The determinants of localization of knowledge spillovers: evidence from the European and North American regions

The paper reports several new findings on the localization of knowledge spillovers with respect to geographical distance and territorial borders for the European and North American regions. First, the negative influence of distance on knowledge spillovers is non linear, and largely it takes place within 200-250 KM range. Second, national borders exert further impact on the localization of knowledge spillovers above and beyond geographical distance. Third, regional borders at various levels of territorial units have an additional impact on the localization of knowledge spillovers as compared to national borders and geographical distance. Furthermore, several national and regional level conditions and policies are analyzed as determinants of the national border effect including labour and product market regulations, strength of the IPR legislation, linguistic affinities, regional industrial structure, and others. Last, the national border effect is shown to have an increasing trend both in Europe and North America.