The role of spatial agglomeration in a structural model of innovation, productivity and export: a firm-level analysis

In this article, using a large sample of Italian manufacturing firms, we estimate a structural model of research, innovation, productivity and export performance augmented to take account for the role played by spatial agglomeration externalities. This model, which is an ‘augmented’ version of Crépon et al. (Econ Innov New Technol 7(2):115–158, 1998) model, comprises five main equations. The first two identify the factors underlying the decision and intensity of Research and Development (R&D) investments; the third links R&D capital to innovation output; the fourth focuses on Total Factor Productivity (TFP) as determined by innovation; the fifth relates TFP to export performance. Our estimates show the significant role played by local externalities in these processes. In particular, related variety and urbanization positively affect the creation of new ideas through R&D, while specialization impacts on TFP to complement innovation output. Finally, urbanization economies support TFP in driving firms’ export performance.