Similarity Of R&D Activities, Physical Proximity, and The Extent Of R&D Spillovers

Deltas, George and Karkalakos, Sotiris (2007): Similarity Of R&D Activities, Physical Proximity, and The Extent Of R&D Spillovers.

Abstract

The diffusion of knowledge generates positive externalities if knowledge flows increase the productivity of Research and Development (R&D) by the recipients of these flows. This paper investigates the extent to which this positive spillover effect of knowledge diffusion depends on the similarity of research activities by the originator and recipient of the knowledge. The paper also investigates at what rate these spillover effects diminish as the distance between the originator and recipient increases. We find, using regional patent and R&D expenditure data from the European Union, that similarity between R&D activities is not only statistically significant, but salient: regions with completely dissimilar R&D activities exhibit essentially no spillovers at all. We also find an increase in the distance between the originating and recipient region by 550 kilometres reduces spillovers by 75% (as low as 55% in some specifications). Unlike much of the extant literature, the rate of spatial decay of spillovers is estimated jointly with the remaining parameters of the model rather than through specification searches over a set of alternative weight matrices. Our results are robust to the inclusion of unobserved country effects and border barriers.

• Item Type: MPRA Paper
• Language: English
• Keywords: Technological similarities, diffusion, spatial effects
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C31 - Cross-Sectional Models ; Spatial Models ; Treatment Effect Models ; Quantile Regressions ; Social Interaction Models; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes

References

Acs Z., Anselin L. and Varga A., (2002) “Patents and innovation Counts as Measures of Regional Production of New Knowledge,” Research Policy, 31, 1069-1085.

Acs Z. and Varga A., (2002) “Geography, Endogenous Growth, and innovation,” International Regional Science Review, 25, 132-148.

Aghion P. and P. Howitt (1992) “A Model of Growth through creative Destruction”,Econometrica, 60: 323-51.

Almeida P. and Kogut B., (1999) “Localization of Knowledge Spillovers and the Mobility of Engineers in Regional Networks”, Management Science, 45, 905-917.

Anselin, L. Bera, A. K., (1998) Spatial dependence in linear regression models with an introduction to spatial econometrics. In: Ullah, Aman, Giles, David E.A. (Eds.), Handbook of applied economic statistics (Marcel Dekker: New York)

Audretsch, D., and Feldman, M., (1996) “R&D spillovers and the geography of innovation and production”, American Economic Review, 86 (3), 630-640.

Bernstein J. and Mohnen P., (1998) “International R&D Spillovers between U.S. and Japanese Intensive Sectors”, Journal of International Economics, 44:2, 315-338.

Bernstein J. and Yan X., (1997) “International R&D spillovers between Canadian and Japanese firms”, Canadian Journal of Economics, 30:2, 276-294.

Bottazi, L., and G. Peri. (2003) “Innovation and Spillovers in Regions:. Evidence from European Patent Data,” European Economic Review. 47: 687–710

Breschi S. and Lissoni F., (2001) Knowledge Spillovers and Local Innovation Systems: A Critical Survey. Liuc Papers n. 84, Serie Economia e Impresa 27, 55-85.

Brueckner J., (1998) “Testing for strategic interaction among local governments: The case of growth controls”, Journal of Urban Economics 44, 438-467.

Evenson R. and Singh L., (1997) Economic Growth, International Technological Spillovers and Public policy: Theory and Empirical Evidence from Asia, Discussion paper no 777, Yale University.

European Commission, (2001) The Territorial Dimension of Research and Development Policy: Regions in the European Research Area, Directorate – General for research, European Commission, February 2001.

Fischer M. and Varga A., (2001) Production of Knowledge and Geographically Mediated Spillovers from Universities. A Spatial Econometric Perspective and Evidence from Austria. 17th Pacific Conference, Regional Science Association International, Portland, Oregon [USA], June/July.

Fritsch M., (2002) “Measuring the Quality of Regional Innovation Systems: A Knowledge Production Approach,” International Regional Science Review 25, 86-101.

Glaeser E., (1999) “Learning in Cities,” Journal of Urban Economics, 46, 254-277.

Grilliches Z., (1992) “The search for R&D spillovers,” Scandinavian Journal of Economics, 94, 29-47.

Grilliches Z., (1990) “Patent Statistics as Economic Indicators: A Survey,” Journal of Economic Literature, 28:4, 1961-1707.

Hall B., A. Jaffe and M. Trajtenberg (2005) “Market Value of Patent Citations,” Rand Journal of Economics, 36, 16-38.

Helliwell J., (1998) How Much Do National Borders Matter? The Brookings Institution, Washington, DC.

Jaffe A., (1989) “Real Effects of Academic Research,” American Economic Review 79, 957-970.

Jaffe A. Trajtenberg M. and R. Henderson (1993) “Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations,” Quarterly Journal of Economics, 108, pages 577-598.

Kamien, M. and Zang, I., (2000) “Meet me halfway: research joint ventures and absorptive capacity”, International Journal of Industrial Organization, 18, 995– 1012.

Keller W., (2002) “Geographic Localization of International Technology Diffusion”, American Economic Review, 92, 120-142.

Levin R., (1988) “Appropriability, R&D Spending, and Technological Performance”, American Economic Review, 78, 424-428.

Marshall A., (1890) ‘‘Principles of Economics’,’ Macmillan.

McCallum J., (1995) “National borders matter: Canada–US regional trade patterns,” American Economic Review 85 (3), 615-623.

Peri G., (2005) “Determinants of Knowledge Flows and Their Effect on Innovation,” Review of Economics and Statistics, 87, 308-322.

Piga C. and J. Poyago-Theotoky (2005) “Endogenous R&D spillovers and locational choice”, Regional Science and Urban Economics, 35, 127-139.

Romer P. M., (1990) “Endogenous Technological Change,” Journal of Political Economy, 98(5), 71-102.

Thompson P. and M. Fox-Kean, (2005), “Patent Citation and Geography Knowledge Spillovers: A Reassessment”, American Economic Review, 95, 450-460.

Trajtenberg M., (1990) “A Penny for Your Quotes: Patent Citations and the value of Innovations,” RAND Journal of Economics, 21, 172-187.

Varga A., (2000). Local Academic Knowledge Transfers and the Concentration of Economic Activity, Journal of Regional Science 40, 289-309.

Wiethaus L., (2005) “Absorptive capacity and connectedness: Why competing firms also adopt identical R&D approaches”, International Journal of Industrial Organization, 23, 467– 481.