‘License to green’: Regional patent licensing networks and green technology diffusion in China

Based on the concept of regional lead markets for environmental innovation, this paper fits exponential random graph models on a regionalized patent licensing network to explore how green technologies diffuse in space. The empirical analysis relies on a novel database of license agreements for Chinese patents, which are used to measure spatial innovation diffusion, as they indicate locations for both innovation development and adoption. Findings suggest, among other factors, that geographic proximity matters, that regions exhibit both network activity and popularity effects particularly in highly populated regions, that network effects such as mutual linking and triadic closure help to explain diffusion processes, and that local technology supply and demand are closely interconnected. In that regard, the role of environmental regulations is identified as being complex. The findings help to understand the formation of regional lead markets for environmental innovation, opening opportunities to accelerate innovation diffusion and a transition towards sustainability.