Localised Knowledge Spillovers and Trade Competitiveness The Case of Italy

A renewed interest has been growing recently for the spatial dimension of trade and knowledge flows. Several contributions have shown that knowledge proximity matters in mediating flows of knowledge and that knowledge spillovers tend to occur within limited geographical boundaries. Theoretical works have also shown that geographical concentration of knowledge spillovers may play a fundamental role in shaping national and regional patterns of specialisation and comparative advantages through cumulative processes. In spite of such advances, still few empirical works exist attempting to verify the relationship between localised processes of knowledge generation and spillovers, on the one hand, and regional patterns of trade specialisation and comparative advantages, on the other hand. This paper aims to provide a first empirical assessment of such relationship with reference to high technology industries in Italy. The data used in the analysis are based on the European Patent Office database and on trade statistics at the SITC five-digit level and are spatially referenced to the Italy NUTS3 regional partition. The analysis adopts a spatial econometric approach where localised processes of knowledge generation and spillovers are modelled through the inclusion in regression estimates of spatially lagged variables for innovations. Results from econometric estimates provide evidence of significant differences across industries with respect to the impact of localised technological spillovers on regional trade performance. Local technological capabilities significantly affect the trade performance of counties in the chemicals sectors (i.e. pharmaceuticals, plastics and fine chemicals) and in the industrial automation and instruments sectors. In addition to that, the results also show that in two of these sectors (i.e. industrial automation and fine chemicals) benefits from innovative activities do not remain within the boundaries of specific counties, but tend to spill over across counties. Less evidence of any positive effect of localised knowledge spillovers (both within and across counties) is instead found in most electronic sectors, where export and innovative activities are polarised around few metropolitan areas.