Firms size and R&D spillovers: Evidence from Italy

The recent emergence in the industrial organization literature of a wave of studies identifying small firms as more innovative than their larger counterparts poses something of a paradox? Where do small firms get their knowledge generating inputs? The purpose of this paper is to link innovative inputs to innovative outputs. This enables the identification of the extent to which spillovers exist from major sources generating new economic knowledge, such as the research and development (R&D) laboratories of private and public firms, as well as universities, to the innovative activity of large and small enterprises. Based on twenty Italian regions over a period of nine years, the empirical evidence suggests that, while firm R&D expenditures contribute to the generation of innovative output for all firms, as well as for large and small firms, the spillovers from university research are apparently more important for small-firm innovation than for large-firm innovation.