R&D spillovers and the geography of innovation and production

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Citation: David B. Audretsch, Maryann P. Feldman (1996) R&D spillovers and the geography of innovation and production. The American Economic Review (RSS)
Internet Archive Scholar (search for fulltext): R&D spillovers and the geography of innovation and production
Tagged: Economics (RSS) Business (RSS), Innovation (RSS), Spillovers (RSS), R&D (RSS)


Although Adam Jaffe and others had provided strong support for the existence of spillovers (e.g., Jaffe et al., 1993), David Audretsch and Maryann Feldman argue that nobody has examined the extent to which industrial activity clusters spacially and to link this concentration to the existence of knowledge externalities. Their basic finding is that, "even after controlling for the degree of geographic concentration inb production, innovative activity tends to cluster more in industries where knowledge spillovers play a decisive role," which the authors argue is strong support for spillovers.

While Jaffe et al. (1993) look at patent pairs within states, Audretsch and Feldman look at the degree of clustering to make the hypothesis that innovative activity will tend to cluster in industries where new economic knowledge plays an especially important role even when controlling for concentration in production. The authors find support for this hypothesis.

Using Gini coefficients (a measure of concentration) as a dependent variable, the authors find that a key determinant of the degree to which an industry is concentrated in the role that new economic knowledge plays in that industry even after controlling for concentration in production.

Theoretical and Practical Relevance

Although Jaffe's work gives strong evidence of knowledge externalities, Audretsch and Feldman offer what is in some ways a more appropriate industry-level (as opposed to patent level) dependent variable that gets much closer to the concept of geographic concentration of industries and that incorporates the key control around concentration of production that Jaffe et al. (1993) argue for. Their article has been cited more than 3,000 times -- most influentially in the literature on geography and innovation and spillovers in particular.