The Location of Industry R&D and the Location of University R&D: How Are They Related?

At the same time as we can observe strong tendencies of globalization of R&D (Florida 1997; Cantwell 1998), we also observe strong spatial clustering of R&D and related innovation activities (Audretsch and Feldman 1996). The standard explanation in the literature of the clustering phenomenon is that clustering brings about external knowledge economies, typically in the form of knowledge flows,1 which tend to be spatially bounded (Jaffe et al. 1993). R&D is a typical innovation activity; irrespective of whether it is focused on new products or new processes. Industry – i.e., private firms – and universities are the major performers of R&D. It is well established in the literature that both university and industry R&D have a positive effect on innovation output (often measured by patent applications), but that the effect diminishes with distance because knowledge flows are spatially bound and that clustering is consequently an effective spatial configuration.