Innovation
R&D spillovers

Recent studies in the US and Europe have found that large corporations enjoy an innovative advantage in certain industries, while small firms are more innovative in others. Research and development (R&D) is concentrated in the world's largest industrial corporations, while most models of technological change view innovative output as a product of knowledge-generating inputs. In Discussion Paper No. 865, Zoltán Acs, Research Fellow David Audretsch and Maryann Feldman seek to account for these disparate findings by arguing that the small firms which emerge as engines of innovative activity obtain the inputs they need from other firms and institutions. R&D investment by private corporations and universities thus `spills over' to be exploited economically by third-party firms.

The authors focus on US data to identify the extent to which university and corporate R&D spills over within individual states; they also find that the bulk of innovative activity is spatially concentrated within a handful of states. They estimate a knowledge production function that links inputs such as corporate R&D and university research to innovative output. Their empirical results suggest that aggregate innovative output rises with the quantities of knowledge-generating inputs in both private corporations and university laboratories. Private sector R&D expenditure provides important inputs into the innovative activity of large firms, while university research expenditure serves as an essential input into the generation of small enterprises' innovative activity. Large corporations appear to be more adept at exploiting the knowledge created in their own laboratories, while their smaller counterparts enjoy a comparative advantage in exploiting spillovers from university laboratories.

Innovation and R&D Spillovers
Zoltán J Acs, David B Audretsch and Maryann P Feldman

Discussion Paper No. 865, December 1993 (AM)