The impact of regional absorptive capacity on spatial knowledge spillovers: the Cohen and Levinthal model revisited

Abstract

We design a conceptual framework for linking two approaches: absorptive capacity and spatial Knowledge Spillovers (KSs). Regions produce new knowledge, but only part of it is efficiently adopted in the economy; the share of efficiently adopted technology depends on cognitive capital. Our dataset is based on a panel of European regions over the period 1999 to 2006, combining data from EUROSTAT and the European Values Study (EVS). We test the hypothesis that insufficient levels of cognitive capital hamper the capability of regions to fully exploit new knowledge. Results show that a lower regional absorptive capacity increases KS towards surrounding areas, hampering the regions’ capability to decode and efficiently exploit new knowledge, both locally produced and originating from outside.

Notes

¹ This argument is further explained below in this article.

² See Hulten (2000) for a comprehensive introduction to this measure.

³ The log-linear transformation allows us to estimate a Cobb–Douglas production function of the form , where Y is the regional GDP in constant 1995 prices; L is the regional labour force; and K is calculated from the regional Gross Fixed Capital Formation dataset, with the perpetual inventory method. The base year is 1995; we assume a yearly depreciation rate equal to 2.5%.

⁴ Here,  = 1.28.

⁵ In general, the rich literature of the learning region explains in detail the role of institutions in shaping regional productivity patterns, as well as the underlying microfoundations of such a relationship.

⁶ The Principal Components Analysis (PCA) is performed on indicators of cognitive capital listed in Table 2. The vector of cognitive capital is identified with the first PCA vector; it explains 40% of total variance. Details on the performed PCA are available upon request.

⁷ The area comprising London, Paris, Milan, Munich and Hamburg.

⁸ Citizens were asked the following set of questions: Do you agree with the statement that ‘Most people can be trusted?’; ‘How much are you interested in your region's inhabitants?’; ‘Do you justify cheating on taxes?’; ‘How much are you interested in politics?’.