Agglomeration and network effects on regional knowledge production activities in Europe

The focus of this study is on regional knowledge production in Europe, with special emphasis on the interplay between intra- and inter-regional research collaboration. The objective is to identify and measure effects of research collaboration on knowledge production at the level of European regions. We use a panel data spatial Durbin model (SDM) relationship for empirical testing. The European coverage is achieved using 228 NUTS-2 regions covering all pre-2007 EU member states except Cyprus, Greece and Malta. The dependent variable, regional knowledge production, is measured in terms of fractional patent counts at the regional level in the time period 2000-2008, using patents applied at the European Patent Office (EPO). The independent variables include an agglomeration variable, reflecting intra-regional research collaboration, measured in terms of employment in knowledge intensive sectors, and a network variable, reflecting extra-regional research collaboration, measured in terms of a region´s collaboration activities in the EU Framework programmes (FPs), weighted by R&D expenditures in network partner regions. We implement a panel version of the standard SDM that controls for spatial autocorrelation as well as individual heterogeneity across regions, and allows for the estimation of spatial spillovers from neighbouring regions. The estimation results confirm the prevalence of agglomeration effects for regional knowledge production, and, by this, the importance of co-location of R&D actors. Furthermore, the study provides evidence that inter-regional R&D collaborations in the FPs significantly contribute to regional knowledge production.