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Similarity Of R&D Activities, Physical Proximity, and The Extent Of R&D Spillovers

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  • Deltas, George
  • Karkalakos, Sotiris

Abstract

The diffusion of knowledge generates positive externalities if knowledge flows increase the productivity of Research and Development (R&D) by the recipients of these flows. This paper investigates the extent to which this positive spillover effect of knowledge diffusion depends on the similarity of research activities by the originator and recipient of the knowledge. The paper also investigates at what rate these spillover effects diminish as the distance between the originator and recipient increases. We find, using regional patent and R&D expenditure data from the European Union, that similarity between R&D activities is not only statistically significant, but salient: regions with completely dissimilar R&D activities exhibit essentially no spillovers at all. We also find an increase in the distance between the originating and recipient region by 550 kilometres reduces spillovers by 75% (as low as 55% in some specifications). Unlike much of the extant literature, the rate of spatial decay of spillovers is estimated jointly with the remaining parameters of the model rather than through specification searches over a set of alternative weight matrices. Our results are robust to the inclusion of unobserved country effects and border barriers.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 45962.

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Date of creation: 01 Apr 2007
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Handle: RePEc:pra:mprapa:45962

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Keywords: Technological similarities; diffusion; spatial effects;

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  1. Edward L. Glaeser, 1997. "Learning in Cities," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1814, Harvard - Institute of Economic Research.
  2. Attila Varga, 2000. "Local Academic Knowledge Transfers and the Concentration of Economic Activity," Journal of Regional Science, Wiley Blackwell, Wiley Blackwell, vol. 40(2), pages 289-309.
  3. Michael Fritsch, 2002. "Measuring the Quality of Regional Innovation Systems: A Knowledge Production Function Approach," International Regional Science Review, , , vol. 25(1), pages 86-101, January.
  4. Jeffrey I. Bernstein & Xiaoyi Yan, 1997. "International R&D Spillovers between Canadian and Japanese Industries," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 30(2), pages 276-94, May.
  5. Jaffe, A.B. & Trajtenberg, M., 1992. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," Papers, Tel Aviv 14-92, Tel Aviv.
  6. Kamien, Morton I. & Zang, Israel, 2000. "Meet me halfway: research joint ventures and absorptive capacity," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 18(7), pages 995-1012, October.
  7. Claudio Piga & Joanna Poyago-Theotoky, 2003. "Endogenous R&D Spillovers and Locational Choice," CRIEFF Discussion Papers, Centre for Research into Industry, Enterprise, Finance and the Firm 0310, Centre for Research into Industry, Enterprise, Finance and the Firm.
  8. Peter Thompson & Melanie Fox-Kean, 2005. "Patent Citations and the Geography of Knowledge Spillovers: A Reassessment: Reply," American Economic Review, American Economic Association, American Economic Association, vol. 95(1), pages 465-466, March.
  9. Peter Thompson & Melanie Fox-Kean, 2005. "Patent Citations and the Geography of Knowledge Spillovers: A Reassessment," American Economic Review, American Economic Association, American Economic Association, vol. 95(1), pages 450-460, March.
  10. Evenson, R.E. & Singh, L., 1997. "Economic Growth, International Technological Spillovers and Public Policy: Theory and Empirical Evidence from Asia," Papers, Yale - Economic Growth Center 777, Yale - Economic Growth Center.
  11. Giovanni Peri, 2005. "Determinants of Knowledge Flows and Their Effect on Innovation," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 308-322, May.
  12. Jeffrey I. Bernstein & Pierre Mohnen, 1994. "International R & D Spillovers between U.S. and Japanese R & D intensive sectors," Cahiers de recherche du Département des sciences économiques, UQAM, Université du Québec à Montréal, Département des sciences économiques 9406, Université du Québec à Montréal, Département des sciences économiques.
  13. Brueckner, Jan K., 1998. "Testing for Strategic Interaction Among Local Governments: The Case of Growth Controls," Journal of Urban Economics, Elsevier, vol. 44(3), pages 438-467, November.
  14. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, American Economic Association, vol. 85(3), pages 615-23, June.
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