How Important are Local Knowledge Spillovers of Public R&D and What Drives Them?

There is a clear consensus that stimulating firm R&D is welfare-increasing due to positive externalities and uncertainty, but the question about the most efficient way to do so is still open to debate: this paper from Leonie Koch (Ludwig Maximilian University of Munich) and Martin Simmler (EconPol Europe, Oxford University Centre for Business Taxation) analyzes the magnitude of local knowledge spillovers of public R&D in Germany and its determinants using patent application data. They find that firms file more patent applications when collaborating with (local) public institutions, that firms file more patent applications when citing a public patent, and that local public R&D seems to increase the number of patent applications by local firms. The authors conclude there is evidence for substantial local spillovers and that these are driven by non-specific knowledge spillovers.