In search of markets and technology: the role of cross-border knowledge for domestic productivity.

This article investigates the impact of domestic and international knowledge sourcing on the productivity of Swiss manufacturing firms, using patent data to measure firms' knowledge capital based on inventor locations. The study finds that foreign knowledge capital, particularly sourced from geographically and culturally close countries within the European Union (EU), significantly enhances firm productivity, whereas domestic knowledge or knowledge from other world regions does not show positive effects. The productivity gains from EU knowledge capital are stronger for firms that are more innovative and have the EU as their main export market, indicating that both knowledge-seeking and market-seeking motives drive international R&D activities. Conversely, knowledge sourced from North America benefits firms with main export markets outside the EU, suggesting regional alignment between knowledge sourcing and market orientation. Robustness checks confirm these findings, highlighting the complementary role of international knowledge sourcing to domestic R&D and the importance of geographic proximity and export orientation in shaping productivity outcomes.