The effect of population size and technological collaboration on firms' innovation

In the current knowledge economy, firms hardly innovate alone; the collaboration with other partners has become crucial for successful innovation. Literature has recently focused on two modes of collaboration: the learning-by-doing, by-using and by-interacting (DUI) and science and technology-based innovation (STI). Nevertheless, collaboration seems to be easier if firms are located in highly populated areas. This paper aims to analyse whether the population size of municipalities where firms are located influences firm innovation either in a direct way or by shaping the effect of the DUI and STI partnerships. Applying panel data methodology to a sample of 3004 Spanish manufacturing firms over the period 2009 to 2016, the results show that innovative performance benefits from STI and DUI innovation modes, especially product innovation. In contrast, location in less populated municipalities seems to have no effect on innovation, regardless of the threshold used to limit the number of inhabitants. Also, weak evidence of the moderating role of the population size on the effect of DUI and STI partnerships on firm innovation is found.