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Firms with direct investment in other countries create jobs at home. This is a counterintuitive fact that defies political thinking, especially in these rapidly changing times of populism and cries against global economic integration. Riccardo Crescenzi, Roberto Ganau, and Michael Storper study the number of jobs new foreign direct investment by domestic companies creates abroad, in comparison with local employment levels. They find a positive effect on domestic local employment, with a potential downside: intra-regional inequalities.

Firms with direct investment in other countries create jobs at home. This is a counterintuitive fact that defies political thinking, especially in these rapidly changing times of populism and cries against global economic integration. Riccardo Crescenzi, Roberto Ganau, and Michael Storper study the number of jobs new foreign direct investment by domestic companies creates abroad, in comparison with local employment levels. They find a positive effect on domestic local employment, with a potential downside: intra-regional inequalities.

Can Geographical Indications (GIs) promote local economic development in rural areas? This paper explores the impact of GIs that identify and endorse agri-food products which are strictly embedded within the territory from which they originate. Examining Italian wine protected by GIs through an innovative dataset and by means of propensity score matching and difference-in-differences models make it possible to compare the local economic development trajectories of rural municipalities afforded GIs with the correspondent dynamics of a counterfactual group of similar municipalities without GI status since 1951. Rural municipalities with GIs experience population growth and economic reorganization towards non-farming sectors, which frequently involve higher value-added activities.

Can active investment promotion efforts attract FDI towards areas and sectors that would not otherwise be targeted? This paper leverages an ad hoc survey on national and sub-national Investment Promotion Agencies (IPAs) in Europe and applies state-of-the-art policy evaluation methods to estimate the impact of IPAs on FDI attraction. The results show that FDI responds to IPAs even in advanced economies. Sub-national IPAs, operating in closer proximity to investors’ operations, attract FDI in particular towards less developed areas where market and institutional failures are stronger. IPAs influence FDI over and above other policies targeting the general economic improvement of the host economies. Impacts are concentrated in knowledge-intensive sectors where collaborative systemic conditions are more relevant. IPAs work best for less experienced companies - ‘occasional’ investors - more likely to suffer from institutional failures. Finally, IPAs are equally effective in attracting companies from both outside and inside the EU Single Market even if the latter are less likely to suffer from regulatory or information asymmetries. Overall, this evidence sheds new light on the role of sub-national IPAs as local ‘institutional plumbers’ in support of foreign investors and their operations.

A complex flow of investment is spreading across the globe, connecting more and more places. These flows bundle together streams of capital, skills and knowledge, the key factors in determining the development and wealth of places. As a result, it is now impossible to understand economic opportunities, innovation and development without one central concept: CONNECTIVITY.

Rising political skepticism on the benefits of global economic integration has increased public scrutiny of the foreign activities of domestic firms in virtually all advanced economies. Decisions to invest in new activities abroad are seen by some commentators as potentially detrimental to domestic employment. We contribute to this debate by scrutinizing the relationship between outward ‘greenfield’ Foreign Direct Investments (FDI) and local employment levels. The analysis, at the scale of USA Economic Areas, finds a generally positive link between outward investment and local employment, but with an important range of differences across regions and sectors. Less developed regions benefit the most from the positive returns of outward FDI, and, particularly, from outward FDI if it is undertaken by firms in high-tech manufacturing and services industries. But there is a downside, in the form of increasing intra-regional inequalities between high-skilled and low-skilled workers in these areas.

We characterize the knowledge production process whereby the inventive capabilities of the firm generate innovation output in highly inventive multinational enterprises (MNEs). We explore the sensitivity of this relationship to the strength of intellectual property rights (IPR) protection across the MNEs R&D subsidiaries. We argue that MNE innovative performance will be enhanced when the firm’s R&D activities are based in locations where IPR protection is stronger. Moreover, when considering the internal geography of the MNEs R&D activities, innovation performance depends on the distance between the home- and host-country IPR regime. Thus, innovation performance is worse, as the difference between home and host IPR regimes increases. Finally, we explore asymmetries in this relationship, in particular that the deterioration is more marked when MNEs locate their R&D activities in host economies with IPR protection significantly less strict than in their home country. We test these ideas using a unique new dataset about the most innovative MNEs in the world, an unbalanced panel of around 900 MNEs observed for the period 2004 to 2013 and find strong support for all our hypotheses.

This paper develops an evidence-based approach to the selection and prioritisation of Next Generation EU (NGEU) projects for timely implementation and impact of the Recovery Plan for Europe. The analysis of a large sample of projects, currently funded by the European Union (EU) with the same priorities and objectives of NGEU, suggests that a timely implementation should be driven – within the EU Commission coordination framework – by national governments liaising directly with their citizens through participatory procedures, involving relevant stakeholders. Simplified implementation procedures with clear spatial targeting and limited involvement of regional authorities are necessary conditions for the avoidance of implementation delays.

Industrial policy is unfit for the new era. Riccardo Crescenzi (LSE), Jintao Zhu (LSE) and the LSE Maryam Forum Innovation and Inclusive Growth Working Group call for a new generation of evidence-based public policies to promote innovation and inclusive growth. Geo-political fragmentation, the reorganisation of global value chains and new technologies were all happening before COVID-19, ... Continued

We exploit exogenous variation in China’s export taxes to investigate the impact of Chinese foreign direct investment (FDI) in Ethiopia. Higher sector-specific export taxes in China lead to more Chinese FDI in Ethiopian districts specialized in those sectors and generate highly heterogeneous effects. Domestic firms competing with Chinese FDI reduce their sales, investment, inputs and prices, while firms in upstream and downstream sectors expand. We build a 20-year district panel of night lights and observe that Chinese FDI leads to no instantaneous impact on local growth, but significant and persistently positive effects after 6-12 years.

This paper develops an evidence-based approach to the selection and prioritisation of Next Generation EU (NGEU) projects for timely implementation and impact of the Recovery Plan for Europe. The analysis of a large sample of projects, currently funded by the EU with the same priorities and objectives of NGEU, suggests that a timely implementation should be driven – within the EU Commission coordination framework - by national governments liaising directly with their citizens through participatory procedures, involving relevant stakeholders. Simplified implementation procedures with clear spatial targeting and limited involvement of regional authorities are necessary conditions for the avoidance of implementation delays.

We study whether and when Research and Development (R&D) activities by foreign multinationals help in the formation and development of new innovation clusters. Combining information on nearly four decades worth of patents with socio-economic data for regions that cover virtually the entire globe, we use matched difference-in-differences estimation to show that R&D activities by foreign multinationals have a positive causal effect on local innovation rates. This effect is sizeable: foreign research activities help a region climb 14 percentiles in the global innovation ranks within five years. This effect materializes through a combination of knowledge spillovers to domestic firms and the attraction of new foreign firms to the region. However, not all multinationals generate equal benefits. In spite of their advanced technological capabilities, technology leaders generate fewer spillovers than technologically less advanced multinationals. A closer inspection reveals that technology leaders also engage in fewer technological alliances and exchange fewer workers in local labor markets abroad than less advanced firms. Moreover, technology leaders tend to set up their foreign R&D activities in regions with relatively low absorptive capacity. We attribute these differences to that fact that the trade-off between costs and benefits of local spillovers a multinational faces depends on the multinational’s technological sophistication. This illustrates the importance of understanding corporate strategy when analyzing innovation clusters.

Through successive industrial revolutions, the geography of innovation around the globe has changed radically, and with it the geography of wealth creation and prosperity. Since the Third Industrial Revolution, high incomes are increasingly metropolitan, leading to a renewal of inter-regional divergence within countries. These metropolitan areas are also hotbeds of innovation. At the same time, global networks for the production and delivery of goods and services have expanded greatly in recent decades. The globalization of production is mirrored in the globalization of innovation. The paper argues that the emerging geography of innovation can be characterised as a globalized hub-to-hub system, rather than a geography of overall spread of innovation and illustrates these trends using patent data. Although much attention has been given to explaining the rise and growth of innovation clusters, there is as yet no unified framework for the micro-foundations of the agglomeration and dispersion of innovation. In addition, there appear to be strong links between growing geographical inequality of innovation and prosperity, particularly within countries. This is particularly relevant in the context of declining overall research productivity, which could be driving growing geographical concentration. All in all, there is a rich agenda for continuing to investigate the relationship between the geography of innovation, economic development and income distribution.

Growing Euroscepticism across the European Union (EU) leaves open ques- tions as to what citizens expect to gain from EU Membership and what influ- ences their dissent for EU integration. This paper looks at the EU Structural Funds, one of the largest and most visible expenditure items in the EU bud- get, to test their impact on electoral support for the EU. By leveraging the Referendum on Brexit held in the United Kingdom, a spatial RDD analysis offers causal evidence that EU money does not influence citizens’ support for the EU. Conversely, the analysis shows that EU funds mitigate Euroscepti- cism only where they are coupled by tangible improvements in local labour market conditions, the ultimate objective of this form of EU intervention. Money cannot buy love for the EU, but its capacity to generate new local opportunities certainly can.

Anti-systemic political movements have emerged in recent years in a large number of countries across the globe. These parties generally fuel their public support with anti-elite and anti-establishment rhetoric, which in Europe often translates into a strong critique to the European Union and its institutions. The EU is regarded by the supporters of anti-system movements as distant from the real, day-to-day, economic challenges and as a binding constraint to the capacity of national governments to deliver a more equitable distribution of prosperity. The inability of mainstream politics – of which the EU is seen as a natural expression – to deliver timely and credible answers to the economic needs of large strata of the electorate has been linked to electoral behaviour by a growing body of research (e.g. Rodrik, 2018; Guiso et al., 2018). However, it remains unclear how the EU can practically make a difference to the economic prospects of millions of EU citizens and, through its visible impact, influence their electoral preferences.

This article investigates the link between multinational enterprises (MNEs) and employment in their host regions by cross-fertilising the literature on MNE externalities with the emerging body of research on industrial relatedness. The link between employment and MNE presence in the same and related industries is tested for European regions. The results suggest that cross-sectoral MNE spillovers are mediated through industrial relatedness and that they are positively and significantly associated with higher employment levels, independently of input–output relations. Our results indicate that regions characterised by lower factor prices are likely to benefit the most from the presence of multinationals in terms of employment, but these benefits are concentrated in high knowledge-intensive sectors, potentially fostering inequalities within less-developed economies.

In a context of rising economic nationalism and Euroscepticism, the value added of a supranational Cohesion Policy of the European Union is constantly under scrutiny. In parallel, a growing body of empirical evidence uncovers a significant heterogeneity of national and regional impacts. This editorial argues that member states should take full responsibility and ownership of Cohesion Policy and its impacts, regaining a substantive role between Brussels and the regions. Strong national leadership and coordination will allow ‘weak’ regions (in terms of institutional quality and governance) to gain momentum, better reconciling ‘unity with (national and regional) diversity’.

To what extent do regions in different member states of the European Union benefit from Cohesion Policy? A spatial regression discontinuity design approach offers distinct but fully comparable estimates of regional impacts for each individual member state. Cohesion Policy has a positive European Union-wide impact on regional growth and employment. However, a large part of the growth bonus is concentrated in Germany, while impacts on employment are confined to the UK. The picture in Southern Europe is less rosy. In Italy, positive impacts on employment do not survive the Great Recession, while in Spain economic growth benefits are limited to the recovery period.

This paper evaluates a programme of subsidies for Collaborative Industrial Research (co-)funded by the EU Cohesion Policy in Italy mobilising over 1 billion euros. This programme in the 2007-2013 funding cycle was a precursor to some of the key features of Smart Specialisation Strategy (S3) programmes, offering evidence-based insights on potential challenges to the practical application of the S3 approach. The programme was not successful in boosting investments, value added or employment of beneficiary firms. The collaborative dimension of the projects added limited value and a more generous funding level would not have improved effectiveness. However, positive impacts emerged in low-tech sectors.

The paper looks at the geographical mobility of graduate students and their skill matching in the labour market. The paper assesses the impact of a learning mobility grant scheme funded by the European Social Fund in Sardinia (ex-Objective 1 region in the Italian Mezzogiorno). The scheme aims to foster regional human capital and increase the employability of local graduates by covering the cost of post-graduate studies in other regions or countries. The econometric analysis is based on a unique dataset that combines administrative data on beneficiaries with information from a dedicated survey. The results suggest that learning mobility grants can reinforce skill matching only if the problem of self-selection of the beneficiaries is properly addressed.

This paper investigates the link between firm-level innovative performance and innovation prone external environments where knowledgeable individuals tend to cluster. Organizational ambidexterity and absorptive capacities (potential and realized) make it possible for firms to leverage the availability of external knowledge and boost their innovation performance. The empirical analysis focuses on England and is based on a novel combination of Community Innovation Survey (CIS) firm-level data and patent data. The results show that only firms complementing potential and realized absorptive capacities are able to take advantage of favorable external environments by actively combining internal and external sources of knowledge.

This paper looks at the results of the Referendum on the United Kingdom membership to the European Union in order to test the link between the internationalisation of the local economy and the openness of the local society as factors associated with the ‘Leave’ vote (Brexit). The paper compares a number of alternative explanations put forward in the public debate after the Referendum. The empirical analysis suggests that the outcome of the referendum can be linked to an increasing tension between the ever increasing internationalisation of local firms and the ‘localistic’ attitude of their employees. Brexit can be seen as the result of a process of ‘split Europeanisation’ whereby Euroscepticism is triggered by the increasing mismatch between internationalised economies (and corporate economic interests) and localistic societies (and workers’ attitudes and cultural preferences).

The BRICs, in general, and China and India, in particular, are now widely regarded as the areas of the world likely to challenge the economic leadership of the United States (US) and the European Union (EU). A large part of this challenge will come from a rapid technological catch up by China and India. Yet, despite a recent rise in interest, there is still limited knowledge about how and where innovation takes place in these two leading emerging countries and to what extent the Chinese and Indian territorial systems of innovation differ from those in the EU or the US. In this paper we explore the geography of innovation in China and India, concentrating on understanding key territorial-level innovation trends by country, region and technology field and using the US and the EU as benchmarks. We find significant contrasts between the geography of innovation in China and India and that of the US and the EU. First, the degree of concentration of innovative activities in both countries is extremely high. The agglomeration of innovation in the coastal provinces of China and in Delhi and the south of India significantly exceeds levels of agglomeration found in the USA and the EU. Second, China has witnessed a more rapid increase in the degree of concentration of innovation than India. We posit that the differences in the geography of innovation between, on the one hand, China and India and, on the other, between these countries and the developed world are rooted in different institutional settings, different systems of innovation and different national innovation strategies.

Post Brexit, the ensuing lack of EU agricultural subsidies will have a detrimental effect on the less developed regions of the UK, potentially more so than the end to EU regional development funds that have been benefiting already fairly well-functioning constituencies. In this piece Riccardo Crescenzi and Mara Giua explain the (un)intended consequences of Brexit in this regard.

The financial crisis affected European countries in radically different ways, with some countries emerging relatively unscathed, while others suffered extreme economic problems that still persist today. But as Riccardo Crescenzi, Davide Luca and Simona Milio outline, the effects were also substantially different between individual cities and regions. Based on recent research, they demonstrate which regions were best placed to weather the crisis and suggest that the presence of a skilled labour force was one of the key factors allowing certain areas to recover more quickly than others.

One of the potential problems created by the free movement of people is that skilled workers are drawn toward more developed areas, undermining the development of their own regions. As Riccardo Crescenzi, Nancy Holman and Enrico Orrù write, this process, commonly referred to as ‘brain drain’, can present a number of challenges for less developed European regions. However, drawing on research in Sardinia, they suggest that fostering an alternative process of ‘brain circulation’, in which the international networks and contacts of individuals living within an area can be utilised as a resource for development, can make mobility a positive driver of change.

Transport infrastructure investment is a cornerstone of growth-promoting strategies in the European Union. Yet, investment in new infrastructure is not always conducive to stronger economic performance. Drawing on a recent study, Riccardo Crescenzi, Marco Di Cataldo and Andrés Rodríguez-Pose write that in contexts marked by weak and inefficient governments and widespread corruption, different types of road investments often yield low or no economic returns.

Global investments and regional development trajectories: the missing links. Regional Studies. Regional economic development has been long conceptualized as a non-linear, interactive and socially embedded process: these features were traditionally regarded as spatially mediated and highly localized. However, unprecedentedly fast technological change coupled with the intensification of global economic integration has spurred the need to place regional development in a truly open and interdependent framework. Despite substantial progress in the academic literature, rethinking regional development in this perspective still presents a number of challenges in terms of concepts, empirical evidence and policy approaches. Following an interdisciplinary assessment of how openness and connectivity – proxied by one of the many cross-border flows, i.e., global investments – interact with regional economic development trajectories, this paper presents a picture of the geography of foreign investments from and to the European regions and its change after the financial and economic crisis in 2008. This simple exercise sheds some initial light on how the operationalization of regional connectivity can improve one’s empirical understanding of the evolution of regional economies and the policy approach needed to support their reaction to change.

This paper addresses a number of fundamental research questions on university-industry (U-I) collaborations. Are U-I collaborations intrinsically different from other forms of collaboration, such as inter-firm or inter-university collaborations? Are they more difficult to form? Is their output qualitatively different? What factors facilitate their development? By looking at the collaborative behavior of all Italian inventors over the 1978-2007 period, the empirical analysis shows that U-I collaborations are less likely to happen when compared to other types of collaboration, and suggests that they tend to generate patents of more general applicability in subsequent inventions. As emphasized by the literature, geographical proximity plays an important role in facilitating all forms of collaboration. At the same time, it works as a possible substitute for institutional proximity, facilitating U-I collaborations. However, the involvement of ‘star inventors’ on both sides of the collaboration can play an equally important role in ‘bridging’ universities and industry.

This paper exploits a unique dataset on regional interventions in 15 beneficiary regions of the European Regional Development Fund over four programming periods (1989-2013) to examine empirically the processes and conditioning factors underpinning success and failure of such interventions over time and across space. Our core results suggest an elevated role for two key policy-design factors in maximising the achievements of Cohesion Policy: planning consistency (confluence between planned and realised expenditures), and alignment between regional needs and programme objectives. Although derived from a ‘selected’ sample, we claim that the obtained results may generalise well beyond the 15 regions studied here.

This paper looks at the European Union as a laboratory to study how ‘spatially-targeted’ policies (i.e. the EU Cohesion and Rural Development Policies) interact with sectoral ‘spatially-blind’ policies (i.e. the Common Agricultural Policy - CAP), jointly shaping regional growth dynamics. The analysis of the drivers of regional growth shows that the EU Regional Policy has a positive influence on economic growth in all regions. However, its impact is stronger in the most socio-economically advanced areas and is maximised when its expenditure is complemented by Rural Development and CAP funds. The top-down funding of the CAP seems to be able to concentrate some benefits in the most deprived areas of the Union. This suggests that bottom-up policies are not always the best approach to territorial cohesion. Top-down policies may – in some cases – be effective in order to channel resources to the most socio-economically deprived areas. Territorial cohesion requires the flexible integration and coordination of both bottom-up and top-down approaches.

The debate on Russia’s innovation performance has paid little attention to the role of geography. This paper addresses this gap by integrating an evolutionary dimension in an ‘augmented’ regional knowledge production function framework to examine the territorial dynamics of knowledge creation in Russia. The empirical analysis identifies a strong link between regional R&D expenditure and patenting performance. However, R&D appears inadequately connected to regional human capital. Conversely, Multinational Enterprises (MNEs) play a fundamental role as ‘global knowledge pipelines’. The incorporation of historical variables reveals that the Russian case is a striking example of long-term pathdependency in regional patterns of knowledge generation. Endowment with Soviet-founded science cities remains a strong predictor of current patenting. However, current innovation drivers and policies also concur to enhance (or hinder) innovation performance in all regions. The alignment of regional innovation efforts, exposure to localised knowledge flows and injections of ‘foreign’ knowledge channelled by MNEs make path-renewal and pathcreation possible, opening new windows of locational opportunity.

This Editorial looks at the process of political and economic integration between the European Union and the European Neighborhood Policy (ENP) countries with a special focus on the processes linked to trade flows, FDI and their spatial impacts. This Editorial highlights the key 'unanswered' questions in the existing literature and explores outstanding conceptual and empirical challenges, discussing how the various papers included in the Theme Issue can provide systematic coherent answers to a number of these research questions. The Editorial includes a synopsis of the key findings of the papers and highlights their connections and linkages. It concludes with open questions for further research and a potential agenda for future conceptual and empirical analyses in this area.

This paper explores the factors that shape the location choices of formerly mobile graduates (FMGs) initially resident in Sardinia, Italy, a less developed European region. Combining qualitative and quantitative techniques the paper examines the reasons why some individuals decide to return after their studies, and the factors that shape their decisions and how these choices unfolded in space and time. It counters the literature, which suggests that migration is a one-off linear process driven only by wealth maximising behaviour positing rather that ac-cess to opportunities in open meritocratic job markets and circular migration trajectories are far more salient to FMGs. This suggests that policy makers should concentrate on promoting labour market opportunities and investing in social network promotion that will aid brain circulation.

Transport infrastructure investment is a cornerstone of growth-promoting strategies. However, the link between infrastructure investment and economic performance remains unclear. This may be a consequence of overlooking the role of government institutions. This paper assesses the connection between regional quality of government and the returns of different types of road infrastructure in the regions of the European Union. The results unveil the influence of regional quality of government on the economic returns of transport infrastructure. In weak institutional contexts, investment in motorways – the preferred option by governments – yields significantly lower returns than the more humble secondary roads. Government institutions also affect the returns of transport maintenance investment.

This article investigates how the location behavior of Multinational Enterprises (MNEs) is shaped by the economic institutions of the host countries. The analysis covers a wide set of geographically proximate economies with different degrees of integration with the ‘Old’ 15 European Union (EU) members: New Member States, Accession and Candidate Countries, as well as European Neighborhood Policy (ENP) countries and the Russian Federation. The article aims to shed new light on the heterogeneity of MNE preferences for the host countries’ regulatory settings (including labor market and business regulation), legal aspects (i.e. protection of property rights and contract enforcement) and the weight of the government in the economy. By employing data on 6,888 greenfield investment projects, the random-coefficient Mixed Logit analysis shows that, while the quality of the national institutional framework is generally beneficial for the attraction of foreign investment, MNEs preferences over economic institutions are highly heterogeneous across sectors and business functions.

This paper explores the location strategies of Multinational Enterprises (MNEs) from emerging countries (EMNEs) in search for regional strategic assets. The analysis is based on a systematic comparison between EMNEs and multinationals from advanced countries (AMNEs) in order to unveil similarities and differences between these two major sources of foreign investments into the regions of the European Union. The empirical results suggest that EMNEs follow a distinct logic in their location strategies because they are attracted by the availability of technological competences only when their subsidiaries pursue more sophisticated and technology-intensive activities. Conversely EMNEs share some behavioural similarities with AMNEs in their response to the spatial agglomeration of investments.

This paper aims to investigate the economic integration between the European Union and its neighbouring countries by exploring the location drivers of Italian Multinational Enterprises (MNEs) in 33 destination countries including the New Member States of the European Union (NMs) and the European Neighbouring countries (NCs). The paper compares market- and efficiency-seeking motivations with asset-seeking strategies. The analysis is based on a mixed-method approach. The quantitative analysis assess the location determinants of 518 Italian MNEs that invested in the area in the years 2003-2008, while qualitative information on strategic location decisions is collected by means of in-depth interviews with executives in two of the largest Italian MNEs active in the region. Market-seeking considerations are still predominant drivers of location decisions in EU Neighbouring Countries together with resource-seeking motivations. However, different MNEs develop diversified strategies to increase their access to these areas which are of increasing interest for global investors.

This paper looks at the link between inter-regional mobility, innovation and firms’ behavioural heterogeneity in their reliance on localised external sources of knowledge. By linking patent data (capturing inventors’ inter-regional mobility) with firm-level data (providing information on firms’ innovation inputs and behaviour) a robust identification strategy makes it possible to shed new light on the geographical mobility-innovation nexus. The analysis of English firms suggests that firm-level heterogeneity – largely overlooked in previous studies - is the key to explain the innovation impact of inter-regional mobility over and above learning-by-hiring mechanisms. A causal link between inflows of new inventors into the local labour market and innovation emerges only for firms that make the use of external knowledge sources an integral part of their innovation strategies.

This paper explores the linkages between pre-2008 crisis national macro-economic conditions, regional resistance factors and depth of the crisis in the regions of the EU27. The results suggest that only a limited set of macro-economic factors shape the regional reaction to the crisis. A healthy current account surplus is associated with stronger economic performance during the post-2008 recession. Conversely, high public debt countries are more successful in sheltering their regional economies in the short-run. When looking at regional-level resistance, human capital is the single most important positive factor. Conversely, research and development-intensive regions are more exposed to negative shocks.

Capacity to absorb new knowledge is essential, find Ricardo Crescenzi, Luisa Gagliardi and Simona Iammarino.

This paper aims at investigating the drivers of Multinational Enterprise (MNE) investment in countries linked to the 'core' of the European Union (EU-15) by different degrees of functional, economic and political integration: the EU 'New' Member states, Accession and Candidate countries, European Neighbourhood Policy countries, as well as Russia. Understanding the drivers of Foreign Investment (FDI) in these countries is highly relevant in consideration of their increasing integration into the global market and the strong influence exerted by the EU on this process. By employing data on individual greenfield investment projects for the period 2003 to 2008, this paper aims to disentangle the drivers of FDI in these countries for different industrial sectors, business functions and investment origins. The empirical results suggest that FDI in the area tends to follow market-seeking and efficiency-oriented strategies, and show path-dependency and concentration patterns that may reinforce core-periphery development trajectories in the EU neighbourhood.

This paper examines the characteristics of the collaborations between inventors in the United Kingdom (UK) by looking at what types of proximities – geographic, organisational, cognitive, social, and cultural-ethnic – between inventors are prevalent in partnerships that ultimately lead to technological progress. Using a new panel of UK inventors this paper provides an analysis of associations between these ‘proximities’ and co-patenting. The results show that while collaboration within firms, research centres and universities remains crucial, external networks of inventors are key feature of innovation teams. The analysis shows that external networks are highly dependent on previous social connections, but are generally unconstrained by cultural or cognitive factors. Geographical proximity is also weakly linked with external networks. Our results suggest that innovation policies should, rather than focus on spatial clustering, facilitate the formation of open and diverse networks of inventors.

This paper looks at foreign Multinational Enterprises (MNEs) investing in the UK and at their impact on the innovation performance of domestic firms active in their same sector. By employing data on Foreign Direct Investments matched with firm-level information the paper develops a direct measure of capital inflows at a three-digit industry level. In order to capture innovation in both manufacturing and services the paper relies on a broader proxy for firm innovativeness based on the Community Innovation Survey (CIS). The results suggest that domestic firms active in sectors with greater investments by MNEs show a stronger innovative performance. However, the heterogeneity across domestic firms in terms of internationalization of both their market engagement and ownership structure is the main driver of this effect.

Crescenzi, R., De Filippis, F. and Pierangeli, F. In tandem for cohesion? Synergies and conflicts between regional and agricultural policies of the European Union, Regional Studies. The paper analyses the financial allocations from the regional, rural development and agricultural policies of the European Union in order to assess their territorial coordination and synergies with the objective of territorial cohesion. Regression analysis is used to uncover the link between funds and territorial disadvantage for the 1994–2013 period. The analysis reveals that both coordination and compatibility with territorial cohesion have not always improved in response to major policy reforms. The territorial ‘vocation’ of overall community spending is weakly linked to its distribution among different policies, but it crucially depends upon appropriate ‘place-based’ allocation mechanisms.

By adopting a semiparametric approach, the ‘traditional’ regional knowledge production function is developed in three complementary directions. First, the model is augmented with region-specific time trends to account for endogeneity due to selection on unobservables. Second, the nonparametric part of the model relaxes the standard assumptions of linearity and additivity regarding the effect of R&D and human capital. Finally, the assumption of homogeneity in the effects of R&D and human capital is also relaxed by explicitly accounting for the differences between developed and lagging regions. The analysis of the genesis of innovation in the regions of the European Union unveils nonlinearities, threshold effects, complex interactions and shadow

Social capital has remained relatively underexplored in innovation literature. Existing studies have failed to reach a consensus on its impact on local innovative performance: some empirical analyses emphasize a positive effect, others speak about a ‘dark side’ of social capital. This paper aims to fill this gap by shedding new light on the differential role of ‘bonding’ and ‘bridging’ social capital. The quantitative analysis of the innovative performance of the Italian provinces shows that social capital is an important predictor of innovative performance after controlling for ‘traditional’ knowledge inputs (R&D investments and human capital endowment) and other characteristics of the local economy. However, only ‘bridging’ social capital – based on weak ties – can be identified as the key driver of the process of innovation while ‘bonding’ social capital is shown to be negative for innovation. Instrumental variable analysis makes it possible to identify clear causal links between bridging (positive) and bonding (negative) social capital and innovation.

This paper investigates how physical, organisational, institutional, cognitive, social, and ethnic proximities between inventors shape their collaboration decisions. Using a new panel of UK inventors and a novel identification strategy, this paper systematically explores the net effects of all these ‘proximities’ on co-patenting. The regression analysis allows us to identify the full effects of each proximity, both on choice of collaborator and on the underlying decision to collaborate. The results show that physical proximity is an important influence on collaboration, but is mediated by organisational and ethnic factors. Over time, physical proximity increases in salience. For multiple inventors, geographic proximity is, however, much less important than organisational, social, and ethnic links. For inventors as a whole, proximities are fundamentally complementary, while for multiple inventors they are substitutes.

The paper sets out to analyze the allocations of financial resources accruing to the European regions from the Regional, Rural Development and Agricultural policies of the European Union in order to assess their territorial coordination and synergies and their degree of compatibility with the "general" objective of territorial cohesion. Regression analysis is used to evaluate the relationship between allocated funds (dependent variable) and factors of territorial disadvantage (explanatory variables) covering the 20-year period 1994-2013 and approximately 90% of total Community expenditure. The analysis reveals that both coordination and compatibility with territorial cohesion of the various areas of Community policy have not always improved in response to major policy reforms. The territorial ‘vocation’ of overall Community spending is weakly linked to its distribution among different policies, but it crucially depends upon how each policy area defines appropriate allocation mechanisms and interventions, based upon the characteristics of each region and its ‘local’ needs.