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Innovation, Demand and Knowledge Spillovers: Theory and Evidence From European Regions


  • Bottazzi, Laura


The Importance of innovation for the economic performance of industrialized countries has been largely stressed recently by the theoretical and empirical literature. Very few studies have carefully considered the determinants of European innovation, the productivity of its R&D and the existence of knowledge spillovers across regional boundaries. Here we develop a model which, emphasizing "the demand pull" as a key exogenous determinant of long-run innovation across regions, allows us to estimate the returns to regional R&D as a generator of innovation. We find that most of the cross-regional differences in innovation rates can be explained by own R&D, even after correcting for the endogeneity bias. Moreover, significant spillovers are found among geographically close regions, especially if they are technologically similar.

Suggested Citation

  • Bottazzi, Laura, 1999. "Innovation, Demand and Knowledge Spillovers: Theory and Evidence From European Regions," CEPR Discussion Papers 2279, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:2279

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    References listed on IDEAS

    1. In-Koo Cho & David M. Kreps, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 179-221.
    2. Daron Acemoglu & James A. Robinson, 2001. "A Theory of Political Transitions," American Economic Review, American Economic Association, vol. 91(4), pages 938-963, September.
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    Cited by:

    1. Dion, David-Pascal, 2004. "Regional integration and economic development: An empirical approach," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 21, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    2. Frankel, Jeffrey, 2004. "Real Convergence and Euro Adoption in Central and Eastern Europe: Trade and Business Cycle Correlations as Endogenous Criteria for Joining EMU," Working Paper Series rwp04-039, Harvard University, John F. Kennedy School of Government.
    3. Wolfgang Keller, 2004. "International Technology Diffusion," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 752-782, September.
    4. Badinger, Harald & Tondl, Gabriele, 2002. "Trade, human capital and innovation: The engines of European regional growth in the 1990s," ERSA conference papers ersa02p043, European Regional Science Association.
    5. Herstad , Sverre J. & Sandven , Tore, 2015. "Innovation and corporate employment growth revisited," Papers in Innovation Studies 2015/3, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.
    6. Wolfgang Keller, 2002. "Geographic Localization of International Technology Diffusion," American Economic Review, American Economic Association, vol. 92(1), pages 120-142, March.
    7. Fabrice Darrigues, 2003. "Externalités de connaissance, équilibres spatiaux et bien-être," Economie & Prévision, La Documentation Française, vol. 157(1), pages 121-143.
    8. Maria Luisa Mancusi, 2000. "The Dynamics of Technology in Industrial Countries," KITeS Working Papers 118, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Nov 2000.
    9. Maria Mancusi, 2001. "Technological specialization in industrial countries: Patterns and dynamics," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 137(4), pages 593-621, December.
    10. López-Rodríguez , Jesús & Faíña, Andrés, 2007. "Regional Wage Disparities in Europe: What role for Market Access?," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 11, pages 5-23.
    11. Funke, Michael & Niebuhr, Annekatrin, 2000. "Spatial R&D spillovers and economic growth : evidence from West Germany," HWWA Discussion Papers 98, Hamburg Institute of International Economics (HWWA).
    12. Jesús López-Rodríguez & J. Andrés Faíña, "undated". "Regional Income Disparities in Europe: What Role for Location?," Regional and Urban Modeling 283600059, EcoMod.
    13. James B. Ang & Jakob B. Madsen, 2013. "International R&D Spillovers And Productivity Trends In The Asian Miracle Economies," Economic Inquiry, Western Economic Association International, vol. 51(2), pages 1523-1541, April.
    14. Oprescu Raluca, 2011. "The Journey To Competitiveness: Eu Speeding Up On The Road Paved With Knowledge And Innovation," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 118-124, July.
    15. Barrios, Salvador & Bertinelli, Luisito & Eric, Strobl & Antonio Carlos, Teixeira, 2003. "Agglomeration Economies and the Location of Industries: A comparison of Three small European Countries," MPRA Paper 5704, University Library of Munich, Germany.
    16. Jesús López-Rodríguez & Daisuke Nakamura, 2011. "Mind the Remoteness! Income disparities across Japanese Prefectures," Estudios de Economia, University of Chile, Department of Economics, vol. 38(2 Year 20), pages 393-417, December.
    17. Huovari, Janne & Alanen, Aku & Kangasharju, Aki, 2000. "Regional Competitiveness In Finland," ERSA conference papers ersa00p234, European Regional Science Association.
    18. repec:kap:jinten:v:15:y:2017:i:2:d:10.1007_s10843-016-0195-7 is not listed on IDEAS
    19. Laura Bottazzi & Giovanni Peri, 2000. "Innovation and Spillovers: Evidence from European Regions," CESifo Working Paper Series 340, CESifo Group Munich.
    20. P.H. van Dongen, 2011. "The Role and Contribution of Intellectual Property Rights in the Process of Spillover of Knowledge, Knowledge Valorization and Regional Economic Development," Chapters,in: Institutions and Regulation for Economic Growth?, chapter 4 Edward Elgar Publishing.
    21. Gong, Guan & Keller, Wolfgang, 2003. "Convergence and polarization in global income levels: a review of recent results on the role of international technology diffusion," Research Policy, Elsevier, vol. 32(6), pages 1055-1079, June.
    22. Thomas Gries, "undated". "SEZ, Regional Development and Disparity," EcoMod2006 272100033, EcoMod.
    23. Alejandro Diaz-Bautista, 2005. "Convergence and Economic Growth considering Human Capital and R&D Spillovers Convergencia y Crecimiento Economico en Mexico considerando al Capital Humano y derrames en Investigacion y Desarrollo," Urban/Regional 0506012, EconWPA.

    More about this item


    Endogenous Innovation; Regional R&D; Spatial Spillovers;

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics


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