Knowledge Spillovers & Sources of Knowledge in the Manufacturing Sector: Literature Review & Empirical Evidence for the UK

Elif Bascavusoglu-Moreau and Qian Cher Li

Working Papers from Centre for Business Research, University of Cambridge

Abstract: This report provides a review of knowledge spillovers and sources of knowledge in the manufacturing sector. The literature reviewed indicates the importance of intangible investments in firms' internal knowledge assets. The weight of evidence also emphasises the importance of firms' absorptive capacity in increasing internal capabilities and in benefiting from external knowledge sources. We also highlight the importance of external knowledge and knowledge-assets (i.e., knowledge spillovers) in determining productivity and competitiveness, as well as the spatial dimension of knowledge flows in particular knowledge clusters. Our study subsequently provides an empirical analysis of firms' knowledge sourcing and cooperation behaviour for innovation activities in the UK manufacturing sector, using establishment-level data from recent four waves of the UK Innovation Survey covering the 2002-2010 period. Following the approach developed in Harris and Li (2009), we have constructed an empirical multi-index of absorptive capacity to measure a firm's ability to internalise and appropriate external knowledge for innovation activities. Our results show substantial heterogeneity across sectors; and overall, manufacturing (especially higher tech or advanced) makes the strongest use of knowledge sources and is associated with highest levels of absorptive capacity followed by Knowledge-Intensive Services (KIS), where the UK has a strong comparative advantage. There is evidence that manufacturers responded to external market conditions in their utilisation of knowledge sources and more specifically, firms were making greater use of knowledge sources in response to the recent economic recession.

Keywords: Manufacturing; knowledge sourcing; innovation; absorptive capacity; inter-industry heterogeneity (search for similar items in EconPapers)
JEL-codes: L25 O25 O32 R11 (search for similar items in EconPapers)
Date: 2013-12
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Citations: View citations in EconPapers (1)

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