R&D spillovers and firms' performance in Italy Evidence from a flexible production function

Regional economic divide and the role of technological spillovers in Italy. Evidence from microdata

“…It is commonly argued that the closer two firms are in technological space, the more they benefit from each other's research efforts. Following the recent literature (Jaffe, 1986 and1988;Cincera, 2005;Harhoff, 2000;Inkmann and Pohlmeier 1995;Kaiser, 2002;Aiello and Cardamone, 2008), we consider the uncentered correlation metric 7 which is computed using a set of variables relating to firms' capacity to absorb technology. For each pair of firms (i,j), the uncentered correlation is defined as follows:…”

“…Along this line, the understanding of the relationship between inputs is really interesting when analysing the Italian regional divide because the level and the type of innovative efforts vary from one area to another. In contrast with Aiello and Cardamone (2008), this paper relaxes the strict assumption of CRS because R&D spillovers work as a public good and, thus, they introduce positive externalities on firms' costs. From a methodological point of view, a by-product of relaxing the CRS assumption is that the production function is not linear, where the non linearity implies that the returns to scale become a result of the model.…”

“…1 Except for the paper by Aiello and Cardamone (2008), these papers do not address the issue regarding the role of R&D in different areas of a country. In their paper, Aiello and Cardamone use a translog production function with constant returns to scale (CRS) and compare the impact of R&D spillovers in the North and in the South of Italy.…”

“…They show that the effect of R&D stock on Centre-Southern firms' production is slightly lower, while the effect of R&D spillovers is markedly higher. However, the output elasticities obtained by Aiello and Cardamone (2008) are sensitive to the measures of R&D spillovers. This evidence likely depends on the assumption made regarding the CRS of that work.…”

“…2 All this implies that technological spillovers can be determined as a weighted sum of other firms' technological capital. As was also done by Aiello and Cardamone (2008), the weighting system used in this study is based on the similarity index which is computed on a set of firm specific variables. However, this paper improves the measure of similarity in order to address the issue relating to direction in the diffusion of technology.…”