Cross-Border Commuters and Knowledge Diffusion

Patents disclose knowledge, but this disclosure is often insufficient to put the knowledge into practice and use it for cumulative innovation. Firms rely on workers possessing tacit knowledge or specific skills to effectively build on the ideas of others. In this study, we examine the effects of Swiss firms’ expanded access to the German labor market on the diffusion of knowledge developed in Germany to Switzerland. We investigate the impact of a reform implemented in 2002 that lifted the restrictions Swiss firms previously faced in hiring German cross-border commuters. We find that after the reform, Swiss firms are more likely to cite and file patents that are textually similar to German patents that originated within a short commuting distance to the Swiss border. The effects are stronger for patented inventions at intermediate technological distances and are concentrated in fields where Switzerland is closer to the knowledge frontier than the neighboring German regions.