Innovation and Space: The Concept of Regional Knowledge Production Functions

In the early stages location theory mainly concentrated on the spatial pattern of industrial activities. Although the focal point of theoretical considerations and empirical analysis has shifted towards the service sector in the meantime, the location of knowledge-based activities has not yet been explained in a satisfying way. Especially the spatial dimension of innovation processes needs further examination. Thus, the article will deal with spatial patterns of patent applications trying to reveal the key location factors of inventive activities. Based on macroeconomic production theory a regional knowledge production function will be developed and empirically tested by statistical data for the Austrian regions. In this approach regional patent densities are not only explained by “classical” production factors such as human and real capital but also by the accessibility and the availability of relevant knowledge. On the one hand, recent studies have shown that due to the crucial role of „tacit knowledge“ proximity still matters even in activities, which were commonly considered to be “footloose”. On the other hand, since spatial proximity to competent persons does not guarantee knowledge-spillovers, the institutional conditions in a region, which determine the transaction costs for acquiring knowledge, also have to be regarded. These soft location factors, which are often referred to as “institutional thickness” or “embeddeness” in literature, will therefore play an important role in the regional knowledge production function to be developed.