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

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  • Michael Fritsch

    (Friedrich Schiller University Jena and Halle Institute for Economic Research (IWH), Germany.)

  • Michael Wyrwich

    (University of Groningen, The Netherlands and Friedrich Schiller University Jena, Germany.)

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 remote and rural areas. Germany provides a clear counterexample to such theories. We argue that a main force behind the geography of innovation in Germany is the country's federal tradition that has shaped the settlement structure, the geographic distribution of universities and public research institutions, as well as local access to finance. Additional factors that may play a role in this respect are the system of education and the tax treatment of inheriting a business. We demonstrate the long-lasting effect of the historical political structure and distribution of knowledge sources on innovation activities today. We conclude that historical factors that shape the settlement structure and location of knowledge sources are of key importance for the geographic location of innovation activities.

Suggested Citation

  • Michael Fritsch & Michael Wyrwich, 2020. "Does Successful Innovation Require Large Urban Areas? Germany as a Counterexample," Jena Economics Research Papers 2020-004, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2020-004
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    References listed on IDEAS

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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. 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.
    3. 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," Papers in Evolutionary Economic Geography (PEEG) 2307, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Mar 2023.
    4. 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).
    5. 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.
    6. 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.

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    More about this item

    Keywords

    Innovation; patents; agglomeration economies; cities; Germany;
    All these keywords.

    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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