Endogenous spillovers, increased competition and re-organization waves

We consider an entrepreneur that is the sole producer of a costreducing skill, but the entrepreneur that hires a team to usethe skill cannot prevent collusive trade for the innovation related knowledge between employees and competitors. We showthat there are two types of diffusion avoiding strategies forthe entrepreneur to preempt collusive communication i) settingup a large productive capacity (the traditional firm) and ii)keeping a small team (the lean firm). The traditional firm ischaracterized by its many "marginal" employees that work shortdays, receive flat wages and are incompletely informed about the innovation. The lean firm is small in number of employees,engages in complete information sharing among members, that are paid with stock option schemes. We find that the lean firm is superior to the traditional firm when technological entry costsare low and when the sector is immature.

Early onset collagen VI myopathies: Genetic and clinical correlations.

OBJECTIVE: Mutations in the genes encoding the extracellular matrix protein collagen VI (ColVI) cause a spectrum of disorders with variable inheritance including Ullrich congenital muscular dystrophy, Bethlem myopathy, and intermediate phenotypes. We extensively characterized, at the clinical, cellular, and molecular levels, 49 patients with onset in the first 2 years of life to investigate genotype-phenotype correlations. METHODS: Patients were classified into 3 groups: early-severe (18%), moderate-progressive (53%), and mild (29%). ColVI secretion was analyzed in patient-derived skin fibroblasts. Chain-specific transcript levels were quantified by quantitative reverse transcriptase polymerase chain reaction (qRT-PCR), and mutation identification was performed by sequencing of complementary DNA. RESULTS: ColVI secretion was altered in all fibroblast cultures studied. We identified 56 mutations, mostly novel and private. Dominant de novo mutations were detected in 61% of the cases. Importantly, mutations causing premature termination codons (PTCs) or in-frame insertions strikingly destabilized the corresponding transcripts. Homozygous PTC-causing mutations in the triple helix domains led to the most severe phenotypes (ambulation never achieved), whereas dominant de novo in-frame exon skipping and glycine missense mutations were identified in patients of the moderate-progressive group (loss of ambulation). INTERPRETATION: This work emphasizes that the diagnosis of early onset ColVI myopathies is arduous and time-consuming, and demonstrates that quantitative RT-PCR is a helpful tool for the identification of some mutation-bearing genes. Moreover, the clinical classification proposed allowed genotype-phenotype relationships to be explored, and may be useful in the design of future clinical trials.

Cell therapies for tendons: old cell choice for modern innovation.

Although tissue engineering and cell therapies are becoming realistic approaches for medical therapeutics, it is likely that musculoskeletal applications will be among the first to benefit on a large scale. Cell sources for tissue engineering and cell therapies for tendon pathologies are reviewed with an emphasis on small defect tendon injuries as seen in the hand which could adapt well to injectable cell administration. Specifically, cell sources including tenocytes, tendon sheath fibroblasts, bone marrow or adipose-derived stem cells, amniotic cells, placenta cells and platelet-derivatives have been proposed to enhance tendon regeneration. The associated advantages and disadvantages for these different strategies will be discussed and evolving regulatory requirements for cellular therapies will also be addressed. Human progenitor tenocytes, along with their clinical cell banking potential, will be presented as an alternative cell source solution. Similar cell banking techniques have already been described with other progenitor cell types in the 1950's for vaccine production, and these "old" cell types incite potentially interesting therapeutic options that could be improved with modern innovation for tendon regeneration and repair.

Firm's network capability and innovation performance: evidences from China hi-tech industry

ABSTRACT : A firm's competitive advantage can arise from internal resources as well as from an interfirm network. -This dissertation investigates the competitive advantage of a firm involved in an innovation network by integrating strategic management theory and social network theory. It develops theory and provides empirical evidence that illustrates how a networked firm enables the network value and appropriates this value in an optimal way according to its strategic purpose. The four inter-related essays in this dissertation provide a framework that sheds light on the extraction of value from an innovation network by managing and designing the network in a proactive manner. The first essay reviews research in social network theory and knowledge transfer management, and identifies the crucial factors of innovation network configuration for a firm's learning performance or innovation output. The findings suggest that network structure, network relationship, and network position all impact on a firm's performance. Although the previous literature indicates that there are disagreements about the impact of dense or spare structure, as well as strong or weak ties, case evidence from Chinese software companies reveals that dense and strong connections with partners are positively associated with firms' performance. The second essay is a theoretical essay that illustrates the limitations of social network theory for explaining the source of network value and offers a new theoretical model that applies resource-based view to network environments. It suggests that network configurations, such as network structure, network relationship and network position, can be considered important network resources. In addition, this essay introduces the concept of network capability, and suggests that four types of network capabilities play an important role in unlocking the potential value of network resources and determining the distribution of network rents between partners. This essay also highlights the contingent effects of network capability on a firm's innovation output, and explains how the different impacts of network capability depend on a firm's strategic choices. This new theoretical model has been pre-tested with a case study of China software industry, which enhances the internal validity of this theory. The third essay addresses the questions of what impact network capability has on firm innovation performance and what are the antecedent factors of network capability. This essay employs a structural equation modelling methodology that uses a sample of 211 Chinese Hi-tech firms. It develops a measurement of network capability and reveals that networked firms deal with cooperation between, and coordination with partners on different levels according to their levels of network capability. The empirical results also suggests that IT maturity, the openness of culture, management system involved, and experience with network activities are antecedents of network capabilities. Furthermore, the two-group analysis of the role of international partner(s) shows that when there is a culture and norm gap between foreign partners, a firm must mobilize more resources and effort to improve its performance with respect to its innovation network. The fourth essay addresses the way in which network capabilities influence firm innovation performance. By using hierarchical multiple regression with data from Chinese Hi-tech firms, the findings suggest that there is a significant partial mediating effect of knowledge transfer on the relationships between network capabilities and innovation performance. The findings also reveal that the impacts of network capabilities divert with the environment and strategic decision the firm has made: exploration or exploitation. Network constructing capability provides a greater positive impact on and yields more contributions to innovation performance than does network operating capability in an exploration network. Network operating capability is more important than network constructing capability for innovative firms in an exploitation network. Therefore, these findings highlight that the firm can shape the innovation network proactively for better benefits, but when it does so, it should adjust its focus and change its efforts in accordance with its innovation purposes or strategic orientation.

The use of micro-XRD for the study of glaze color decorations

The compounds responsible for the colours and decorations in glass and glazed ceramics include: colouring agents (transition metal ions), pigments (micro-and nano-precipitates of compounds that either do not dissolve or recrystallize in the glassy matrix) and opacifiers (microcrystalline compounds with high light scattering capability). Their composition, structure and range of stability are highly dependent not only on the composition but also on the procedures followed to obtain them. Chemical composition of the colorants and crystallites may be obtained by means of SEM-EDX and WDX. Synchrotron Radiation micro-X-ray Diffraction has a small beam size adequate (10 to 50 microns footprint size) to obtain the structural information of crystalline compounds and high brilliance, optimal for determining the crystallites even when present in low amounts. In addition, in glass decorations the crystallites often appear forming thin layers (from 10 to 100 micrometers thick) and they show a depth dependent composition and crystal structure. Their nature and distribution across the glass/glazes decorations gives direct information on the technology of production and stability and may be related to the color and appearance. A selection of glass and glaze coloring agents and decorations are studied by means of SR-micro- XRD and SEM-EDX including: manganese brown, antimony yellow, red copper lusters and cobalt blue. The selection includes Medieval (Islamic, and Hispano Moresque) and renaissance tin glazed ceramics from the 10th to the 17th century AD.

Entropic transport in confined media: a challenge for computational studies in biological and soft-matter systems

Transport in small-scale biological and soft-matter systems typically occurs under confinement conditions in which particles proceed through obstacles and irregularities of the boundaries that may significantly alter their trajectories. A transport model that assimilates the confinement to the presence of entropic barriers provides an efficient approach to quantify its effect on the particle current and the diffusion coefficient. We review the main peculiarities of entropic transport and treat two cases in which confinement effects play a crucial role, with the appearance of emergent properties. The presence of entropic barriers modifies the mean first-passage time distribution and therefore plays a very important role in ion transport through micro- and nano-channels. The functionality of molecular motors, modeled as Brownian ratchets, is strongly affected when the motor proceeds in a confined medium that may constitute another source of rectification. The interplay between ratchet and entropic rectification gives rise to a wide variety of dynamical behaviors, not observed when the Brownian motor proceeds in an unbounded medium. Entropic transport offers new venues of transport control and particle manipulation and new ways to engineer more efficient devices for transport at the nanoscale.

Bone mineral density (BMD), micro-architecture estimation (TBS) and vertebral fracture assessment (VFA) extracted from a single DXA device in combination with clinical risk factors improve significantly the identification of women at high risk of fracture.

Osteoporosis (OP) is a systemic skeletal disease characterized by a low bone mineral density (BMD) and a micro-architectural (MA) deterioration. Clinical risk factors (CRF) are often used as a MA approximation. MA is yet evaluable in daily practice by the trabecular bone score (TBS) measure. TBS is very simple to obtain, by reanalyzing a lumbar DXA-scan. TBS has proven to have diagnosis and prognosis values, partially independent of CRF and BMD. The aim of the OsteoLaus cohort is to combine in daily practice the CRF and the information given by DXA (BMD, TBS and vertebral fracture assessment (VFA)) to better identify women at high fracture risk. The OsteoLaus cohort (1400 women 50 to 80 years living in Lausanne, Switzerland) started in 2010. This study is derived from the cohort COLAUS who started in Lausanne in 2003. The main goal of COLAUS is to obtain information on the epidemiology and genetic determinants of cardiovascular risk in 6700 men and women. CRF for OP, bone ultrasound of the heel, lumbar spine and hip BMD, VFA by DXA and MA evaluation by TBS are recorded in OsteoLaus. Preliminary results are reported. We included 631 women: mean age 67.4 ± 6.7 years, BMI 26.1 ± 4.6, mean lumbar spine BMD 0.943 ± 0.168 (T-score − 1.4 SD), and TBS 1.271 ± 0.103. As expected, correlation between BMD and site matched TBS is low (r2 = 0.16). Prevalence of VFx grade 2/3, major OP Fx and all OP Fx is 8.4%, 17.0% and 26.0% respectively. Age- and BMI-adjusted ORs (per SD decrease) are 1.8 (1.2-2.5), 1.6 (1.2-2.1), and 1.3 (1.1-1.6) for BMD for the different categories of fractures and 2.0 (1.4-3.0), 1.9 (1.4-2.5), and 1.4 (1.1-1.7) for TBS respectively. Only 32 to 37% of women with OP Fx have a BMD < − 2.5 SD or a TBS < 1.200. If we combine a BMD < − 2.5 SD or a TBS < 1.200, 54 to 60% of women with an osteoporotic Fx are identified. As in the already published studies, these preliminary results confirm the partial independence between BMD and TBS. More importantly, a combination of TBS subsequent to BMD increases significantly the identification of women with prevalent OP Fx which would have been misclassified by BMD alone. For the first time we are able to have complementary information about fracture (VFA), density (BMD), micro- and macro architecture (TBS and HAS) from a simple, low ionizing radiation and cheap device: DXA. Such complementary information is very useful for the patient in the daily practice and moreover will likely have an impact on cost effectiveness analysis.

Business Development Efforts and Performance Improvements in SMEs Case Study of Business Development Projects Implemented in SME

Under the circumstances of the increasing market pressure, enterprises try to improve their competitive position by development efforts, and a business development project is one tool for that. There are not many answers to the question of how the development projects launched to improve the business performance in SMEs have succeeded. Theacademic interest in the business development project success has mainly focused on projects implemented in larger organisations rather than in SMEs. The previous studies on the business success of SMEs have mainly focused on new business ventures rather than on existing SMEs. However, nowadays a large number of business development projects are undertaken in existing SMEs, where they can pose a great challenge. This study focuses on business development success in SMEs thathave already established their business. The objective of the present study is to gain a deep understanding on business development project success in the SME-context and to identify the dimensions and factors affecting the project success. Further, the aim is to clarify how the business development projects implemented in SMEs have affected their performance. The empirical evidence is based on multiple case study. This study builds a framework for a generic theory of business development success in the SME-context, based on literature from the areas ofproject and change management, entrepreneurship and small business management, as well as performance measurement, and on empirical evidence from SMES. The framework consists of five success dimensions: entrepreneurial, project preparation, change management, project management and project success. The framework provides a systematic way for analysing the business development project and its impact on the performance and on the performing company. This case evidence indicates that successful business development projects have a balanced, high performance concerning all the dimensions. Good performance in one dimension is not enoughfor the project success, but it gives a good ground for the other dimensions. The other way round, poor performance in one success dimension affects the others, leading to poor performance of the project. In the SME-context the business development project success seems to be dependent on several interrelated dimensions and factors. Success in one area leads to success in other areas, and so creates an upward success spiral. Failure in one area seems to lead to failure in other areas, creating a downward failure spiral. The study indicates that the internal business development projects have affected the SMEs' performance widely also on areas and functions not initially targeted. The implications cover all thesuccess categories: the project efficiency, the impact on the customer, the business success and the future potentiality. With successful cases, the success tends to spread out to areas and functions not mentioned as the project goals, andwith unsuccessful cases the failure seems to spread out widely to the SMEs' other functions. This study also indicates that the most important key factors for successful business development project implementation are the strength of intention, business ability, knowledge, motivation and participation of the employees, as well as adequate and well-timed training provided to the employees.

On the innovation capacity of technologyrelated knowledge-intensive business services. A case study of the technology and engineering consulting (TEC) sector in Singapore

Even though the research on innovation in services has expanded remarkably especially during the past two decades, there is still a need to increase understanding on the special characteristics of service innovation. In addition to studying innovation in service companies and industries, research has also recently focused more on services in innovation, as especially the significance of so-called knowledge intensive business services (KIBS) for the competitive edge of their clients, othercompanies, regions and even nations has been proved in several previous studies. This study focuses on studying technology-based KIBS firms, and technology andengineering consulting (TEC) sector in particular. These firms have multiple roles in innovation systems, and thus, there is also a need for in-depth studies that increase knowledge about the types and dimensions of service innovations as well as underlying mechanisms and procedures which make the innovations successful. The main aim of this study is to generate new knowledge in the fragmented research field of service innovation management by recognizing the different typesof innovations in TEC services and some of the enablers of and barriers to innovation capacity in the field, especially from the knowledge management perspective. The study also aims to shed light on some of the existing routines and new constructions needed for enhancing service innovation and knowledge processing activities in KIBS companies of the TEC sector. The main samples of data in this research include literature reviews and public data sources, and a qualitative research approach with exploratory case studies conducted with the help of the interviews at technology consulting companies in Singapore in 2006. These complement the qualitative interview data gathered previously in Finland during a larger research project in the years 2004-2005. The data is also supplemented by a survey conducted in Singapore. The respondents for the survey by Tan (2007) were technology consulting companies who operate in the Singapore region. The purpose ofthe quantitative part of the study was to validate and further examine specificaspects such as the influence of knowledge management activities on innovativeness and different types of service innovations, in which the technology consultancies are involved. Singapore is known as a South-east Asian knowledge hub and is thus a significant research area where several multinational knowledge-intensive service firms operate. Typically, the service innovations identified in the studied TEC firms were formed by several dimensions of innovations. In addition to technological aspects, innovations were, for instance, related to new client interfaces and service delivery processes. The main enablers of and barriers to innovation seem to be partly similar in Singaporean firms as compared to the earlier study of Finnish TEC firms. Empirical studies also brought forth the significance of various sources of knowledge and knowledge processing activities as themain driving forces of service innovation in technology-related KIBS firms. A framework was also developed to study the effect of knowledge processing capabilities as well as some moderators on the innovativeness of TEC firms. Especially efficient knowledge acquisition and environmental dynamism seem to influence the innovativeness of TEC firms positively. The results of the study also contributeto the present service innovation literature by focusing more on 'innovation within KIBs' rather than 'innovation through KIBS', which has been the typical viewpoint stressed in the previous literature. Additionally, the study provides several possibilities for further research.

Are Evaluation of ICTs Investment Using Decision Support Systems:Case Applications from Distributor's and End User's Perspective Group Decision

The evaluation of investments in advanced technology is one of the most important decision making tasks. The importance is even more pronounced considering the huge budget concerning the strategic, economic and analytic justification in order to shorten design and development time. Choosing the most appropriate technology requires an accurate and reliable system that can lead the decision makers to obtain such a complicated task. Currently, several Information and Communication Technologies (ICTs) manufacturers that design global products are seeking local firms to act as their sales and services representatives (called distributors) to the end user. At the same time, the end user or customer is also searching for the best possible deal for their investment in ICT's projects. Therefore, the objective of this research is to present a holistic decision support system to assist the decision maker in Small and Medium Enterprises (SMEs) - working either as individual decision makers or in a group - in the evaluation of the investment to become an ICT's distributor or an ICT's end user. The model is composed of the Delphi/MAH (Maximising Agreement Heuristic) Analysis, a well-known quantitative method in Group Support System (GSS), which is applied to gather the average ranking data from amongst Decision Makers (DMs). After that the Analytic Network Process (ANP) analysis is brought in to analyse holistically: it performs quantitative and qualitative analysis simultaneously. The illustrative data are obtained from industrial entrepreneurs by using the Group Support System (GSS) laboratory facilities at Lappeenranta University of Technology, Finland and in Thailand. The result of the research, which is currently implemented in Thailand, can provide benefits to the industry in the evaluation of becoming an ICT's distributor or an ICT's end user, particularly in the assessment of the Enterprise Resource Planning (ERP) programme. After the model is put to test with an in-depth collaboration with industrial entrepreneurs in Finland and Thailand, the sensitivity analysis is also performed to validate the robustness of the model. The contribution of this research is in developing a new approach and the Delphi/MAH software to obtain an analysis of the value of becoming an ERP distributor or end user that is flexible and applicable to entrepreneurs, who are looking for the most appropriate investment to become an ERP distributor or end user. The main advantage of this research over others is that the model can deliver the value of becoming an ERP distributor or end user in a single number which makes it easier for DMs to choose the most appropriate ERP vendor. The associated advantage is that the model can include qualitative data as well as quantitative data, as the results from using quantitative data alone can be misleading and inadequate. There is a need to utilise quantitative and qualitative analysis together, as can be seen from the case studies.

Diffusion of Administrative Innovation: TQM Implementation and Effectiveness in a Global

The main objective of this dissertation is to create new knowledge on an administrative innovation, its adoption, diffusion and finally its effectiveness. In this dissertation the administrative innovation is approached through a widely utilized management philosophy, namely the total quality management (TQM) strategy. TQM operationalizes a self-assessment procedure, which is based on continual improvement principles and measuring the improvements. This dissertation also captures the theme of change management as it analyzes the adoption and diffusion of the administrative innovation. It identifies innovation characteristics as well as organisational and individual factors explaining the adoption and implementation. As a special feature, this study also explores the effectiveness of the innovation based on objective data. For studying the administrative innovation (TQM model), a multinational Case Company provides a versatile ground for a deep, longitudinal analysis. The Case Company started the adoption systematically in the mid 1980s in some of its units. As part of their strategic planning today, the procedure is in use throughout the entire global company. The empirical story begins from the innovation adoption decision that was made in the Case Company over 22 years ago. In order to be able to capture the right atmosphere and backgrounds leading to the adoption decision, key informants from that time were interviewed, since the main target was to clarify the dynamics of how an administrative innovation develops. In addition, archival material was collected and studied, available memos and data relating to the innovation, innovation adoption and later to the implementation contained altogether 20500 pages of documents. A survey was furthermore conducted at the end of 2006 focusing on questions related to the innovation, organization and leadership characteristics and the response rate totalled up to 54%. For measuring the effectiveness of the innovation implementation, the needed longitudinal objective performance data was collected. This data included the profit unit level experience of TQM, the development of the self assessment scores per profit unit and performance data per profit unit measured with profitability, productivity and customer satisfaction. The data covered the years 1995-2006. As a result, the prerequisites for the successful adoption of an administrative innovation were defined, such as the top management involvement, support of the change agents and effective tools for implementation and measurement. The factors with the greatest effect on the depth of the implementation were the timing of the adoption and formalization. The results also indicated that the TQM model does have an effect on the company performance measured with profitability, productivity and customer satisfaction. Consequently this thesis contributes to the present literature (i) by taking into its scope an administrative innovation and focusing on the whole innovation implementation process, from the adoption, through diffusion until its consequences, (ii) because the studied factors with an effect on the innovation adoption and diffusion are multifaceted and grouped into individual, organizational and environmental factors, and a strong emphasis is put on the role of the individual change agents and (iii) by measuring the depth and consistency of the administrative innovation. This deep analysis was possible due to the availability of longitudinal data with triangulation possibilities.

Innovation process management of complex consumer products and services in new innovation paradigm – case location based business

Innovation is the word of this decade. According to innovation definitions, without positive sales impact and meaningful market share the company’s product or service has not been an innovation. Research problem of this master thesis is to find out what is the innovation process of complex new consumer products and services in new innovation paradigm. The objective is to get answers to two research questions: 1) What are the critical success factors what company should do when it is implementing the paradigm change in mass markets consumer business with complex products and services? 2) What is the process or framework one firm could follow? The research problem is looked from one company’s innovation creation process, networking and organization change management challenges point of views. Special focus is to look the research problem from an existing company perspective which is entering new business area. Innovation process management framework of complex new consumer products and services in new innovation paradigm has been created with support of several existing innovation theories. The new process framework includes the critical innovation process elements companies should take into consideration in their daily activities when they are in their new business innovation implementing process. Case company location based business implementation activities are studied via the new innovation process framework. This case study showed how important it is to manage the process, look how the target market and the competition in it is developing during company’s own innovation process, make decisions at right time and from beginning plan and implement the organization change management as one activity in the innovation process. In the end this master thesis showed that all companies need to create their own innovation process master plan with milestones and activities. One plan does not fit all, but all companies can start their planning from the new innovation process what was introduced in this master thesis.

Keskisuurten kasvuyritysten johtaminen - tulevaisuuden haasteet ja osaamistarpeet

Suomi tarvitsee enemmän kasvuyrityksiä uudistaakseen talouttaan sekä luodakseen uusia työpaikkoja. Tutkimusten mukaan erityisesti keskisuuret yritykset ovat tärkeitä kansantaloudelle ja niillä on usein suurempi mahdollisuus pitempiaikaiseen kasvuun kuin pienillä yrityksillä. Tutkimuksia keskisuurten kasvuyritysten kasvusta ja erityisesti näiden yritysten johtamisesta on tehty hyvin vähän. Tämän työn tarkoituksena on lisätä ymmärrystä kuinka keskisuuria kasvuyrityksiä voitaisiin johtaa vielä paremmin, tutkimalla mm. kyseisten yritysten johtajien mieltämiä tulevaisuuden haasteita ja osaamistarpeita. Empiirinen osuus toteutettiin kvalitatiivisena ja kvantitatiivisena tutkimuksena. Kansainvälisten kulttuurien tuntemus, ihmisten johtaminen, muuttuvat markkinat ja liiketoimintamallit, kasvavien verkostojen hallinta, aineeton pääoma ja innovaatioympäristöjen luominen ovat asioita, jotka aiheuttavat haasteita ja osaamistarpeita tulevaisuudessa keskisuurten kasvuyritysten johtajien mukaan. Tärkeänä pidettiin myös mm. tiedon luomista, jalostamista ja jakamista.

Russian Enterprise Restructuring - the Effect of Privatisation and Market Liberalisation on the Performance of Large Enterprises

The fundamental question in the transitional economies of the former Eastern Europe and Soviet Union has been whether privatisation and market liberalisation have had an effect on the performance of former state-owned enterprises. This study examines the effect of privatisation, capital market discipline, price liberalisation and international price exposure on the restructuring of large Russian enterprises. The performance indicators are sales, profitability, labour productivity and stock market valuations. The results do not show performance differences between state-owned and privatised enterprises. On the other hand, the expansion of the de novo private sector has been strong. New enterprises have significantly higher sales growth, profitability and labour productivity. However, the results indicate a diminishing effect of ownership. The international stock market listing has a significant positive effect on profitability, while the effect of domestic stock market listing is insignificant. The international price exposure has a significant positive increasing effect on profitability and labour productivity. International enterprises have higher profitability only when operating on price liberalised markets, however. The main results of the study are strong evidence on the positive effects of international linkages on the enterprise restructuring and the higher than expected role of new enterprises in the Russian economy.

Human Capital Composition and Economic Growth at a Regional Level

With this paper we build a two-region model where both innovation and imitation are performed. In particular imitation takes the form of technological spillovers that lagging regions may exploit given certain human capital conditions. We show how the high skill content of each region’s workforce (rather than the average human capital stock) is crucial to determine convergence towards the income level of the leader region and to exploit the technological spillovers coming from the frontier. The same applies to bureaucratic/institutional quality which are conductive to higher growth in the long run. We test successfully our theoretical result over Spanish regions for the period between 1960 and 1997. We exploit system GMM estimators which allow us to correctly deal with endogeneity problems and small sample bias.