What explains the location of industrial innovation Economists have traditionally attempted to answer this question by studying firm-external knowledge spillovers. This paper shows that firm-internal linkages between production and R&D play an equally important role. I estimate an R&D location...

The literature of new growth theory regards Research and Development (R&D) as a crucial factor in economic growth. This is because R&D not only improves production technology, but also because of its significant externality (spillover) effects on other firms. This paper employs the model...