Review of Industrial Organization 12: 243–258, 1997.
1997 Kluwer Academic Publishers. Printed in the Netherlands.
From Which Source Do Small Firms Derive Their
Innovative Inputs? Some Evidence from Italian
, ENRICO SANTARELLI
Istat (National Statistical Ofﬁce of Italy), Dipartimento di Contabilit
a Nazionale e Analisi
Economica, Via Depretis 74/B, 00184 Rome;
a di Bologna (Italy), Dipartimento di
Scienza Economiche, Strada Maggiore, 45, 40125 Bologna;
a Cattolica di Piacenza
a di Economia, Via Emilia Parmense, 84, 29100 Piacenza, Italy
Abstract. This paper relies upon the hypothesis that the “knowledge production function” – deﬁned
in the geographical sense – is characterized by coefﬁcient estimates which vary with ﬁrm size. In
particular, large ﬁrms depend for their innovative output on direct and indirect R&D inputs, whereas
small ﬁrms more extensively exploit the spillovers from research activities carried out by universities
and by other ﬁrms. This hypothesis is tested against two different sets of data: the ﬁrst based on
patent statistics and dealing with 20 Italian regions over the period 1978–86; the second consisting
of a selected number of product innovations identiﬁed by a literature-based counting procedure
and dealing with 46 Italian provinces in year 1989. The results of regression analysis support the
hypothesis that ﬁrms belonging to different size classes resort to different sources for the knowledge
relevant to their innovative output. In particular, industry R&D prove to play a relatively more
important function than do spillovers from university research in generating innovative output in
large ﬁrms, whereas the opposite is true in the case of small ﬁrms.
Key words: R&D spillovers, product innovation, ﬁrm size.
JEL Classiﬁcation: L11, O31.
It is conventional wisdom in industrial organization that large ﬁrms are the most
powerful engine of technological change, while small ﬁrms account for a scant
portion of total innovative activities. This view can be traced back to the so called
We wishto thank DavidAudretsch, Massimo Colombo,FrancoMalerba, Alessandro Sembenelli,
and an anonymous referee for their useful suggestions, Paolo Silvestri and Francesco Lissoni for
assistance in data collection. This paper is part of the project “Determinants of the specialization of
small ﬁrms, large ﬁrms and universities in the production and use of scientiﬁc knowledge” (Ricerca
di base Universit
a Bocconi, directed by Giuliano Mussati, Marzio A. Romani and Sergio Vacc
the project “Product innovation in manufacturing” (National Research Council of Italy grants No.
92.01961.CT10 and 93.00971.CT10, responsible Enrico Santarelli). Although the paper is a joint
effort, Sections I, IV.A, and V can be attributed to Roberta Piergiovanni; Section IV.B to Enrico
Santarelli; Sections II and III to Marco Vivarelli.