Rethinking the regional knowledge production function

The knowledge production function is a questionable device for identifying the determinants of commercial patenting. Adapted from firm level analysis, it implicitly assumes that some mechanism exists to transfer research and development inputs across institutions to maximize invention output. Augmenting the approach with regional structure variables risks confounding causes and effects, because these conditions determine research and development in the first place. We contrast a knowledge production function and a regional structure model to identify the determinants of commercial patenting in US states in the period 2002-2004. Results show that human capital, specialized knowledge flows, urbanization and industry dominance in technical advance drive commercial patenting.