This paper investigates the influence of country-specific factors on the degree of reliance on public knowledge among innovators. Using backward citations as our dependent variable we find that national characteristics indicative of the quality of the innovation system generally have a positive effect on knowledge flows. A national bias towards applied research and development (R&D) has a negative impact, but this is moderated by individual public-private cooperation. Overall, our empirical exercise confirms the strong mutual influence of the characteristics of applicants and the attendant institutional context, thus contributing to the debate on the centrality of university/government-industry interaction in the current policy debate. Our sample consists of some 600,000 patents from the EU27 member states in years 1990-2007. The policy implications of our empirical exercise suggest the importance of strengthening the quality of innovation infrastructures and of setting targets for the composition of R&D funding to achieve a balance between patent knowledge production and knowledge flows. Last but not least, this analysis provides broad support for policies aimed at enhancing public-private cooperation to compensate for the effects of strong bias in the direction of national research.
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