What Do We Know About Geographical Knowledge Spillovers and Regional Growth? A Survey of the Literature

Modern (endogenous) growth theory tells us that knowledge spillovers are crucial for the growth of high-income economies. Against this background the paper provides a survey of theoretical and empirical findings highlighting the question of how geographically limited knowledge diffusion can help to explain clusters of regions with persistently different levels of growth. The paper discusses this topic in two steps: First, the theoretical concept of knowledge spillovers is outlined by discussing the different types of knowledge, the spatial dimension of knowledge spillovers, and the geographical mechanisms and structural conditions of knowledge diffusion. This discussion shows that the literature on knowledge spillovers focuses on the hypotheses that such spillovers lead to dynamic externalities and – in the geographical dimension – to agglomeration effects, both of which constitute path dependence in the economic growth of regions. Second, the paper analyses the empirical evidence for these theoretical findings. Existing empirical work mainly supports the theoretically derived hypotheses. This applies especially with focus on the spatial limited character of knowledge spillovers as well as the importance of knowledge transfer for regional productivity and innovative behaviour.