Internet Domains and the Innovativeness of Cities/Regions--Evidence from Germany and Munich

This paper focuses on the factors determining a region's ability to produce Internet content and tries to identify relationships with the role of the same region in the national and global economy. The number of .de-domains is used to measure Internet content production, which serves as an indicator for the innovativeness of the regions in an emerging part of the service economy. Data used for the spatial distribution of .de-domains (1.2 million names at the end of 1999) is original and has not been published before. In the first part of the paper the development of the number of Internet domain names in German regions is described and independent variables to explain the spatial structure are analysed. Results show that those variables that are associated with potentials to create and commercialize new knowledge are especially suited to explain the regions' relative frequencies in domain name counts. However, no single hypothesis alone is able to explain the spatial structure of .de-domains, rather a mixture of factors indicating external economies, creation of knowledge and highly qualified labour is best. The knowledge and attitude of these individuals is crucial for the adaptation and diffusion of an innovation like the Internet. Thus, the Internet does not create new regions but it replicates, at least in Germany, the well-known ranking of regions in terms of high-tech. Concerning high-tech industries and knowledge-intensive services, Munich has stood at the top of German regions for about 15 years; this region will be analysed in the second part of the paper. Munich's national and global competitiveness depends mainly, as for other regions, on the innovativeness of its firms, research institutions, and people. The capability of Internet domain names as an indicator for regional innovativeness is the better the younger this innovation is. Despite the rather decentralized spatial structure of Germany (see the very low primacy index), compared, e.g. with the UK and France, Munich stands out in terms of the number of domain names. Munich's role in the national and global economy is supported by the early adoption of the Internet by the local firms and private users - and vice versa! If one considers the Internet as a basic innovation in the sense of Schumpeter's long wave approach then new combinations of resources in new or old regions can lead to strong national growth, but attended by increasing disparities between regions within the respective nation. We may distinguish two driving forces: the Internet as the basic innovation and the export of the respective content production to other parts of the global economy. Munich serves as a proof for the hypothesis that regions with a large potential of Internet production are also able to export these contents into other parts of the world. Zook's work on regional economic impacts of the Internet on US regions shows that regions with above-average Internet content production and marketing activities do profit significantly from the multiplicator and spin-off-effects of the related exports. Thus, although information can be distributed by the Internet in very short time to all places in the world, it nevertheless produces uneven economic landscapes (and in part manifest the old landscape) that sees the regions with strong Internet content production in a much better position than regions where the Internet consumption prevails, although this still has to be analysed for German regions.