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CEP discussion paper

Spillovers in Space: Does Geography Matter?

Using US firm level panel data we simultaneously assess the contributions to productivity of three potential sources of research and development spillovers: geographic, technological, and product market (“horizontal”). To do so, we construct new measures of geographic proximity based on the distribution of a firm’s inventor locations as well as its headquarters. We find that geographic location is important for productivity, perhaps dominating other spillover mechanisms, and that both intra– and inter–regional (counties) spillovers matter. The geographic location of a firm’s researchers is more important than its headquarters. These benefits may be the reason why local policy–makers compete so hard for the location of local R&D labs and high tech workers.

Sergey Lychagin, Joris Pinkse, Margaret E. Slade and John Van Reenen

August 2010     Paper Number CEPDP0991

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This CEP discussion paper is published under the centre's Growth programme.