Knowledge Creation and Absorption The Regional Dimension

             Alessandro Sterlacchini

KNOWLEDGE ECONOMY FORUM VII: “Technology Absorption by
Innovative Small and Medium Enterprises”. Ancona, June 17-19, 2008.
Knowledge and economic growth
   Broad consensus on the positive relationship
    between knowledge investments and economic
   However, the linkage is far from being linear and
    cannot be taken for granted
       Countries and regions with different levels of
        development cannot reap equal benefits from
        investing the same amount of resources in the same
       Similar considerations apply to firms of different size
Knowledge and economic growth
   To exploit the existing stock of knowledge for
    commercial purposes some enabling conditions
    must be at work
       Absorption capacity (human capital)
       Transmission channels (university-industry relations)
       Filtering mechanisms (entrepreneurship)

   The above caveats emerge from many empirical
    studies and, especially, those concerned with
    regions (sub-national areas)
The regional dimension
   Due to its tacit elements, knowledge is not
    easily transferable so that positive
    externalities are strongly localised
   Accordingly, geographical proximity matters
    and the regional level is best suited for
    effective innovation policies
   In the EU, regional policies are key
    instruments for implementing the Lisbon
EU Regional Policy (Structural
Funds) 2007-2013
    Two objectives:

   Competitiveness and employment:
    developed regions (GDP per capita 
    75% of the EU25 average)

   Convergence : less developed regions
    (GDP per capita< 75%)
    Empirical background

   Sterlacchini, A., R. Esposti, N. Matteucci and F.
    Venturini (2005) Policy guidelines for regions
    falling under the new regional competitiveness
    and employment objective for the 2007-2013
    period. Vol. I: Statistical analysis, Report
    prepared for the European Commission, DG
    Regional Policy.

   Sterlacchini, A. (2008) R&D, Higher Education
    and Regional Growth: Uneven Linkages Among
    European Regions, Research Policy.
Knowledge and innovation indicators (R&D,
patents, higher education, etc.)
 Factor analysis to obtain a synthetic indicator

 Identification of 3 regional groups (low, medium, high)

Economic performance indicators (GDP per capita
level, GDP growth, rate of unemployment, etc.)
 Factor analysis to obtain a synthetic indicator

 Identification of 3 regional groups

   Joint analysis of knowledge and
   economic performance indicators
Type and number of regions
   KNOWLEDGE &        LOW          INTERME-           HIGH
     INNOVATION                      DIATE

                                   Unexploited    Strong unexpl.
LOW               Low performers    potential        potential
                        23             18               10

INTERMEDIATE       Uncorrelated    Intermediate      potential
                       23               33              13

HIGH               uncorrelated    Uncorrelated   High performers
                        7              24               17
analysis for all the regions of the EU15

   Knowledge creation: intensity of R&D
    expenditures on regional value added

   Knowledge absorption: share of adult
    population with tertiary education
    Note: in the EU the level of secondary education is not a
    suitable indicator of knowledge absorption

→ Economic growth: change in GDP per capita
 over 1995-2002

   For the developed regions both the intensity
    of R&D and higher education are effective
    drivers of GDP growth

   For the less developed regions only the
    extent of higher education is effective
GDP growth Vs. intensity of R&D
GDP growth Vs. intensity of Higher
COUNTRY DIFFERENCES (looking at developed
regions only):

The joint impact of R&D and higher education
on regional growth is not significant for
Southern European Countries (Austria, France,
Italy and Spain)
GDP growth Vs. intensity of R&D and
Higher Education (developed regions only)
                          Inner London

                                         South = Austria,
                                         France, Italy, Spain

                                         North = Belgium,
                                         Finland, Germany,
                                         the Netherlands,
                                         Sweden, UK

           Cumbria (UK)
Evidence for the regions of
Central European countries
   Replica of the previous exercise: R&D and
    higher education as drivers of regional GDP
   Provisional results
   Limited country coverage due to the poor
    availability of regional data: Czech Republic,
    Hungary, Poland and Slovak Republic
GDP growth Vs. intensity of R&D and
Higher Education: Czech Republic,
Hungary and Slovak Republic
GDP growth Vs. intensity of R&D and
Higher education: Czech Republic,
Hungary and Slovak Republic

   The positive relationship is almost exclusively
    due to the performances of “central” capital
    regions (note: this does not occur in Western
   To what extent the above relationship is
    “simply” due to agglomeration economies?
   How to deal with this dualistic pattern of
    regional growth (central Vs. peripheral
GDP growth Vs. intensity of R&D
and Higher education: Poland
GDP growth Vs. intensity of R&D
and Higher education: Poland

   For Poland, the relationship is not significant
   In this sense, Poland can be assimilated to
    the Southern Countries of Western Europe
   Industrial specialization, FDI and
    geographical proximity to EU markets
    probably play a greater role than knowledge
Concluding remarks and policy
   Remarkable differences across EU regions both
    in terms of knowledge potential and capability
    to exploit it
   Too much emphasis on knowledge creation and
    research infrastructures could be ineffective;
    moreover, it could increase rather than reduce
    regional disparities
   In the medium run, the less developed regions
    should pay particular attention to higher
    education, especially for improving the
    absorption capacity of SMEs
   With some qualifications, the above
    considerations can be extended to the
    countries of East Europe and Central Asia