The search and diffusion of knowledge appear to play a crucial role in the process of innovation for creating new technologies. In essence, innovation is incremental in nature, and its most fundamental process is the recombination of prior technologies—recombination that consists of two contrasting search types: local search (exploitation) and distant search (exploration). Despite past studies on technology-search and -diffusion, the relationship between these two processes has yet to be sufficiently clarified. The purposes of this study were thus twofold: one was to explore the longitudinal change of the characteristics of firms' search process, and the other was to examine the degree to which local search affects the characteristics of the technology-diffusion process. From a methodological point of view, this study was an analysis of patent data and an empirical examination based on a quantitative approach using hypothesis testing. In practice, patent data were selected from five patent classes related to the semiconductor industry for the years 1990, 1995, and 2000. In the analysis, three key constructs were formulated to quantify the local search and diffusion process: (a) classification affinity, which proxies the focal patent's familiarity with a specific technological segment; (b) component affinity, which proxies the focal patent's familiarity with patent components; and (c) domain impact, which proxies the degree of a focal patent's influence in a specific technological segment. The longitudinal analysis based on the Mann-Whitney U test finds that the component affinity tends to increase and, conversely, the average prior citation age tends to decrease. These findings indicate that inventors are inclined to conduct search activities more deeply and elaborately than before and the technology-diffusion process proceeds more rapidly than before. Furthermore, the cross-sectional analysis based on negative binomial regression and multiple regression clarifies that the classification affinity of a patent has positive relationship with its domain impact and has weak, negative relationship with the average subsequent citation age. These findings suggest that the higher level of local search inventors conduct in the technology-search activities, the more frequently their new technologies diffuse into the same technological domain and, simultaneously, the faster they also tend to diffuse into subsequent patents.
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