High Skilled Migration, Innovation and Regional Diversification in Europe

Abstract

Regions tend to diversify their industries by entering industries that are related to their current industries. This is because new industry formation relies heavily on the knowledge present in the region. Regions can acquire new knowledge via extra-regional linkages, one of which is through high skilled migration. This paper aims to analyze the effects of high skilled migration as an extra-regional knowledge source on regional innovation and regional diversification. Regional diversification paths of 242 European regions are analyzed using a patent dataset containing information on nationality and region of residence of inventors. Total innovative output of regions increases because of an influx of foreign inventors, and the patents by foreign inventors contribute to regional diversification. In regions with below average patenting activity, the contribution of foreign inventors allows those regions to diversify into more unrelated industries.