THE RECENT LOCATION OF FOREIGN-OWNED R&D ACTIVITIES BY LARGE MNCs IN THE EUROPEAN REGIONS: THE ROLE OF SPILLOVERS AND EXTERNALITIES

This paper examines the role of spillovers and externalities in influencing the recent siting of foreign-owned R&D activities in European regions. In accordance with the literature on knowledge creation in MNCs, we find that location of foreign-owned research tends to agglomerate, depending upon the potential for the following different sources of spillovers and externalities: (i) intra-industry spillovers or specialisation externalities, associated with the presence of a wide-ranging collection of firms active in the same sector; (ii) inter-industry spillovers or diversity externalities, associated with the co-presence of firms working in different fields; and (iii) science-technology spillovers and externalities stemming from the presence of a munificent scientific and educational infrastructure. Additionally, we find that benefits from spillovers decline with distance, but this holds especially for intraand interindustry spillovers.