Trust and inventive activity in Europe: causal, spatial and nonlinear forces

This paper investigates the effect of trust on inventive activity. The paper uses generalised trust and about 20 other trust (and trustworthiness)-related indicators and investigates which trust-related variables explain inventive activity in 20 European countries divided into 135 regions with a special focus on causal, nonlinear and spatial forces. The findings indicate that only generalised trust and non-egoistic fairness have robust effects on inventive activity in Europe. Using historical data on the extent and existence of universities as instruments, a causal relationship between trust and inventive activity is set up. Even after controlling for causal, spatial and nonlinear forces, there is a significant direct impact of trust on inventive activity. The result show that a one standard deviation rise in general trust (a 12.5 % rise in the trust level) increases patents per million inhabitants on average by 2 %. Despite the growing literature that associate social capital to inventive activity at the regional level, the direct policy conclusions are weak. This paper argues that moving from “regional learning” to “learning region” may induce researchers to consider direct and down-to-earth policy implications.