Combining geographical and semantic proximity to measure spillovers. The case of Sweden

To exchange knowledge, firms need to be physically close and share some expertise. We develop a semantic measure, based on web data, to assess how similar companies are in terms of their specialisation and technological focus. Moreover, we introduce a method that combines physical proximity with semantic similarity to understand how firms influence one another. We maintain and test that companies generate spillovers, which impact the performance of their neighbours. Results show that a firm’s performance depends on its intrinsic characteristics such as its scale or growth stage, but also on the spillovers that arise from both geographical and semantic proximity.