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Why are Some Regions More Innovative than Others? The Role of Firm Size Diversity

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  • Ajay K. Agrawal
  • Iain M. Cockburn
  • Alberto Galasso
  • Alexander Oettl

Abstract

Large labs may spawn spin-outs caused by innovations deemed unrelated to the firm's overall business. Small labs generate demand for specialized services that lower entry costs for others. We develop a theoretical framework to study the interplay of these two localized externalities and their impact on regional innovation. We examine MSA-level patent data during the period 1975-2000 and find that innovation output is higher where large and small labs coexist. The finding is robust to across-region as well as within-region analysis, IV analysis, and the effect is stronger in certain subsamples consistent with our explanation but not the plausible alternatives.

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  • Ajay K. Agrawal & Iain M. Cockburn & Alberto Galasso & Alexander Oettl, 2012. "Why are Some Regions More Innovative than Others? The Role of Firm Size Diversity," NBER Working Papers 17793, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:17793 Note: PR
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    Cited by:

    1. Crescenzi, Riccardo & Nathan, Max & Rodríguez-Pose, Andrés, 2016. "Do inventors talk to strangers? On proximity and collaborative knowledge creation," Research Policy, Elsevier, pages 177-194.
    2. Matthias Firgo & Peter Mayerhofer, 2015. "Wissens-Spillovers und regionale Entwicklung - welche strukturpolitische Ausrichtung optimiert des Wachstum?," Working Paper Reihe der AK Wien - Materialien zu Wirtschaft und Gesellschaft 144, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik.
    3. Carlino, Gerald & Kerr, William R., 2015. "Agglomeration and Innovation," Handbook of Regional and Urban Economics, Elsevier.
    4. Yael V. Hochberg, 2016. "Accelerating Entrepreneurs and Ecosystems: The Seed Accelerator Model," Innovation Policy and the Economy, University of Chicago Press, vol. 16(1), pages 25-51.
    5. Aaron Chatterji & Edward Glaeser & William Kerr, 2014. "Clusters of Entrepreneurship and Innovation," Innovation Policy and the Economy, University of Chicago Press, pages 129-166.
    6. Edward L. Glaeser & Sari Pekkala Kerr & William R. Kerr, 2015. "Entrepreneurship and Urban Growth: An Empirical Assessment with Historical Mines," The Review of Economics and Statistics, MIT Press, vol. 97(2), pages 498-520, May.
    7. Agrawal, Ajay & Galasso, Alberto & Oettl, Alexander, 2014. "Roads and Innovation," CEPR Discussion Papers 10113, C.E.P.R. Discussion Papers.
    8. Yael V. Hochberg, 2015. "Accelerating Entrepreneurs and Ecosystems: The Seed Accelerator Model," NBER Chapters,in: Innovation Policy and the Economy, Volume 16 National Bureau of Economic Research, Inc.
    9. Diego Martínez-López & Manuel Palazuelos-Martínez, 2014. "Breaking with the past in smart specialisation: A new model of selection of business stakeholders within the entrepreneurial process of discovery," Working Papers. Collection B: Regional and sectoral economics 1401, Universidade de Vigo, GEN - Governance and Economics research Network.
    10. Charlotte Senftleben-König & Hanna Wielandt, 2014. "Spatial Wage Inequality and Technological Change," Working Papers 2014008, Berlin Doctoral Program in Economics and Management Science (BDPEMS).
    11. Charlotte Senftleben-Koenig & Hanna Wielandt, 2014. "Spatial Wage Inequality and Technological Change," SFB 649 Discussion Papers SFB649DP2014-038, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.

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    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

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