Public R&D funding and new regional specialisations: The contingent role of technological relatedness

It is widely acknowledged that new technological specialisations of regions are to a large extent driven by the recombination of existing knowledge and capabilities. Yet, little is known about the role of policy in this process. To address this, we analyse the relationship between the regional allocation of research grants and new technological specialisations of European regions between 1999 and 2010. Research grants are measured as the number of R&D projects supported by the EU Framework Programmes (FP) and technological specialisations based on regional patenting activities. Using a fixed effects linear probability model, our results indicate that FP participations have a positive but relatively small effect on the development of new specialisations of regions. Results further suggest that the effect is highest if the level of relatedness with the new technology is neither too low nor too high, indicating that participations can compensate for a lack of local related capabilities.