How do dimensions of institutional quality improve Italian regional innovation system efficiency? The Knowledge production function using SFA

This paper investigates the contribution of different dimensions of institutional qual- ity on the efficiency of the Italian regional innovation system (RIS) through the application of a knowledge production function estimated within a Stochastic Fron- tier Analysis environment. Though most of the dimensions of institutional quality considered in the analysis are found to play no role in affecting RIS efficiency, we detect a positive and highly significant impact of government effectiveness on the variable of interest. This result is robust to different assumptions about the underly- ing technology, to alternative lag structures between R&D and patenting activities and to the application of different R&D inputs. Moreover, this evidence is confirmed once instead of the RIS efficiency, we appraise the impact of institutional quality on the amount of registered patents, through the application of a canonical knowl- edge production function. In terms of policy implications, our analysis indicates that measures that strengthen the endowment of regional socio-economic structures are highly recommended as they enhance the efficiency of the RIS and stimulate pat- enting activities. Finally, interventions for Southern regions should be designed to reduce the technological and efficiency gap with the most advanced regions in the country.