The effects of regional capacity in knowledge recombination on production efficiency

Knowledge recombination, combining knowledge existing (exploitation) or new knowledge capacity (exploration) for creating knowledge collaboration, is one of the important ways of achieving innovation. However, little has known about how the knowledge recombination types affect differently to production efficiency at a regional level. This study explores the relationship between the knowledge recombination types of exploitation and exploration and regional technical efficiency by using the empirical data sets combining EPO PATSTAT, Eurostat, and Cambridge Econometrics regional database. For this purpose, three stages of analysis have been deployed. Firstly, CPC co-occurrence network analysis and relative comparative advantage (RCA) measures are used to construct knowledge space and measure regional capacity. Then, using the stochastic frontier analysis, the production efficiencies of the European NUTS 2 regions are measured. With all estimated measures, the effects of both exploration and exploitation of knowledge recombination on regional production efficiencies are estimated. The results show the positive effect of exploration on regional production efficiency, which highlights the importance of extending the range and variety of knowledge bases.