Measuring Spillovers from Industrial R&D: On the Importance of Geographic and Technological Proximity

I present evidence to suggest that an important share of the apparent geographic localization of spillovers from industrial R&D may be an artifact of other agglomerative forces. A production-function framework is used to examine the role of geographic and technological proximity for interfirm spillovers from R&D in SIC 35. Spillovers among firms within narrow, four-digit industrial classifications are generally stronger than those identified within the broader, three-digit class. Such spillovers, however, do not appear to be attenuated by distance. Geographic distance does appear to attenuate spillovers that cross four-digit boundaries, suggesting that they may play a role in the formation of diverse (but not too diverse) industrial agglomerations.