Innovation without Borders? The Geography of Technological Diffusion

Ursel Baumann, Cullen, Zöe, Ester Faia, Annalisa Ferrando, Ricardo Perez-Truglia and Judith Rariga

No 21601, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: How well does innovation diffuse across geographic boundaries? To shed light on this question, we present a large-scale field experiment involving 3,300 firms across twelve European Union (EU) countries. We elicit firms' perceptions of the share of similar firms in their own country that had invested in AI, as well as the corresponding share among similar firms in the three largest EU economies. We randomly provide half of the sample with accurate information about both domestic and foreign AI investment. We show that firms substantially underestimate competitors' current AI investment, both domestically and abroad, and that they update their expectations about competitors' future adoption in response to the information treatment. The treatment also causes a statistically significant increase in firms' own expected AI investment rate (p-value

Keywords: Innovation (search for similar items in EconPapers)
JEL-codes: C93 D22 L21 O33 (search for similar items in EconPapers)
Date: 2026-06
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Working Paper: Innovation without Borders? The Geography of Technological Diffusion (2026)
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