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HARD AND SOFT LOCATIONAL FACTORS,INNOVATIVENESS AND FIRM PERFORMANCE - an empirical test of Porter’s diamond model at the micro-level

Author

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  • Eickelpasch, Alexander

    (DIW Berlin)

  • Lejpras, Anna

    (European University Viadrina Frankfurt/Oder)

  • Stephan, Andreas

    (JIBS and CESIS)

Abstract

This paper investigates predictions of Porter’s Diamond model regarding the impact of locational factors on innovativeness and performance at the firm level. We formulate a structural equation model based on the relationships between locational conditions, e.g., transportation infrastructure, proximity to universities and research institutes, qualified labour, on the one hand, and innovativeness measured by new product or process development, number of patents, and firm performance in terms of market growth or profit assessment, on the other hand. Based on a sample of about 2,100 East German firms, we apply the partial least squares path modelling approach to test the proposed relationships. We find that particularly cooperation intensity at the local level spurs the innovativeness of firms; whereas in contrast to Porter’s predictions, our results indicate that strong local competition and a locally focused market appear to impede the innovativeness and performance of firms.

Suggested Citation

  • Eickelpasch, Alexander & Lejpras, Anna & Stephan, Andreas, 2007. "HARD AND SOFT LOCATIONAL FACTORS,INNOVATIVENESS AND FIRM PERFORMANCE - an empirical test of Porter’s diamond model at the micro-level," Working Paper Series in Economics and Institutions of Innovation 109, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    • Handle: RePEc:hhs:cesisp:0109
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    Cited by:

    1. Anna Lejpras & Andreas Stephan, 2011. "Locational conditions, cooperation, and innovativeness: evidence from research and company spin-offs," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 46(3), pages 543-575, June.
    2. Jia Liu, 2012. "The Dynamics of Listed SMEs in China," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 19(3), pages 421-450, November.
    3. Christina Fischer & Rüdiger Hamm, 2019. "Football clubs and regional image [Fußballvereine und regionales Image]," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 39(1), pages 1-23, February.
    4. Stefano Manzocchi & Beniamino Quintieri & Gianluca Santoni, 2017. "Local manufacturing productivity markers: an empirical study of the Italian counties," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 59(1), pages 255-279, July.
    5. Andreas Stephan, 2011. "Locational conditions and firm performance: introduction to the special issue," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 46(3), pages 487-494, June.

    More about this item

    Keywords

    Hard and Soft Locational Factors; Innovativeness; Firm Performance; East German Firms; Structural Equation Modelling; Partial Least Squares Approach;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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