Innovation and spillovers in regions: Evidence from European patent data

This paper estimates the effect of & research externalities in generating innovation. We use R&D and patent data for European Regions in the 1977-1995 period. We find that spillovers are very localized and exist only within a distance of 300 km. The estimates are robust to simultaneity, omitted variable bias, different specifications of distance functions, country and border effects. However the size of these spillovers is small. Doubling R&D spending in a region would increase the output of new ideas in other regions within 300 km only by 2-3%, while it would increase the innovation of the region itself by 80-90%. (C) 2002 Elsevier B.V. All rights reserved.