R&D-Persistency, Metropolitan Externalities and Productivity

Firms display persistent differences as regards both internal and external characteristics, and these differences correspond to asymmetries in the performance of firms with regard to productivity level and growth as well as innovativeness. This paper focuses on one internal characteristic and one external factor by distinguishing between firms with persistent R&D efforts and other firms and firms located in a metropolitan region versus firms with other locations. Applying Swedish data on individual firms and their location, the paper shows that firms that follow a strategy with persistent R&D efforts have a distinctly higher level of productivity across all types of location. In addition, the productivity level of firms with persistent R&D is augmented in a significant way when such firms have a metropolitan location and, in particular, a location in a metropolitan city