Abstract
This paper examines the effects of knowledge externalities (technology specialization and technology diversification) on job creation in European regions. The moderating effect of economic centralization on the above relation is also tested by using the measure of size of government from economic freedom index. For empirical analyses, a panel data on 203 regions in Europe from 2000 to 2012 was used. The results indicate that whereas specialization and related diversification of technology have negative effects on regional job creation, unrelated diversification of technology has a positive effect on regional job creation. This study also suggests that economic control to transform knowledge externalities into regional job creation should be decentralized in Coordinated Market Economies but centralized in Liberal Market Economies. Overall, we provide one- size-fits all solution for regional job creation by disentangling the complex interrelationships among knowledge externalities, economic centralization, and the varieties of capitalism.
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