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

Author(s): Laura Bottazzi

Publication Date: October 1999

Keyword(s): Endogenous Innovation, Regional R&D and Spatial Spillovers

Programme Area(s): Industrial Organization and International Macroeconomics

Abstract: 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.

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Bibliographic Reference

Bottazzi, L. 1999. 'Innovation, Demand and Knowledge Spillovers: Theory and Evidence From European Regions'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2279