Since the 1980s, income differences between European Union (EU) states have declined at the same time as regional inequalities within countries have increased (Puga, 2002). Across many states of the EU regional development is increasingly polarized (Overman et al., 2002). Although regional income convergence followed the introduction of the Euro (Beyer and Stemmer, 2016), the economic crisis that began in 2008 reversed this process leading to a growth in inequality within and between countries (Cuadrado-Roura et al, 2016; Crescenzi et al., 2016). Achieving economic and social cohesion through European integration is one of the main goals of the EU. Inasmuch, the recent growth of development differences across European regions calls for significant policy action. Innovation and knowledge creation is widely acknowledged as a fundamental driver of regional competitiveness and development (Solow, 1956; Romer, 1990). As a result, regional and national governments, and international organizations have ranked innovation-based policies high on their agendas. For instance, in 2000, the Lisbon Agenda established the goal of making the EU "the most competitive and dynamic knowledge-based economy in the world". More recently, the Europe 2020 Agenda highlighted the need to close the gap in R&D investment with other leading countries (European Commission, 2010). Most all economic activity is geographically concentrated and innovation is no different, tending to concentrate in core regions of the European Union. Moreno et al. (2005) show that some urban areas tend to host a disproportionate amount of European innovation, while intermediary and less developed regions lag behind. Similarly, the Regional Innovation Scoreboard (European Commission, 2016) elaborates a synthetic indicator of regional innovative performance and uses it to classify regions as innovation leaders, strong innovators, moderate innovators or modest innovators. Two important results are evident in Figure 1. On the one hand, within country differences suggest that geographical variations in knowledge production are not fully explained by national innovation systems. On the other hand, a core-periphery pattern exists: i) a core of regional innovation leadership is evident around an axis from Munich to London, with some additional hot spots in the north of Europe (some Scandinavian regions); ii) a periphery of moderate and modest regional innovation exists in southern and eastern regions of Europe.
