Cover of EconPol Working Paper 42

How Important are Local Knowledge Spillovers of Public R&D and What Drives Them?

Leonie Koch ( Ludwig Maximilian University of Munich ), Martin Simmler (EconPol Europe, Oxford University Centre for Business Taxation)

There is a clear consensus that stimulating firm R&D is welfare-increasing due to positive externalities and uncertainty, but the question about the most efficient way to do so is still open to debate. This paper from Leonie Koch ( Ludwig Maximilian University of Munich) and Martin Simmler (EconPol Europe, Oxford University Centre for Business Taxation) analyzes the magnitude of local knowledge spillovers of public R&D in Germany and its determinants using patent application data. They find that firms file more patent applications when collaborating with (local) public institutions, that firms file more patent applications when citing a public patent, and that local public R&D seems to increase the number of patent applications by local firms. The authors conclude there is evidence for substantial local spillovers and that these are driven by non-specific knowledge spillovers.

Abstract

This paper analyzes the magnitude of local knowledge spillovers of public R&D in Germany and its determinants using patent application data. We identify three distinct transmission channels. First, firms file more patent applications when collaborating with (local) public institutions. Second, firms file more patent applications when citing a public patent. Third, local public R&D seems to increase the number of patent applications by local firms also via nonspecific knowledge spillovers. Using a fixed effect instrumental variable regression approach, we find evidence for substantial local spillovers and that these are driven by non-specific knowledge spillovers.

Citation

Leonie Koch, Martin Simmler: How Important are Local Knowledge Spillovers of Public R&D and What Drives Them?, EconPol Working Paper 42, February 2020