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Why are some regions more innovative than others? The role of firm size diversity

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  • Cockburn, Iain M
  • Agrawal, Ajay
  • Galasso, Alberto
  • Oettl, Alexander

Abstract

Large firms spawn spin-outs caused by innovations deemed unrelated to the firm's overall business. Small firms generate demand for specialized services that lower entry costs for others. We study the interplay of these two localized externalities and their impact on regional innovation. We examine MSA-level patent data during the period 1975-2000 and find that innovation output is higher in regions where large and small firms coexist. The finding is robust to across-region as well as within-region analysis and the effect is stronger in certain subsamples in a manner that is consistent with our explanation.

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  • Cockburn, Iain M & Agrawal, Ajay & Galasso, Alberto & Oettl, Alexander, 2013. "Why are some regions more innovative than others? The role of firm size diversity," CEPR Discussion Papers 9766, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:9766
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    2. Carlino, Gerald & Kerr, William R., 2015. "Agglomeration and Innovation," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 349-404, Elsevier.
    3. Matthias Firgo & Peter Mayerhofer, 2015. "Wissens-Spillovers und regionale Entwicklung - welche strukturpolitische Ausrichtung optimiert des Wachstum?," Working Paper Reihe der AK Wien - Materialien zu Wirtschaft und Gesellschaft 144, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik.
    4. Diego Martínez-López & Manuel Palazuelos-Martínez, 2019. "Breaking with the Past in Smart Specialisation: A New Model of Selection of Business Stakeholders Within the Entrepreneurial Process of Discovery," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 10(4), pages 1643-1656, December.
    5. Yael V. Hochberg, 2016. "Accelerating Entrepreneurs and Ecosystems: The Seed Accelerator Model," Innovation Policy and the Economy, University of Chicago Press, vol. 16(1), pages 25-51.
    6. Aaron Chatterji & Edward Glaeser & William Kerr, 2014. "Clusters of Entrepreneurship and Innovation," Innovation Policy and the Economy, University of Chicago Press, vol. 14(1), pages 129-166.
    7. Edward L. Glaeser & Sari Pekkala Kerr & William R. Kerr, 2015. "Entrepreneurship and Urban Growth: An Empirical Assessment with Historical Mines," The Review of Economics and Statistics, MIT Press, vol. 97(2), pages 498-520, May.
    8. Timothy Komarek & Scott Loveridge, 2015. "Firm Sizes And Economic Development: Estimating Long-Term Effects On U.S. County Growth, 1990–2000," Journal of Regional Science, Wiley Blackwell, vol. 55(2), pages 262-279, March.
    9. Carlo MENON, 2014. "La propagation des grandes idées? L\'impact de l\'activité de brevet des firmes leader sur les inventeurs locaux," Cahiers du GREThA (2007-2019) 2014-11, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    10. Robert W. Helsley & William C. Strange, 2014. "Coagglomeration, Clusters, and the Scale and Composition of Cities," Journal of Political Economy, University of Chicago Press, vol. 122(5), pages 1064-1093.
    11. Ajay Agrawal & Alberto Galasso & Alexander Oettl, 2017. "Roads and Innovation," The Review of Economics and Statistics, MIT Press, vol. 99(3), pages 417-434, July.
    12. Yael V. Hochberg, 2015. "Accelerating Entrepreneurs and Ecosystems: The Seed Accelerator Model," NBER Chapters, in: Innovation Policy and the Economy, Volume 16, pages 25-51, National Bureau of Economic Research, Inc.
    13. Charlotte Senftleben-König & Hanna Wielandt, "undated". "Spatial Wage Inequality and Technological Change," BDPEMS Working Papers 2014008, Berlin School of Economics.
    14. Timothy M. Komarek & Scott Loveridge, 2014. "Too Big? Too Small? Just Right? An Empirical Perspective on Local Firm Size Distribution and Economic Growth in U.S. Counties and High-Poverty Rural Regions," Economic Development Quarterly, , vol. 28(1), pages 28-41, February.
    15. Charlotte Senftleben-Koenig & Hanna Wielandt, 2014. "Spatial Wage Inequality and Technological Change," SFB 649 Discussion Papers SFB649DP2014-038, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    16. Monica Coffano & Dominique Foray, 2014. "The Centrality of Entrepreneurial Discovery in Building and Implementing a Smart Specialisation Strategy," SCIENZE REGIONALI, FrancoAngeli Editore, vol. 2014(1), pages 33-50.

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    More about this item

    Keywords

    Innovation; Spin-outs; Cities; Patents; Firm size diversity; Externalities;
    All these keywords.

    JEL classification:

    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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