Knowledge Flows Between U.S. and China in the Era of Rising Geopolitical Tension

Geopolitical tensions can reshape firms’ access to foreign knowledge even when underlying technical information remains codified and publicly visible. We examine how the July 2018 escalation in U.S.–China technology restrictions altered bilateral knowledge linkages and how firms’ pre-shock knowledge recombination patterns conditioned their responses. Using USPTO patents and applicant-added citations, we construct a firm–partner–month panel (2016–2020) and implement a partner-country difference-in-differences design that compares China to seven innovation-intensive partners. We find that firms on both sides reduce citations to patents originating in the other country after July 2018, indicating a rapid reweighting of cross-border codified knowledge use. In contrast, U.S.–China co-invention does not decline in the short run, consistent with higher exit and switching costs in collaborative R&D. We further show that search configurations shape the adjustment of citation behavior. These findings extend the search-based view of innovation by showing how the structure of firms’ recombination strategies interacts with institutional shocks to reconfigure global knowledge linkages.