The German East-West Divide in Knowledge Production: An Application to Nanomaterial Patenting

Research and development (R&D), in the field of nanomaterials is expected to be a major driver of innovation and economic growth. Consequently, it is of great interest to understand which factors facilitate the creation of new technological knowledge. The existing literature has typically addressed this question by employing a knowledge production function based on firm-, regional- or even country-level data. Estimating the effects for the entire national system of innovation, however, assumes poolability of regional data. We apply our reasoning to Germany, which has well-known regional disparities, in particular between the East and the West. Based on analyses at the NUTS 3 regional level, we find different knowledge production functions for the East and the West. Moreover, we investigate how our results are affected by the adoption of alternative aggregation levels. Overall, our findings suggest that a careful evaluation of poolability and aggregation is required before estimating knowledge production functions at the regional level.