The diffusion of innovation: a spatial econometric approach

Abstract

The present paper highlights a critical aspect of endogenous growth theory to unravel the pivotal theme of knowledge production and innovation activities. This research draws inspiration from seminal works by Griliches (1979), Romer and Jones (1990-1995), which laid the foundation for the Knowledge Production Function (KPF) with patent flow as a primary output indicator. The versatility of forms of innovation ranging from tangible to intangible allows its mobility across economic agents, carrying substantial implications at both local and international scales. By estimating the spatial panel data model across a sample of 20 countries affiliated with the OECD organization over a 20-year period from 1995 to 2015, our examination identified a beneficial spatial interdependence in the production of innovation among countries. Also, a positive direct impact of innovation stock was observed within a country, both internally and in neighboring nations. Additionally, our analysis unveiled a significant negative indirect influence of Research and Development (RD) stock on innovation production in adjacent countries.