R&D, spatial proximity and productivity at firm level: evidence from Italy

The aim of this paper is to evaluate the effect of research and development (R&D) on productivity by taking into account productivity spillovers. To this end, by using a sample of Italian manufacturing firms provided by the Xth UniCredit-Capitalia survey (2008), which covers the period 2004-2006, we have analyzed the role of R&D in firm productivity by using a spatial autoregressive model. In so doing, we have allowed the total factor productivity (TFP) of each firm to be affected by the TFP of nearby firms. Results show that R&D play an important role in Italian firm productivity. Moreover, we find evidence in favor of productivity spillovers across firms due to spatial proximity. In addition, intrasectoral R&D spillovers seem to have a relevant effect on firm productivity, while intersectoral R&D spillovers do not have a significant effect.