R&D Spillovers and the Geography of Innovation and Production

Previous research has indicated that investment in R&D by private firms and universities can lead to knowledge spillover, which can lead to exploitation from other third-party firms. If the ability of these third-party firms to acquire knowledge spillovers is influenced by their proximity to the knowledge source, then geographic clustering should be observable, especially in industries where access to knowledge spillovers is vital. The spatial distribution of innovation activity and the geographic concentration of production are examined, using three sources of economic knowledge: industry R&D, skilled labor, and the size of the pool of basic science for a specific industry. Results show that the propensity for innovative activity to cluster spatially is more attributable to the influence of knowledge spillovers and not merely the geographic concentration of production. (SFL)