Economists have long agreed that the local availability of a more qualified workforce generates significant spillovers. This study suggests that these externalities may arise because plants by having access to a more qualified workforce at a regional level, can benefit more from R&D spillovers than those located in areas with less qualified workforce. This hypothesis is tested on a sample of British establishments drawn from the Annual Business Inquiry over the period 1997–2002. The main results are consistent with our expectations that the regional differences in the industry‐level educational attainment of the workforce available to a plant will condition its capability of absorbing R&D spillovers.