The Effect of R&D Co-Location on Innovative Activities in Great Britain

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On the 27th of April, City-REDI held a webinar featuring Dr John Moffat from Durham University Business School:

The Effect of R&D Co-Location on Innovative Activities in Great Britain

Using UK Innovation Survey and the data from the various databases of the UK Office for National Statistics from 2004 – 2018, Dr John Moffat and Professor Richard Harris examine the effects of the inter- and intra-industry R&D co-location on the extensive and intensive margins of R&D and innovation. This study aims to deepen our understanding of the spatial colocation of R&D and whether the benefits from R&D colocation can help the UK achieve ‘levelling up’ the economy.

The results show that employment co-location, which can be understood as general co-location, has a negative association with R&D and innovation activities. However, the inter- and intra-industry R&D co-location do have positive effects on both extensive and intensive margins of R&D and innovation. These findings suggest that businesses need to invest in R&D to build their absorptive capacity to benefit from spillovers from nearby businesses. It is worth noting that the inter-industry R&D co-location effects tend to be larger. One plausible explanation is the expropriation avoidance effects.

The results broadly provide support for the UK government’s plans to encourage clustering to achieve its goal of levelling up the UK economy. Moreover, they also point to the importance of promoting diverse clusters.

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