On the Importance of Geographic and Technological Proximity for R&D Spillovers: An Empirical Investigation

Abstract

Empirical studies of the external effects of R&D suggest that both geographic and technological distance attenuate inter-firm spillovers from innovative activity. The results presented here indicate that the tendency for R&D spillovers to localize economic activity is conditional on the technological relation between spillover generating and receiving firms. The production function framework is generalized to control for correlation between measures of geographic and technological proximity. Coefficient estimates confirm that R&D spillovers are largest among technological neighbors. However, spillovers within narrowly defined technological groups do not appear to be attenuated by distance. Geographic proximity serves to attenuate only those inter-firm spillovers that cross narrowly defined technological boundaries.

Keywords: R&D, Spillovers, Industrial Agglomeration, Geography, Empirical Studies

JEL Classification: O3, L6