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Why are some regions more innovative than others? The role of small firms in the presence of large labs

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

Abstract

We study the impact of small firms on innovation in regions where large labs are present. Small firms generate demand for specialized services that lower entry costs for others. This effect is particularly relevant in the presence of large firms that spawn spin-outs caused by innovations deemed unrelated to the firm’s overall business. We examine MSA-level patent data during the period 1975–2000 and find that innovation output is higher in regions where both a sizable population of small firms and large labs are present. 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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  • Agrawal, Ajay & Cockburn, Iain & Galasso, Alberto & Oettl, Alexander, 2014. "Why are some regions more innovative than others? The role of small firms in the presence of large labs," Journal of Urban Economics, Elsevier, vol. 81(C), pages 149-165.
  • Handle: RePEc:eee:juecon:v:81:y:2014:i:c:p:149-165 DOI: 10.1016/j.jue.2014.03.003
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    Cited by:

    1. Crescenzi, Riccardo & Nathan, Max & Rodríguez-Pose, Andrés, 2016. "Do inventors talk to strangers? On proximity and collaborative knowledge creation," Research Policy, Elsevier, pages 177-194.
    2. Laurent BERGÉ & Pascale ROUX & Nicolas CARAYOL, 2017. "How do inventor networks affect urban invention?," Cahiers du GREThA 2017-06, Groupe de Recherche en Economie Théorique et Appliquée.
    3. Wang, Xu & Zhang, Xiaobo & Xie, Zhuan & Huang, Yiping, 2016. "Roads to innovation: Firm-level evidence from China:," IFPRI discussion papers 1542, International Food Policy Research Institute (IFPRI).
    4. Carlino, Gerald & Kerr, William R., 2015. "Agglomeration and Innovation," Handbook of Regional and Urban Economics, Elsevier.
    5. Henry Sauermann, 2017. "Fire in the Belly? Employee Motives and Innovative Performance in Startups versus Established Firms," NBER Working Papers 23099, National Bureau of Economic Research, Inc.
    6. Livanis, Grigorios & Lamin, Anna, 2016. "Knowledge, Proximity and R&D Exodus," Research Policy, Elsevier, pages 8-26.
    7. Thomas J. Hannigan & Alessandra Perri & Vittoria Giada Scalera, 2016. "The Dispersed Multinational: Does Connectedness Across Spatial Dimensions Lead to Broader Technological Search?," Working Papers 11, Department of Management, Università Ca' Foscari Venezia.
    8. Ashish Arora & Sharon Belenzon & Honggi Lee, 2017. "Reversed Citations and the Localization of Knowledge Spillovers," NBER Working Papers 23036, National Bureau of Economic Research, Inc.
    9. Agrawal, Ajay & Galasso, Alberto & Oettl, Alexander, 2014. "Roads and Innovation," CEPR Discussion Papers 10113, C.E.P.R. Discussion Papers.
    10. Laurent BERGÉ & Pascale ROUX & Nicolas CARAYOL, 2017. "How do inventor networks affect urban invention?," Cahiers du GREThA 2017-06, Groupe de Recherche en Economie Théorique et Appliquée.
    11. Charlotte Senftleben-König & Hanna Wielandt, 2014. "Spatial Wage Inequality and Technological Change," Working Papers 2014008, Berlin Doctoral Program in Economics and Management Science (BDPEMS).
    12. Charlotte Senftleben-Koenig & Hanna Wielandt, 2014. "Spatial Wage Inequality and Technological Change," SFB 649 Discussion Papers SFB649DP2014-038, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.

    More about this item

    Keywords

    Innovation; Spin-outs; Cities; Patents; Firm size diversity; Externalities;

    JEL classification:

    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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