In this paper, we analyse a new dataset on innovation in the British regions from 1990 to 2006. We interpret these data as representing the rate of growth of investment in innovation which we analyse using a range of estimators. The paper explores the role of macro- and microeconomic determinants of innovation. In addition to standard determinants that help to explain the decline in innovation from the late 1990s, our findings also support the hypothesis of path dependence in innovation and the importance of human capital. These findings are consistent with the literature on absorptive capacity and suggest a role for regional policies to promote investment in innovation and training as well as appropriate macroeconomic policies.

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