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The Location of Industrial Innovation: Does Manufacturing Matter?

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  • Isabel Tecu

Abstract

What explains the location of industrial innovation? Economists have traditionally attempted to answer this question by studying firm-external knowledge spillovers. This paper shows that firm-internal linkages between production and R&D play an equally important role. I estimate an R&D location choice model that predicts patents by a firm in a location from R&D productivity and costs. Focusing on large R&D-performing firms in the chemical industry, an average-sized plant raises the firm’s R&D productivity in the metropolitan area by about 2.5 times. The elasticity of R&D productivity with respect to the firm’s production workers is almost as large as the elasticity with respect to total patents in the MSA, while proximity to academic R&D has no significant effect on R&D productivity in this sample. Other manufacturing industries exhibit similar results. My results cast doubt on the frequently-held view that a country can divest itself of manufacturing and specialize in innovation alone.

Suggested Citation

  • Isabel Tecu, 2013. "The Location of Industrial Innovation: Does Manufacturing Matter?," Working Papers 13-09, Center for Economic Studies, U.S. Census Bureau.
  • Handle: RePEc:cen:wpaper:13-09
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    File URL: https://www2.census.gov/ces/wp/2013/CES-WP-13-09.pdf
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    References listed on IDEAS

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    1. Natarajan Balasubramanian & Jagadeesh Sivadasan, 2011. "What Happens When Firms Patent? New Evidence from U.S. Economic Census Data," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 126-146, February.
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    3. Sergey Lychagin & Joris Pinkse & Margaret E. Slade & John Van Reenen, 2016. "Spillovers in Space: Does Geography Matter?," Journal of Industrial Economics, Wiley Blackwell, vol. 64(2), pages 295-335, June.
    4. Mikko Ketokivi & Jyrki Ali-Yrkkö, 2009. "Unbundling R&D and Manufacturing: Postindustrial Myth or Economic Reality?," Review of Policy Research, Policy Studies Organization, vol. 26(1-2), pages 35-54, January.
    5. Henderson, J. Vernon & Ono, Yukako, 2008. "Where do manufacturing firms locate their headquarters?," Journal of Urban Economics, Elsevier, vol. 63(2), pages 431-450, March.
    6. Jeffrey L. Furman & Margaret K. Kyle & Iain Cockburn & Rebecca M. Henderson, 2010. "Public and Private Spillovers: Location and the Productivity of Pharmaceutical Research," NBER Chapters,in: Contributions in Memory of Zvi Griliches, pages 165-188 National Bureau of Economic Research, Inc.
    7. Jeffrey L. Furman & Megan MacGarvie, 2007. "Academic Science and the Birth of Industrial Research Laboratories in the U.S. Pharmaceutical Industry," NBER Chapters,in: Academic Science and Entrepreneurship: Dual Engines of Growth National Bureau of Economic Research, Inc.
    8. Ufuk Akcigit & William R. Kerr, 2010. "Growth through Heterogeneous Innovations," PIER Working Paper Archive 10-035, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    9. Myriam Mariani, 2002. "Next to Production or to Technological Clusters? The Economics and Management of R&D Location," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 6(2), pages 131-152, May.
    10. Naomi Hausman, 2012. "University Innovation, Local Economic Growth, and Entrepreneurship," Working Papers 12-10, Center for Economic Studies, U.S. Census Bureau.
    11. Grid Thoma & Salvatore Torrisi & Alfonso Gambardella & Dominique Guellec & Bronwyn H. Hall & Dietmar Harhoff, 2010. "Harmonizing and Combining Large Datasets - An Application to Firm-Level Patent and Accounting Data," NBER Working Papers 15851, National Bureau of Economic Research, Inc.
    12. Mohammad Arzaghi & J. Vernon Henderson, 2008. "Networking off Madison Avenue," Review of Economic Studies, Oxford University Press, vol. 75(4), pages 1011-1038.
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    Cited by:

    1. Desmet, Klaus & Henderson, J. Vernon, 2015. "The Geography of Development Within Countries," Handbook of Regional and Urban Economics, Elsevier.
    2. Richard B. Freeman, 2013. "One Ring to Rule Them All? Globalization of Knowledge and Knowledge Creation," NBER Working Papers 19301, National Bureau of Economic Research, Inc.

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