From potential to realized knowledge flows : a dual-channel framework of knowledge flows in China's industry 4.0 transition

Abstract

The transition to Industry 4.0 is reshaping the spatial dynamics of innovation by demanding not only technological capabilities but also the ability to absorb and recombine diverse knowledge. While prior studies emphasize the role of cognitive proximity, few have systematically distinguished between potential and realized knowledge flows in shaping regional specialization. This study introduces a dual-channel framework to examine how cities develop technological advantage through structurally available but unrealized opportunities (potential flows) versus actualized linkages (realized flows). Drawing on patent co-classification data from China's Industry 4.0 domains, we construct four indicators—PBDI, PBRI, RBDI, and RBRI—to trace intercity knowledge diffusion. Empirical results reveal that realized flows, especially direct linkages, play a consistently positive role in fostering specialization, while potential flows without integration mechanisms may hinder diversification. These effects are conditioned by local absorptive capacity and development level, with interaction analyses showing that technological relatedness amplifies the benefits of cross-domain recombination. The findings offer new insight into how local and external knowledge dynamics jointly shape industrial upgrading and provide policy implications for narrowing China's regional innovation gap.