Externalities and the UK Regional Divide in Innovative Behaviour

Abstract

This empirical paper investigates the impact of different sources of increasing returns on firm innovative behaviour in two regions of the UK in the period of the 1990s. We pay particular attention to the impact of intermediate markets such as the market for specialised business services as a possible externality that influences regional innovation. Other influences on regional innovation such as knowledge spillovers due to public R&D in UK counties and dynamic economies of scle due to learning within a firm are also considered.

Keywords: Increasing returns and innovation, specialised markets, public R&D and firm innovation, regional innovation, regional development

JEL Classification: R0, R3, 03, H4, L8