Technological change, technological catch-up and market potential: Evidence from the EU Regions

Abstract

The paper examines the way(s) market potential affects the EU regions' technological change and technological catch-up. The analysis refers to a sample of 263 NUTS II EU regions and covers the period 1995-2008 (i.e. prior to the outburst of the economic crisis). On the basis of the latest advances of nonparametric frontier analysis, and in the presence of dynamic effects, time-dependent conditional nonparametric frontiers are developed. The incorporation of the dynamic effects of the EU regions' market potential conditions, allows for modelling the corresponding effects on technological change and technological catch-up. The findings of the paper provide valuable insight to both theory and policy-making, revealing that, within the integrated EU space, market potential acts as a technology-initiating factor, creating asymmetric effects and leaving a distinct “spatial footprint” with respect to the processes of technological change and technological catch-up. © 2021 Hellenic Association of Regional Scientists. All rights reserved.