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Does agglomeration boost innovation? An econometric evaluation

  • Megha Mukim

    ()

Innovation is crucial to regional economic competitiveness and to productivity growth. A salient feature of the Indian economy is the geographic concentration of both, economic activity and innovation, as measured by patent activity. Theoretical models argue that the clustering of economic activity within a geographic region results in knowledge spillovers, which in turn drives innovation. The literature also posits that the presence of human capital is critical to the generation of new knowledge. This paper studies how and why economic geography and factor endowments matter for innovative activity – in other words, what is the relationship between human capital and patent generation, and crucially, how is this affected by the spatial distribution of economic activity? The paper analyses patent activity, both applications and grants, between 1995 and 2004 across districts in India. By using an econometric model, it then relates innovation to measures of agglomeration, industry-type and the size distribution of firms, and to the distribution of human capital endowments. It also uses data on employment by industrial activity, productivity and FDI flows. Understanding the magnitude of the effects of economic geography and factor endowments is vital for policy formulation aimed at encouraging innovative activity.

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa10p1356.

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Date of creation: Sep 2011
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Handle: RePEc:wiw:wiwrsa:ersa10p1356
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  1. Sourafel Girma & Yundan Gong & Holger Görg, 2008. "Foreign Direct Investment, Access to Finance, and Innovation Activity in Chinese Enterprises," World Bank Economic Review, World Bank Group, vol. 22(2), pages 367-382, June.
  2. Gerald Carlino & Satyajit Chatterjee & Robert Hunt, 2006. "Urban density and the rate of invention," Working Papers 06-14, Federal Reserve Bank of Philadelphia.
  3. Andrés Rodríguez-Pose & Riccardo Crescenzi, 2006. "R&D, Spillovers, Innovation Systems and the Genesis of Regional Growth in Europe," Bruges European Economic Research Papers 5, European Economic Studies Department, College of Europe.
  4. Eckhardt Bode, 2004. "The spatial pattern of localized R&D spillovers: an empirical investigation for Germany," Journal of Economic Geography, Oxford University Press, vol. 4(1), pages 43-64, January.
  5. Roberta Piergiovanni & Enrico Santarelli, 2001. "Patents and the Geographic Localization of R&D Spillovers in French Manufacturing," Regional Studies, Taylor & Francis Journals, vol. 35(8), pages 697-702.
  6. Sherwat E. Ibrahim & M. Hosein Fallah & Richard R. Reilly, 2009. "Localized sources of knowledge and the effect of knowledge spillovers: an empirical study of inventors in the telecommunications industry," Journal of Economic Geography, Oxford University Press, vol. 9(3), pages 405-431, May.
  7. Ciccone, Antonio & Hall, Robert E, 1996. "Productivity and the Density of Economic Activity," American Economic Review, American Economic Association, vol. 86(1), pages 54-70, March.
  8. Manfred M. Fischer & Attila Varga, 2003. "Spatial knowledge spillovers and university research: Evidence from Austria," The Annals of Regional Science, Springer, vol. 37(2), pages 303-322, 05.
  9. Fritsch, Michael & Slavtchev, Viktor, 2006. "Universities and innovation in space," Freiberg Working Papers 2006,15, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
  10. Roderik Ponds & Frank van Oort & Koen Frenken, 2009. "Innovation, spillovers, and university-industry collaboration: An extended knowledge production function approach," Papers in Evolutionary Economic Geography (PEEG) 0903, Utrecht University, Section of Economic Geography, revised Feb 2009.
  11. Adam B. Jaffe & Manuel Trajtenberg & Rebecca Henderson, 1992. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," NBER Working Papers 3993, National Bureau of Economic Research, Inc.
  12. Audretsch, David B, 1998. "Agglomeration and the Location of Innovative Activity," Oxford Review of Economic Policy, Oxford University Press, vol. 14(2), pages 18-29, Summer.
  13. Paci, Raffaele & Usai, Stefano, 2000. "Externalities, Knowledge Spillovers And The Spatial Distribution Of Innovation," ERSA conference papers ersa00p104, European Regional Science Association.
  14. Audretsch, David B & Feldman, Maryann P, 1998. "Innovation in Cities: Science-Based Diversity, Specialization and Localized Competition," CEPR Discussion Papers 1980, C.E.P.R. Discussion Papers.
  15. Anselin, Luc & Varga, Attila & Acs, Zoltan, 1997. "Local Geographic Spillovers between University Research and High Technology Innovations," Journal of Urban Economics, Elsevier, vol. 42(3), pages 422-448, November.
  16. Carlo Menon, 2009. "Stars and Comets: An Exploration of the Patent Universe," SERC Discussion Papers 0037, Spatial Economics Research Centre, LSE.
  17. Tomas Del Barrio-Castro & Jose Garcia-Quevedo, 2005. "Effects of university research on the geography of innovation," Regional Studies, Taylor & Francis Journals, vol. 39(9), pages 1217-1229.
  18. Kelly, Morgan & Hageman, Anya, 1999. " Marshallian Externalities in Innovation," Journal of Economic Growth, Springer, vol. 4(1), pages 39-54, March.
  19. Shawn Kantor & Alexander Whalley, 2009. "Do Universities Generate Agglomeration Spillovers? Evidence from Endowment Value Shocks," NBER Working Papers 15299, National Bureau of Economic Research, Inc.
  20. Thomas Doring & Jan Schnellenbach, 2006. "What do we know about geographical knowledge spillovers and regional growth?: A survey of the literature," Regional Studies, Taylor & Francis Journals, vol. 40(3), pages 375-395.
  21. John Mullahy, 1997. "Instrumental-Variable Estimation Of Count Data Models: Applications To Models Of Cigarette Smoking Behavior," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 586-593, November.
  22. Acs, Zoltan J. & Anselin, Luc & Varga, Attila, 2002. "Patents and innovation counts as measures of regional production of new knowledge," Research Policy, Elsevier, vol. 31(7), pages 1069-1085, September.
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