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Does Successful Innovation Require Large Urban Areas? Germany as a Counterexample

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  • Michael Fritsch
  • Michael Wyrwich

Abstract

Popular theories claim that innovation activities should be located in large cities because of more favorable environmental conditions that are absent in smaller cities or peripheral areas. Germany provides a counterexample to such theories. We argue that a major reason behind the geography of innovation in Germany is the country’s pronounced legacy of political fragmentation that created a decentralized settlement structure, shaped the geographic distribution of universities and public research institutions, and brought about a rather uniform and local access to finance. We show how political fragmentation influenced the emergence of historic centers of knowledge production and impacts the positioning of innovation activities today. We conclude that institutional factors should play a more prominent role in theories that aim at explaining the spatial distribution of innovation activities.

Suggested Citation

  • Michael Fritsch & Michael Wyrwich, 2021. "Does Successful Innovation Require Large Urban Areas? Germany as a Counterexample," Economic Geography, Taylor & Francis Journals, vol. 97(3), pages 284-308, May.
    • Handle: RePEc:taf:recgxx:v:97:y:2021:i:3:p:284-308
    DOI: 10.1080/00130095.2021.1920391
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    Cited by:

    1. Michael Wyrwich, 2022. "Historical episodes and their legacies across space: A famous case revisited," Journal of Regional Science, Wiley Blackwell, vol. 62(4), pages 1048-1091, September.
    2. Burhan Can Karahasan, 2023. "Spatial distribution of new firms and firm‐level innovation: Evidence from Turkey," Regional Science Policy & Practice, Wiley Blackwell, vol. 15(9), pages 2156-2181, December.
    3. Anna Butzin & Franz Flögel, 2024. "High-tech development for “left behind” places: lessons-learnt from the Ruhr cybersecurity ecosystem," Cambridge Journal of Regions, Economy and Society, Cambridge Political Economy Society, vol. 17(2), pages 307-322.
    4. Ali Sina Önder & Sascha Schweitzer & Olga Tcaci, 2024. "Innovation and Regional Development: The Impact of Patenting on Labor Market Outcomes," Working Papers in Economics & Finance 2024-07, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.
    5. Alejandro Almeida & Antonio A. Golpe & Juan Manuel Martín-Álvarez & Jose Carlos Vides, 2025. "New England’s Pinnacle: fostering quality entrepreneurial ecosystems," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 15(1), pages 243-271, March.
    6. Flögel, Franz & Hejnová, Tereza, 2021. "The effects of regional banks on economic resilience during the COVID-19 pandemic and the global financial crisis a cross-country comparison of the European countries," IAT Discussion Papers 21/01, Institut Arbeit und Technik (IAT), Westfälische Hochschule, University of Applied Sciences.
    7. Carolina Castaldi & Nicola Cortinovis & Milene S. Tessarin, 2025. "Out of sight? Revealing creativity-led innovation in rural regions," Papers in Evolutionary Economic Geography (PEEG) 2517, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Jun 2025.
    8. Carolina Castaldi & Kyriakos Drivas, 2023. "Relatedness, Cross-relatedness and Regional Innovation Specializations: An Analysis of Technology, Design, and Market Activities in Europe and the US," Economic Geography, Taylor & Francis Journals, vol. 99(3), pages 253-284, May.
    9. Carolina Castaldi, 2025. "Mapping innovation in space," Papers in Evolutionary Economic Geography (PEEG) 2505, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Feb 2025.
    10. Anthony F. J. Raan & Jos J. Winnink, 2025. "Urban scaling of patents and relation with socioeconomic strength for German cities and their urban areas," Scientometrics, Springer;Akadémiai Kiadó, vol. 130(8), pages 4339-4367, August.
    11. Robert Huggins & Piers Thompson, 2024. "Understanding the contemporary history of urban economic change: The case of entrepreneurial innovation," Growth and Change, Wiley Blackwell, vol. 55(1), March.
    12. Dai, Xin & Tang, Jie & Yin, Deyun, 2025. "Science and city: Exploring science's contribution to China's urban technological innovation," China Economic Review, Elsevier, vol. 93(C).
    13. Calvo, Nuria & Fernández-López, Sara & Rodríguez-Gulías, María Jesús & Rodeiro-Pazos, David, 2022. "The effect of population size and technological collaboration on firms' innovation," Technological Forecasting and Social Change, Elsevier, vol. 183(C).
    14. RODRÍGUEZ-POSE Andrés & DIJKSTRA Lewis, 2024. "Cohesion and the Competitiveness Challenge in the EU," JRC Research Reports JRC139556, Joint Research Centre.
    15. Benz Lena & Block Jörn H. & Johann Matthias S., 2024. "Hidden champions as a determinant of regional development: An analysis of german districts," ZFW – Advances in Economic Geography, De Gruyter, vol. 68(1), pages 9-39.
    16. Henriette Ruhrmann & Michael Fritsch & Loet Leydesdorff, 2020. "Smart Specialization Strategies at National, Regional, or Local Levels? Synergy and Policy-making in German Systems of Innovation," Jena Economics Research Papers 2020-007, Friedrich-Schiller-University Jena.
    17. Runst Petrik & Thomä Jörg, 2025. "Mit integrativer Innovationspolitik ländliches Potenzial erschließen," Wirtschaftsdienst, Sciendo, vol. 105(6), pages 414-418.
    18. Martin Andersson & Johan E. Eklund & Alexandra Tsvetkova, 2023. "Spatial variations in financial constraints of SMEs—evidence from firm-level estimates of investment-cash flow sensitivities in Sweden," Small Business Economics, Springer, vol. 60(4), pages 1683-1698, April.
    19. Rodríguez-Pose, Andrés, 2025. "Forging a sustainable future together: cohesion Policy at its defining moment," LSE Research Online Documents on Economics 129229, London School of Economics and Political Science, LSE Library.
    20. Carolina Castaldi, 2024. "The geography of urban innovation beyond patents only: New evidence on large and secondary cities in the United States," Urban Studies, Urban Studies Journal Limited, vol. 61(7), pages 1248-1272, May.
    21. Qiliang, Mao & Xianzhuang, Mao, 2024. "The shaping of inter-regional industrial linkages by institutional and cultural division in China: Characteristics and differences," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 1113-1132.

    More about this item

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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