Geographical Indications and Innovation: Evidence from EU regions

Understanding the relationship between the diffusion of geographical indications (GIs) and innovation in the agri-food sector represents a relevant research area not yet properly addressed by the current literature. Our contribution aims to fill this gap by investigating the extent to which the diffusion of GIs across EU regions affects technological innovation. We investigate this issue through a Neo-Schumpeterian 'distance-to-the-frontier' model, according to which the relation between the diffusion of GIs and innovations is non-monotonic and depends on the distance of firms and local systems from the technological frontier. To test this prediction, we build an original longitudinal dataset that includes information on GIs and agri-food patents in 265 EU regions over the period 1996-2014. Using different estimators and different proxies for innovative activities, we show that the diffusion of GIs affects innovative activities, conditional on the region's distance from the technological frontier. That is to say, the spread of GIs slightly reduces innovation and growth in regions close to the technological frontier but spurs them on in laggard regions. These findings have important policy implications.