Local vibrancy and innovation spillover

We show evidence of local spillover effects in corporate innovation productivity. Specifically, we find that firms’ patent counts and patent citations are positively related to the innovation output of other local firms, including those firms in different industries. We rule out exogenous local area shocks and local social capital as the driver of this relationship and instead discuss the importance of local endogenous interactions, described as local vibrancy. Our evidence suggests that the quality of the local labor market is an important aspect of local vibrancy affecting innovation spillover. Specifically, we find that local spillover effects are concentrated in areas with higher incomes, larger populations, greater educational attainment, and a greater concentration of technology-related businesses, suggesting that having a large and educated workforce with transferable technological skills are driving our spillover results.