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The Geography of Innovative Firms

Author

Listed:
  • Craig A. Chikis
  • Benny Kleinman
  • Marta Prato

Abstract

Firms conducting R&D across multiple local markets account for most U.S. innovation. We study how their geographic scope affects growth and whether it is socially optimal. We develop a spatial growth model with multi-market firms that generate local knowledge spillovers. In equilibrium, firms may expand into too few or too many markets, depending on the sensitivity of spillovers to their local footprint. We estimate the model using data on R&D locations, patents, and citations, and find that firms under-invest in geographic expansion. Through model counterfactuals, we show that welfare gains from policies promoting broader geographic expansion are higher than traditional R&D subsidies.

Suggested Citation

  • Craig A. Chikis & Benny Kleinman & Marta Prato, 2025. "The Geography of Innovative Firms," NBER Working Papers 34010, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:34010
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    More about this item

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • F0 - International Economics - - General
    • L0 - Industrial Organization - - General
    • O0 - Economic Development, Innovation, Technological Change, and Growth - - General
    • R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General

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