The aim of this investigation is to analyze the effect of technological innovation on Mexico’s regional economic growth during 1995–2007. It is argued that the inclusion of the spatial dimension in empirical analysis is still a rare practice in Mexico and even in international studies. Such inclusion allows studying the pattern of spatial interaction, the possible effects of spatial diffusion and the estimation of robust parameters. We apply the spatial data analysis methodology that has three components: (a) exploratory analysis, (b) visualization and (c) spatial econometric modeling. The main result suggests that technological innovation has a positive effect on Mexico’s regional economic growth. The empirical evidence also suggests that there is a positive effect coming from cross-border diffusion effects of technological knowledge. It also implies that states with stronger innovation activity benefited from spatial technological externalities and hence faster economic growth.
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