Complexity and Competitiveness: Analyzing Knowledge Production's Impact on Productivity in European Metropolitan Regions

There is considerable variation in economic development both between and within countries. The variation in productivity levels is a significant factor in this phenomenon, and is in turn linked to the advancement of technology enabled by innovation and knowledge production. The focus on knowledge that is complex is expected to yield even greater benefits in terms of productivity development than knowledge of lesser quality or complexity. Although the production of complex knowledge has been the subject of considerable academic interest in recent times, the direct effects of complex knowledge on total factor productivity (TFP) remain relatively unexplored. This paper addresses the aforementioned shortcomings by utilising patent data of 192 European metropolitan regions over the period 1996 to 2017 to proxy complex knowledge production. Furthermore, a spatial econometric modelling approach is employed to investigate the relationship between metropolitan knowledge complexity and total factor productivity growth. Our results lend support to the findings of earlier studies which have demonstrated positive effects of complex knowledge production on productivity (or indirectly GDP).