Patent Visibility and the Diffusion of Trapped Knowledge: Evidence from US Grants

Abstract

Valuable knowledge developed in one part of the world may remain “trapped" locally due to frictions in how knowledge is recognized and shared globally. This paper examines how granting US patents to foreign-origin inventions—by elevating their visibility and credibility— untraps the knowledge and facilitates global diffusion. Using examiner leniency as an instrument, complemented by a difference-in-differences design, I find that US grants of home country patents significantly increase both the likelihood and intensity of forward citations, including marked increases from third countries. A novel measure of “trappedness” reveals that knowledge from historically more trapped countries and sectors sees larger diffusion benefits after the US grants. These findings highlight the central role of the US as a platform of global knowledge recognition and diffusion, particularly in turning overlooked ideas into globally relevant innovations.