The innovation process of European régions

This paper aims at investigating the innovation process of European regions in taking into account potential feedback relations between university and private business research and development (R&D). After a review of the related literature, we construct a simultaneous equation model based on a knowledge production function framework. The model is tested onto an extended sample of 153 European regions and highlights that the European region's knowledge creation heavily depends on private business and university R&D efforts which, in turn, influence each other. However, the European landscape is characterised by important disparities in terms of knowledge creation capacities. Since the innovative capacity of "objective 1" regions is extremely weak, we attempt to identify by means of dummy variable estimations the specific components of the innovation process that should be fostered by an adequate S&T policy.