Interplay between regional and industrial aspects in the R&D-productivity link: evidence from Europe

Interplay between regional and industrial aspects in the R&D-productivity link: evidence from Europe. Regional Studies. The paper tests the effect of the interplay between regional and sectoral dimensions in the firm-level research and development (R&D)-productivity link. Using a longitudinal database of innovative publicly traded European companies between 1991 and 2008, the following main results arise. First, the elasticity of value added with respect to R&D is larger in regions characterized by a higher innovation performance (knowledge hubs versus industrial zones). Second, in knowledge hubs, industry affiliation mediates the gains from R&D: high-tech manufacturing firms profit more from R&D than low-tech ones. This evidence suggests that an innovative regional environment increases the capacity to translate R&D investments into productivity for European high-tech industries. This virtuous circle is not at work in services and in low-tech manufacturing industries.