The research issues addressed in this research segment concern the forces that make some regions embark on growth trajectories, while others fall into stagnation and decline. How do we explain that some regions seem to enjoy continuous inflows by “outsiders” (entry of firms and skills), paired by investment by indigenous firms and rapid technology-based entry into new industries, simultaneously as other regions decelerate in economic activity? Are the differences in regional performance linked to factors at the national, regional or sectoral levels? Or even at the firm level? What role is played by knowledge and what kind of knowledge is important for regional dynamism and development? Finally, to what extent can the answers be traced to differences in the institutional set-up and what policy lessons can be drawn from the divergent pattern across European regions? Theoretical guidance regarding the research path to follow is provided by the knowledge based (endogenous) growth theory. A main research question concerns which kind of knowledge is important, to what extent it emanates from university research, and the channels through which knowledge is diffused. In this area we still have only limited insights. Moreover, is a generic component (path-dependence) crucial in regional development, i.e. can we trace the rise of today’s knowledge intensive regions in EU to previous, similar, productions? What role can be attributed to public policies in setting these knowledge-based industries into motion? Is the balance between policies aimed at accumulating and upgrading knowledge on the one hand, and, on the other, policies providing incentives that foster commercial exploitation of knowledge, appropriate? This research will provide a solid base for policy recommendations, founded in a rigorous microeconomic analysis of the mechanisms that promote growth at the regional level. WP Leads: Roman Römisch, The Vienna Institute for International Economic Studies (wiiw) WP Co-Leads Marius Brülhart, Département d´Econométrie et d´Economie Politique, Université de Lausanne (DEEP) WP Partners: WIIW, CESR, IE HAS, FEEM, KTH, GRIPICO (EEG), AM, PNB Work plan of WP4 (October 2008 - March 2010) Work plan of WP4 (October 2007 - March 2009)

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