This paper deals with the effects of publicly funded research at universities, polytechnics and federal research labs on industrial innovations in Germany. We discuss the characteristics of companies that benefit from the findings of public research institutions. In questioning 2,300 companies we found that less than one tenth of product or process innovating firms introduced innovations between 1993 and 1995 that would not have been developed without public research. These new products amount to approximately 5 percent of all new product sales. Regressions show that firms' own R&D support the ability to absorb the findings of public research and turn them into innovations. Contrary to the widely held opinion that proximity to public research institutions does promote collaboration between firms and public research and increase the amount of received knowledge spillovers, we found no higher probability of publicly supported innovations for firms in Germany that are located near universities or polytechnics
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