Reconsidering the drivers of territorial innovation: new evidence on the spatial knowledge production function in the EU Regions

The paper explores the heterogeneity behind the production of innovation at the regional level. We empirically estimate the innovation equation with EU regional data using either patents or innovative sales in the region as dependent variable. The empirical model accounts for external, spillover, effects and allows for parameter heterogeneity among pre-selected groups of regions. Findings suggest that expenditures in Research & Development (R&D) lead to patents while non-R&D expenditures drive the innovative sales. For both types of expenditure, we find relatively weaker effects on innovation in the regions belonging to the New Member States and in Convergence regions but we find significant spillover effects. The evidence provides full support to the argument that a faster diffusion of knowledge can accelerate the process of technological convergence in Europe, but still draws a picture of the innovation Union characterized by a marked and persistent core-periphery pattern.