The effects of externalities on productivity growth in Spanish industry

The paper discusses the role of externalities in promoting industrial growth in Spanish regions. We try to identify whether the so-called dynamic externalities (technological spillovers) come from outside the industry (Jacobs type externalities) or whether they are generated between firms inside the industry (Marshall-Arrow-Romer or MAR type externalities). Moreover, this study attempts to test the effects of competition on innovation and growth (Porter type external effects). Related to earlier work by the authors on static and dynamic externalities analysis, this paper restricts the analysis to dynamic externalities using productivity, instead of labor. The empirical analysis is based on data from the Spanish Industry Survey from 1978 to 1992 for 26 manufacturing branches. We find evidence of dynamic effects due to specialization (MAR) that depend on the level of this variable. While specialization seems to affect productivity growth negatively, once it reaches a certain level, its effect on growth becomes positive due to knowledge sharing. However, we do not find clear evidence on the presence of diversity (Jacobs) and competition (Porter) externalities. (C) 2002 Elsevier Science B.V. All rights reserved.