, localized knowledge from domestic collaboration and distant knowledge from international collaboration, and investigates their spillover effect on local firms' innovation. The findings of this study challenge the conventional idea that international collaboration, especially collaboration with developed countries that possess frontier knowledge, better promotes innovation in developing countries. For the period from 1999 to 2004, only in first-tier regions of China do domestic and international university collaborations show a positive relation with local corporate innovation. In the period from 2005 to 2012, the positive spillover effect of both types of collaboration spreads to second-tier regions. However, international collaboration is negatively associated with firms' innovation in the least developed regions. Furthermore, domestic collaboration has shown a larger positive impact on corporate innovation than international collaboration in recent years. In our paper, the regional absorptive capacity was identified to explain this puzzle. We argue that the universities of relatively developed regions should build research collaborations with both local and global universities to promote local innovation. Conversely, for underdeveloped regions, universities should emphasize local technological demand rather than blindly pursue international collaboration.