Determinants of spatial knowledge spillovers in Italian provinces

Statistical evidence suggests that the relevance of knowledge spillovers has increased over time. In this paper we focus on regional knowledge spillovers and adopt a new econometric transformation that allows inference on potential inter-regional knowledge spillovers, accounting for spatial interdependencies. Determinants of inter-regional knowledge spillovers are explained with a sample of 103 Italian provinces. We find that a region's absorptive capacity, measured by local R&D expenditure and social capital, implies a reduction of outward knowledge spillovers. Identification is based on the use of Two Stages Least Squares and Fixed Effects estimates.