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The Location of Industrial Innovation: Does Manufacturing Matter?

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  • Isabel Tecu
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    Abstract

    What explains the location of industrial innovation? Economists have traditionally attempted to answer this question by studying firm-external knowledge spillovers. This paper shows that firm-internal linkages between production and R&D play an equally important role. I estimate an R&D location choice model that predicts patents by a firm in a location from R&D productivity and costs. Focusing on large R&D-performing firms in the chemical industry, an average-sized plant raises the firm’s R&D productivity in the metropolitan area by about 2.5 times. The elasticity of R&D productivity with respect to the firm’s production workers is almost as large as the elasticity with respect to total patents in the MSA, while proximity to academic R&D has no significant effect on R&D productivity in this sample. Other manufacturing industries exhibit similar results. My results cast doubt on the frequently-held view that a country can divest itself of manufacturing and specialize in innovation alone.

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    File URL: ftp://ftp2.census.gov/ces/wp/2013/CES-WP-13-09.pdf
    File Function: First version, 2013
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    Bibliographic Info

    Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 13-09.

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    Length: 62 pages
    Date of creation: Mar 2013
    Date of revision:
    Handle: RePEc:cen:wpaper:13-09

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    1. Sergey Lychagin & Joris Pinkse & Margaret E. Slade & John Van Reenen, 2010. "Spillovers in Space: Does Geography Matter?," CEP Discussion Papers dp0991, Centre for Economic Performance, LSE.
    2. Natarajan Balasubramanian & Jagadeesh Sivadasan, 2011. "What Happens When Firms Patent? New Evidence from U.S. Economic Census Data," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 126-146, February.
    3. Mohammad Arzaghi & J. Vernon Henderson, 2008. "Networking off Madison Avenue," Review of Economic Studies, Oxford University Press, vol. 75(4), pages 1011-1038.
    4. Bronwyn H. Hall & Adam B. Jaffe & Manuel Trajtenberg, 2001. "The NBER Patent Citation Data File: Lessons, Insights and Methodological Tools," NBER Working Papers 8498, National Bureau of Economic Research, Inc.
    5. Grid Thoma & Salvatore Torrisi & Alfonso Gambardella & Dominique Guellec & Bronwyn H. Hall & Dietmar Harhoff, 2010. "Harmonizing and Combining Large Datasets – An Application to Firm-Level Patent and Accounting Data," NBER Working Papers 15851, National Bureau of Economic Research, Inc.
    6. Furman, Jeffrey L. & MacGarvie, Megan J., 2007. "Academic science and the birth of industrial research laboratories in the U.S. pharmaceutical industry," Journal of Economic Behavior & Organization, Elsevier, vol. 63(4), pages 756-776, August.
    7. Mikko Ketokivi & Jyrki Ali-Yrkkö, 2009. "Unbundling R&D and Manufacturing: Postindustrial Myth or Economic Reality?," Review of Policy Research, Policy Studies Organization, vol. 26(1-2), pages 35-54, 01.
    8. Henderson, J. Vernon & Ono, Yukako, 2008. "Where do manufacturing firms locate their headquarters?," Journal of Urban Economics, Elsevier, vol. 63(2), pages 431-450, March.
    9. Jeffrey L. Furman & Margaret K. Kyle & Iain Cockburn & Rebecca M. Henderson, 2010. "Public and Private Spillovers: Location and the Productivity of Pharmaceutical Research," NBER Chapters, in: Contributions in Memory of Zvi Griliches, pages 165-188 National Bureau of Economic Research, Inc.
    10. Myriam Mariani, 2002. "Next to Production or to Technological Clusters? The Economics and Management of R&D Location," Journal of Management and Governance, Springer, Springer, vol. 6(2), pages 131-152, May.
    11. Akcigit, Ufuk & Kerr, William R., 2013. "Growth through heterogeneous innovations," Research Discussion Papers 28/2013, Bank of Finland.
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    Cited by:
    1. Richard B. Freeman, 2013. "One Ring to Rule Them All? Globalization of Knowledge and Knowledge Creation," NBER Working Papers 19301, National Bureau of Economic Research, Inc.

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