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Proximity and Innovation in Italian SMEs


  • Morone, Piergiuseppe
  • Petraglia, Carmelo
  • Testa, Giuseppina


Abstract: In this paper we assess the relevance of both knowledge creation and diffusion processes in affecting Italian SMEs’ propensity to innovate. In doing so a knowledge production function (KPF) is estimated for a representative sample of small and medium manufacturing firms over the period 1998-2003. To account for endogeneity of R&D effort in the KPF, we estimate a Heckman selection model on R&D decisions and obtain two main results. First, we do not find the probability of being engaged in intramural R&D activities to be significantly related to firm size. Second, for those firms engaged in R&D activities, the intensity of R&D effort increases with firm size. Then, the KPF is estimated for three different samples of firms using a standard probit where the probability that SMEs will innovate depends upon intramural R&D effort, regional and industrial spillovers and a vector of interaction and control variables. The main results obtained from this second set of regressions are the following: first, we find the probability to innovate to be positively related to sectoral spillovers, the magnitude of such impact being decreasing in firms’ size. Second, knowledge diffusion via geographical proximity enhances the probability of the recipient firm to innovate only if it has an appropriate endowment of human capital.

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  • Morone, Piergiuseppe & Petraglia, Carmelo & Testa, Giuseppina, 2008. "Proximity and Innovation in Italian SMEs," MPRA Paper 13329, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:13329

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    References listed on IDEAS

    1. Ron A. Boschma & Jan G. Lambooy, 1999. "Evolutionary economics and economic geography," Journal of Evolutionary Economics, Springer, vol. 9(4), pages 411-429.
    2. Salvador Barrios & Holger Goerg & Eric Strobl, 2003. "Explaining Firms' Export Behaviour: R&D, Spillovers and the Destination Market," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(4), pages 475-496, September.
    3. André Sapir, 2005. "Un modello obsoleto? Crescita e specializzone dell'economia italiana," ULB Institutional Repository 2013/8122, ULB -- Universite Libre de Bruxelles.
    4. Simon Kuznets, 1962. "Inventive Activity: Problems of Definition and Measurement," NBER Chapters,in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 19-52 National Bureau of Economic Research, Inc.
    5. Piergiuseppe Morone & Carmelo Petraglia & Giuseppina Testa, 2007. "Research, Knowledge Spillovers and Innovation," Birkbeck Working Papers in Economics and Finance 0713, Birkbeck, Department of Economics, Mathematics & Statistics.
    6. Rachel Griffith & Elena Huergo & Jacques Mairesse & Bettina Peters, 2006. "Innovation and Productivity Across Four European Countries," Oxford Review of Economic Policy, Oxford University Press, vol. 22(4), pages 483-498, Winter.
    7. Giuliani, Elisa & Bell, Martin, 2005. "The micro-determinants of meso-level learning and innovation: evidence from a Chilean wine cluster," Research Policy, Elsevier, vol. 34(1), pages 47-68, February.
    8. Bruno Crepon & Emmanuel Duguet & Jacques Mairesse, 1998. "Research, Innovation And Productivity: An Econometric Analysis At The Firm Level," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 7(2), pages 115-158.
    9. Piergiuseppe Morone & Roberta Sisto & Richard Taylor, 2006. "Knowledge Diffusion and Networking in the Organic Production Sector: A Case Study," EuroChoices, The Agricultural Economics Society, vol. 5(3), pages 40-46, December.
    10. Chris Freeman & Luc Soete, 1997. "The Economics of Industrial Innovation, 3rd Edition," MIT Press Books, The MIT Press, edition 3, volume 1, number 0262061953, January.
    11. Zvi Griliches, 1998. "The Search for R&D Spillovers," NBER Chapters,in: R&D and Productivity: The Econometric Evidence, pages 251-268 National Bureau of Economic Research, Inc.
    12. Ron Boschma, 2005. "Proximity and Innovation: A Critical Assessment," Regional Studies, Taylor & Francis Journals, vol. 39(1), pages 61-74.
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    More about this item


    Innovation; knowledge; spillovers; firm size;

    JEL classification:

    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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