What's behind the disparities in firm innovation rates across regions?

Abstract

"Empirical evidence on innovation activity points to both significant disparities in innovation output across regions and important differences in firm innovation rates. These differences suggest that firm characteristics as well as regional factors might impact on innovation. Evidence on the relative importance of the two groups of factors is still scarce and ambiguous. We analyze the impact of firm characteristics and the regional context on differences in firm innovation rates in Germany for the period 1998 - 2009. By combining firm-level data with information on the regional environment, we can distinguish between composition effects caused by the selection of highly innovative firms in specific regions and the impact of regional factors. Our results indicate that the propensity to innovate of firms located in agglomerations significantly exceeds the innovation output of plants in rural regions. To analyze the role of the regional context for the firm's probability to innovate, we use a multilevel approach. Besides controlling for important firm-level factors such as R&D employment, size and age of the firm, we also account for different regional factors. The regression results point to a positive association between regional R&D activity and the firm's innovation output. Moreover, the effect of the regional context seems to differ with the size, age and R&D intensity of the firms." (Author's abstract, IAB-Doku) ((en))

Cite article

Naz, A., Niebuhr, A. & Peters, C. (2015): What's behind the disparities in firm innovation rates across regions? Evidence on composition and context effects. In: The annals of regional science, Vol. 55, No. 1, p. 131-156. DOI:10.1007/s00168-015-0694-9