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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:

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    2. 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.
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    7. 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).
    8. RODRÍGUEZ-POSE Andrés & DIJKSTRA Lewis, 2024. "Cohesion and the Competitiveness Challenge in the EU," JRC Research Reports JRC139556, Joint Research Centre.
    9. 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.
    10. 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.
    11. 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.
    12. 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.
    13. 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.
    14. 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.
    15. 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.
    16. 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.
    17. 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.

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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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