Three essays on knowledge diffusion and firms' economic performance

In this research, our main goal rests in the analysis of the main determinants and the features of output performance of firms. First, we will investigate the direct and the indirect effects (spillovers) of Research and Development (R&D) investments on firms’ total factor productivity growth. To that end, we begin by estimating the returns to R&D by using international micro level data, as first proposed in Griliches (1979). We quantify the effects on firms’ productivity of exogenous variations in the state of technology and of the R&D of other firms (R&D spillovers, Jaffe, 1986). Second, we will try to take into account the firms’ ability to identify, assimilate and exploit existing information, that is their absorptive capacity (Cohen, Levinthal 1989). We assume that the elasticity of output (or value added) to national or foreign stock of spillovers depend on the chosen measure of Absorptive Capacity, which generally is represented by own R&D capital. The positive effect of the interaction between own R&D capital and the spillover pool term indicates the firm ability to absorb new ideas from outside, while its negative effect gives evidence of necessity to invest more in own R&D. Third, we will explore the question whether geographic and technological proximities affect the knowledge flows, proxied by patent citations for large international firms and how these effects change over time. We expect that the geographical proximity impact on knowledge flows is decreasing over time, since information travels at lower communication costs over time (Coyle, 1997 and Friedman, 2005). Yet, according to Evans and Harringan (2005), distance is still relevant in some technological sectors, where face-to-face interaction is fundamental and knowledge is tacit and hard to codify. Then, it is also interesting to analyse the impact of technological proximity on knowledge flows over time.