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The article accounts for the determinants of sectoral specialisation in business services\ud(BS) across the EU-27 regions as determined by: (i) agglomeration economies (ii) the\udregion-specific structure of intermediate linkages (iii) technological innovation and\udknowledge intensity and (iv) the presence of these factors in neighbouring regions. The\udempirical analysis draws upon the REGIO panel database over the period 1999–2003.\udBy estimating a Spatial Durbin Model, we find significant spatial effects in explaining\udregional specialisation in BS. Our findings show that, besides urbanisation economies,\udthe spatial structure of intermediate sectoral linkages and innovation, in particular\udInformation and Communication Technologies (ICTs), are important determinants of\udspecialisation in BS. The article contributes to the debate on the global versus local\uddeterminants of regional specialisation in BS by restating the importance of the\udregional sectoral structure besides that of urbanisation. We draw policy implications by\udrejecting the ‘footloose hypothesis’ for BS

The determinants of regional specialisation in business services: agglomeration economies, vertical linkages and innovation