Private and public sector R&D efforts, knowledge spillovers and regional growth in Europe

Scope and method of study. The primary purpose of this research is to empirically analyze the influence of R&D personnel employed in the business enterprise sector and in the government sector, and associated knowledge spillovers, respectively, on the European regional growth in labor productivity. A sample of 57 regions at the NUTS 2 level from three contiguous members of the EU (France, Italy and Spain) is studied for the period between 1985–95. Even though the issue has recently received a great deal of attention, only a few empirical studies have carefully specified the EU regional development process. Therefore, in a different way than most of the earlier empirical work, we spatially specify Romer's (1990) growth model in the light of Caniels (2000) and Magrini (1997) for EU regional development. Hence, we can interpret the empirical findings along with the mainstream economic growth theory, which is ignored in much of the earlier empirical literature.; Findings and conclusions. From various regressions, it is found that both private and government sector R&D efforts improve regional labor productivity growth between 1–2 percent. Cross-regional knowledge spillovers from private sector R&D efforts of all other regions increase regional labor productivity growth about 5 percent, whereas those from government sector R&D efforts of all other regions increase it by about 2.3 percent. Cross-regional knowledge spillovers from private sector R&D gap increase regional labor productivity growth about 2 percent, while those from government sector R&D gap increase it by about 1.8 percent. Private sector R&D and associated spillovers are found to significantly improve (by over 1 percent) the productivity growth of both the Italian regions and the Spanish regions relative to French regions. However, government sector R&D and associated spillovers do not have a significant differential impact on the productivity growth of countries.