Do Clusters Generate Greater Innovation and Growth? An Analysis of European Regions. Bruges European Economic Research (BEER) Papers 21/October 2011

The analysis of clusters has attracted considerable interest over the last few decades. The articulation of clusters into complex networks and systems of innovation -- generally known as regional innovation systems -- has, in particular, been associated with the delivery of greater innovation and growth. However, despite the growing economic and policy relevance of clusters, little systematic research has been conducted into their association with other factors promoting innovation and economic growth. This article addresses this issue by looking at the relationship between innovation and economic growth in 152 regions of Europe during the period between 1995 and 2006. Using an econometric model with a static and a dynamic dimension, the results of the analysis highlight that: a) regional growth through innovation in Europe is fundamentally connected to the presence of an adequate socioeconomic environment and, in particular, to the existence of a well-trained and educated pool of workers; b) the presence of clusters matters for regional growth, but only in combination with a good ‘social filter’, and this association wanes in time; c) more traditional R&D variables have a weak initial connection to economic development, but this connection increases over time and, is, once again, contingent on the existence of adequate socioeconomic conditions.