Academic journal article Geographical Analysis

The Geography of Knowledge Spillovers between High-Technology Firms in Europe: Evidence from a Spatial Interaction Modeling Perspective

Academic journal article Geographical Analysis

The Geography of Knowledge Spillovers between High-Technology Firms in Europe: Evidence from a Spatial Interaction Modeling Perspective

Article excerpt

The focus in this article is on knowledge spillovers between high-technology firms in Europe, as captured by patent citations. The European coverage is given by patent applications at the European Patent Office that are assigned to high-technology firms located in the EU-25 member states (except Cyprus and Malta), the two accession countries Bulgaria and Romania, and Norway and Switzerland. By following the paper trail left by citations between these high-technology patents we adopt a Poisson spatial interaction modeling perspective to identify and measure spatial separation effects to interregional knowledge spillovers. In doing so we control for technological proximity between the regions, as geographical distance could be just proxying for technological proximity. The study produces prima facie evidence that geography matters. First, geographical distance has a significant impact on knowledge spillovers, and this effect is substantial. Second, national border effects are important and dominate geographical distance effects. Knowledge flows within European countries more easily than across. Not only geography, but also technological proximity matters. Interregional knowledge flows are industry specific and occur most often between regions located close to each other in technological space.


The last few years have witnessed an increasing interest in knowledge spillovers. Knowledge spillovers (1) may be defined to denote the benefits of knowledge to firms or individuals not responsible for the original investment in the creation of this knowledge. There are two distinct types of knowledge spillovers: spillovers embodied in traded capital or intermediate goods and services (so-called pecuniary externalities) and spillovers of the disembodied kind (nonpecuniary externalities). This article considers spillovers of the second type. Such spillovers arise when some of the research and development (R & D) activities have the classic characteristic of a nonrivalrous good and cannot be appropriated entirely.

The importance of knowledge spillovers is widely recognized. Modern endogenous growth theory, for example, casts knowledge spillovers from investments in R & D as a central component in generating the increasing returns which sustain long-term growth (see, e.g., Romer 1990). In these theories, it is typically assumed that knowledge spills over to other agents within the country, but not to other countries. Yet there is no good reason to believe that knowledge stops spilling over because it hits a national boundary.

The last few years have seen the development of a significant body of empirical research on knowledge spillovers. Empirical analysis of the externalities is usually carried out using the R & D expenditure that helps to create them, rather than the inventions themselves. Many different measurements (2) provide varied evidence of knowledge spillovers at the aggregate level. Most of the studies find some evidence for such spillovers, some do not (see Griliches 1992, 1995). Generally speaking, this research has shown that new technological knowledge spills over and complements R & D in some industries, especially in high-technology ones (see Bernstein and Nadiri 1988).

But the spatial range of such knowledge spillovers is greatly contested (3) (see Karlsson and Manduchi 2001). Several explanations have been offered for this lack of agreement, such as, for example, the notorious difficulty to measure knowledge spillovers. Indeed, Krugman (1991, p. 53) has argued that economists should abandon any attempts at measuring knowledge spillovers because "knowledge flows ... are invisible; they leave no paper trail by which they may be measured and tracked." The work of Jaffe, Trajtenberg, and Henderson (1993), however, pointed to one important exception. They argued that spillovers of knowledge may well leave a paper trail in the citations to previous patents recorded in patent documents. …

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