Europeant3 for the four European cases and US variables for Japan. Non regional variables are, non European and non US variables respectively.

Tables (l)-(5) report the estimated versions of eq. (5). We estimate several versions of eq. (5), proceeding in steps. We first consider the two sources of foreign knowledge separately, testing for differences in the associated parameters. We then try combinations of the two sources of foreign knowledge allowing for the presence of different geographical effects according to the different source of foreign knowledge (e.g. regional effects may be present or relevant when imports are the vehicle of knowledge but may be negligible when other vehicles, as captured by the stock of foreign knowledge, are considered). We finally test for the effect of each of the four foreign knowledge variables separately to assess their individual contribution to domestic knowledge accumulation. We assume the presence of "strong" regional effects when only regional foreign knowledge affects significantly domestic knowledge accumulation. A "weak" regional effect is assumed when both regional and non regional foreign knowledge affects domestic knowledge accumulation, but the former exhorts a stronger effect. Tables (1)- (5) report parameter estimates (standard error in parenthesis) as well as tests for the differences of parameters 01,Or2 and C3.C4, respectively when appropriate. _CNR_<sup>_2_</sup> is the Carter Nagar statistics for simultaneous models, see Carter, Nagar (1977). The latter values refer to the FIML estimation of the full model described in Appendix 1.

# Discussion is best carried out on a country by country case.

_Germany_ -see table l- is the only case that shows strong regional effects. The parameter al is larger than a2, which is also non significant (case 1). The same is true when high tech imports are included in place of the stock of knowledge. This result is confirmed by case (3) where only European variables are included. The case where only non European variables are included presents mostly non significant variables and is not reported. Estimates with only one foreign variable -cases (4)-(7)suggest that high tech imports rather than the foreign stock of knowledge, capture the foreign spillover effect, consistently with results obtained in Padoan (1996).

_France_ This case -see table 2- exhibits weak regional effects. Both stocks of foreign knowledge are significant but the parameter ci is significantly larger than c2 -case (1). The opposite holds, however, when imports of high tech goods are considered. While both variables are significant, non European high tech imports show a significantly larger parameter with respect to the European high tech imports, see case (2). Regional effects, therefore, seem to depend on the vehicle of knowledge diffusion. This is confirmed by case (4) which includes both stocks of foreign knowledge and non European high tech imports, and which shows the highest _CNR_<sup>_2_</sup> value. Versions with only one foreign variables -cases (7)-(10)- confirm the results above. The European stock of knowledge and the non European high tech imports show the best results in terms of parameter values and goodness of fit.

The case of _Italy,_ see table 3, should be classified as one showing weak regional effects, nevertheless such effects appear stronger than the case of France. The parameter ai is significantly larger than a2, case (1), and the same applies when high tech imports are considered, case (2). The best fit is obtained when both stocks of 13 Each time defined so as to exclude the country under investigation. See Appendix 2