The determinants of regional innovation in Europe: A combined factorial and regression knowledge production function approach

The present paper studies the determinants of regional innovation in Europe through a knowledge production function approach that combines factorial analysis and regression. Our dependent variable are the patents while we used initially 21 explanatory variables that were converted--by a factor analysis--into five non-observable "hypothetical" variables reflecting five important aspects of the innovation systems: the National environment, the Regional environment, Innovating firms, Universities and the R&D done by Public Administration. Our results show that all factors have a statistically significant effect on the production of knowledge (patents), although they present very different impacts.