Regional Differences in the Competitive Characteristics of U.S. Machine Tool Companies

The U.S. machine tool (MT) sector has undergone substantial restructuring over the past three decades. Despite signs of a commercial rebound in recent years, however, a number of critical issues remain for this industry. Not all firms share these concerns, in that differences exist between producers located in the core manufacturing belt and those located elsewhere. This paper examines the characteristics, competitive problems, and markets of firms located in these two regions. Survey data from a sample of 104 machine tool companies reveal that significant core–periphery differences exist with regard to firm–specific difficulties and markets served. The data also show that firms in the periphery have been growing significantly faster than firms in the core. The paper concludes with a discussion of the likely reasons for regional variability in the characteristics of firms in this industry. Directions for future research are also suggested, notably with regard to the interplay between national regulatory conditions and the competitive performance of MT firms.     

Location and the Innovation Performance of Commercial GIS Companies

This paper looks at the role of firm size, location, and in‐house research and development (R&D) in the innovation performance of U.S. firms in the commercial geographic information systems (GIS) industry. Data from a survey of 300 GIS firms are presented. The results suggest that innovation‐intensity varies directly with in‐house R&D spending (scaled as a proportion of company sales), but inversely with company size (total employment). Significant regional variations in the innovation performance of GIS firms are identified. It is argued that the geography of innovation is influenced by the spatial distribution of young and/or small firms, in that R&D‐productivity is found to vary inversely with company size. An important finding is that creative inputs to support innovation are almost evenly divided between internal and external sources. A surprising result is that the academic community is not viewed as a particularly important source of new ideas for innovative firms. The paper concludes with a discussion of the implications of the survey data for future empirical work on the GIS sector.     

Innovation and Regional Growth in the Enlarged Europe: The Role of Local Innovative Capabilities,Peripherality, and Education

ABSTRACT In this paper, a formal model for the relationship between innovation and growth in European Union regions is developed drawing upon the theoretical contribution of the systems of innovation approach. The model combines the analytical approach of the regional growth models with the insights of the systemic approach. The cross‐sectional analysis, covering all the Enlarged Europe (EU‐25) regions (for which data are available), shows that regional innovative activities (for which a specific measure is developed) play a significant role in determining differential regional growth patterns. Furthermore, the model sheds light on how geographical accessibility and human capital accumulation, by shaping the regional system of innovation, interact (in a statistically significant way) with local innovative activities, thus allowing them to be more (or less) effectively translated into economic growth. The paper shows that an increase in innovative effort is not necessarily likely to produce the same effect in all EU‐25 regions. Indeed, the empirical analysis suggests that in order to allow innovative efforts in peripheral regions to be as productive as in core areas, they need to be complemented by huge investments in human capital.     

Diverse diversities—Open innovation in small towns and rural areas

It is generally accepted that cities and other forms of geographic agglomerations are conducive to innovation because their density and variety of firms, sectors and individuals create a diverse environment. However, a growing body of work shows that innovation also occurs in peripheral regions and small towns. Furthermore, work on rural social networks shows that diversity is multidimensional, and that along certain dimensions networks developed in rural areas are more diverse than those observed in cities. In this paper, we develop these arguments, then report our observations of seven successful firms in Swiss small towns. These firms benefit from at least three types of diversity: internal diversity; multiplexed interactions between workers at different hierarchical levels; and external diversity as firms reach beyond the region. We conclude that diversity conducive to firm‐level innovation is not a specifically urban attribute: at least some of its dimensions are present in small towns and more peripheral areas.     

Innovation Ideas and Regional Characteristics: Product Innovations and Export Entrepreneurship by Firms in Swedish Regions

ABSTRACT This paper focuses upon the ways in which characteristics of regions in regards to knowledge sources, communication opportunities, and absorptive capacity influence the development of innovation ideas among existing and potential entrepreneurs. We formulate a model where entrepreneurs or innovating firms introduce new products in a quasi‐temporal setting. Market conditions are characterised by monopolistic competition between varieties belonging to the same product group, in which there is entry and exit of varieties. A stochastic process is assumed to generate new innovation ideas as time goes by, and a firm (entrepreneur) who receives such an idea has to transform the idea to an innovation, which in the model is specified as a particular variety combined with a specific destination market. The theoretical model is used as a reference when formulating two regression models, with which we estimate how a set of regional characteristics are associated with the likelihood of innovation ideas across Swedish local labour market regions. In one model, we examine the emergence of new export varieties, and in the second model, we investigate the appearance of new export firms. Results are consistent with the assumption that knowledge and information flows have a positive influence on the frequency of arrival of innovation ideas to firms.     

Who leads regional industrial dynamics? “New industry creators” in Chinese regions

Recent evolutionary economic geography studies have argued that regional diversification emerges as a path‐dependent process, as regions often branch into industries that are related to its industrial structure. However, it is less clear who are creating new industries and under what regional conditions. This research seeks to fill this gap and identify “new industry creators” in regional industrial diversification. We differentiate two types of new industry formation—path‐breaking and path‐dependent—and examine whether some new industry creators are more path‐breaking than others, by incorporating two factors that have been largely overlooked in recent literature on technological relatedness—firm heterogeneity and regional institutions. Based on a firm‐level data set of China’s manufacturing industries, this paper shows that path‐breaking and path‐dependence coexist. Empirical results confirm that firm heterogeneity and regional institutions not only affect the firms’ capabilities in creating new industries, but also encourage/discourage firms to be adventurous and path‐breaking. This research implies that lagging regions can catch up with developed regions by coordinating regional resources and adjusting local institutional arrangements to attract more path‐breaking firms.     

Emerging geography of technological innovation in China's ICT industry: Region,inter‐firm linkages and innovative performance in a transitional economy

This study critically evaluates the relevance of the existing theory of technological innovation to the case of China's information and communications technology industry. Based on a large‐scale questionnaire survey conducted in China's three most important city‐regions, namely, Beijing, Shanghai and Shenzhen, where the core of China's information and communications technology industry is located, this study reveals a significant regional variation in technological innovation in a political economy undergoing marketisation and globalisation. This research has found no significant relationship between the innovative performance of firms and the extent of production linkages; nor was there a significant knowledge exchange among firms. A further analysis has identified the significant role played by government purchases, research and development capital input and export propensity in the process of technological innovation. The findings of this research cast doubts over the prevailing theory of ‘new economic geography’ in which soft and unbounded relational assets have been overemphasised at the expense of some solid and bounded actors and agents that are pivotal to technological innovation in a developing economy.     

Building innovative capacity in regional entrepreneurship and innovation (eco)systems: Startups versus incumbent firms

This article studies how three sets of regional factors—knowledge, agglomeration, and openness—impact and interact differently with startups and incumbent firms in their innovative capacity building. Based on a large dataset of Chinese high-tech firms, regression analysis shows that the speed of growing startup innovative capacity relies positively on regional knowledge stock and localization economies. In addition to regional knowledge stock, incumbent innovative capacity building benefits from urbanization economies and regional openness. Favorable regional factors, including the presence of universities and the clustering of knowledge-intensive peers, also enable startups (but not incumbents) to leverage internal knowledge assets into their innovative capacity. The results suggest that it is not only the access to the external knowledge environment but also proactive endeavors to cross-fertilize between internal and external knowledge that underlie the eco-systemic nature of startup innovative capacity building.     

Threshold Firms: Innovation,Design and Collaboration in British Columbia's Forest Economy

This paper assesses the extent to which threshold firms have emerged within British Columbia's wood processing industries. Threshold firms comprise an innovative business segment and are growth oriented, larger than most small firms but not giant, locally owned, international in scope at least with respect to exporting, reliant on skilled, well paid employees, and that have developed knowledge‐based product market advantages. The analysis draws on an extended case study survey of 14 firms located in the lower mainland and Okanagan regions of British Columbia, and selected for their potential as threshold firms. The analysis examines six characteristics associated with threshold firms: size and ownership, internationalization, wood supply, labor relations, innovative design and collaboration, and local embeddedness. These firms reveal attributes of threshold firms, and the paper concludes by suggesting that an innovative forest policy for British Columbia could usefully focus on this type of firm.     

Firm Innovation and Co‐Location in Portugal

This paper investigates the geographical distribution and concentration of firms’ innovation persistence and innovation type (product and process) based on three waves of the Portuguese Community Innovation Survey data covering the period 1998–2006. The main findings are: 1) both innovation persistence and innovation type are asymmetrically distributed across Portuguese regions, 2) the degree of correlation between geographical location and innovative output varies with the innovation type, and 3) the correlation between geographical unit and innovation increases when the spatial unit of analysis is narrower. The results suggest that the firms’ choices of geographical location have a long‐lasting effect, engendering no equal probabilities of being persistently innovative.     

Technology Clusters versus Industry Clusters: Resources,Networks, and Regional Advantages

ABSTRACT The tendency of firms to cluster within a region has been observed for quite some time. However, it is only over the past two decades that business researchers have focused much attention on clusters, particularly in terms of their entrepreneurial and innovative characteristics and potential. At the same time, regional developers around the world have put much effort in promoting the formation of clusters. A gap in such efforts is an understanding of the differences among types of clusters. This article draws a distinction between two generic types of clusters: technology‐based and industry‐focused. Using the resource‐based view as the organizing framework, we argue that the two generic cluster types create very different regional resource profiles over time, accumulating resources in a different manner, cultivating different capabilities, and deriving different sources of regional advantage. As concluded in the study, these differences are likely to have implications for firms located in the regions as well as for economic developers and public policy officials charged with developing cluster strategies.     

The impact of foreign influence on exporting through open innovation

Foreign direct investment brings both increased competitive pressures and opportunities for domestic Small and Medium Sized Enterprises (SMEs). Competition may force them to seek new international markets, but also provide access to international customers. However, as economies become more knowledge-based in order to access international markets, SMEs must seek to innovate. This study examines how foreign firm presence and innovation influence the exporting activities of SMEs. It contributes to the existing literature by dividing innovation into product/process innovation and in-house/open innovation. With open innovation, products are more likely to be novel and productivity boosted to a larger degree. We interact different types of innovation with foreign influence to examine whether there is a moderating influence on the relationship. The individual firm level data and foreign influence data are from the Longitudinal Small Business Survey and Office for National Statistics. Whether firms are active exporters is explored using multilevel logit regressions. Both innovative activities and the foreign influence increase the likelihood of exporting. In-house product innovation boosts export propensity to a lesser degree in areas with higher levels of foreign influence. The hypothesis that open innovation has more impact on exporting activities when foreign influence is greater is not supported for either type of innovation.     

Revisiting the Roles of the University in Regional Economic Development: A Triangulation of Data

There is a general understanding that university plays a crucial role in regional development under the current age of knowledge economy. At the same time, we have observed a fair number of counter‐evidentiary studies, demonstrating several regions that do not thrive despite strong research universities or other patterns of development in the absence of research universities. However, they are based on case studies of individual universities or regions, and the findings currently cannot be generalized. Another set of studies that have challenged the effect of universities at the nationwide scale and demonstrated its disproportionately small impact of universities, but their scope is limited to spin‐offs, patents, and license activities. In this article, we propose to investigate this subject more systematically by triangulating three methods: 1) national‐scale regression models with Business Dynamics Statistics and National Establishment Time Series data, 2) a regional survey of IT and life science firms in four so‐called “second tier regions,” and 3) a microeconomic firm‐level analysis based on interviews with founders of technology intensive firms. Furthermore, we test the roles of university beyond those explicit, direct measures of spin‐offs and patents by analyzing the firm formation rate and firm growth rate at the regional level, as well as the sources of growth at the company level. All results point in the same direction: The research function of the university has been overstated, and the teaching function of the university has been underappreciated. These findings provide profound implications for the policy of regional development.     

The Dynamic Firm–Territory Nexus of Taiwanese Informatics Industry Investments in China

ABSTRACT This article explores the transformation of industrial systems in transborder investments made by Taiwanese information technology investors in China. It asks how cross‐border firms would operate in these new territories. The study found that, by and large, Taiwanese investors chose to respond strategically to the tensions in different ways at different stages. At first, regarding China as a land of cheap labor and land, they relocated the Taiwanese industrial system in such a way as to avoid disturbing the hosting regions. The situation changed as China’s market emerged confidently and opened gradually to foreign investors after the mid‐1990s. Exploring this huge new market in China provided a mandate for Taiwanese investors to prosper. They opened up their firm boundaries and added new departments of research, development, and marketing. They developed from being merely export subcontractors to producing their own brand‐name goods. In the most recent stage, Taiwanese investors have created networks to tap into local resources to support new activities. Echoing Yeung (2005) in a recent issue of this journal, this article argues that new investments change the developmental trajectories of the host regions and, at the same time, the regions imbued the incoming firms with their own regional stamp. From this perspective, location and localization decisions by cross‐strait firms may be regarded as geographically sensitive strategies whereby firms, as reflexive agents, protect and reinforce their competence through the evolution of a firm–territory nexus.     

Incubating an Illusion? Long‐Term Incubator Firm Performance after Graduation

Local economic development policies worldwide perceive business incubation as an effective measure to promote regional growth through the support of young and innovative ventures. The common assumption is that incubation promotes firm growth, in particular after these firms graduated from their incubator organisations. However, knowledge regarding the performance of incubated ventures after they have (successfully) completed their incubation is almost non‐existent. This article investigates the long‐term development of 324 graduate firms from five German business incubators (incubated between 1990 and 2006). The present study does not suffer from a survivor bias, meaning that performance data of non‐surviving firms is also included. Using employment and sales measures as performance indicators, this study contradicts existing results with regard to long‐term graduate performance. Findings of this paper do not support the presumption of sustainable and strong firm growth beyond incubation.     

Government support and firm innovation performance in Chinese science and technology parks: The perspective of firm and sub-park heterogeneity

Science and technology parks (STPs) are established to promote the firm innovation performance via agglomeration economy and government support in China. On-site qualified firms obtain government R&D funding as a type of government support, and they are offered differential innovation service caused by the differential capabilities of sub-parks which scatter throughout a single city. It is debatable whether those government supports at firm and sub-park levels can promote firm innovation capabilities. This study takes Zhangjiang National Innovation Demonstration Zone, Shanghai as an example. It applies a Tobit regression model to analyse the databases of Zhangjiang Annual Sampling Survey of Firms 2015 and Zhangjiang Development Report 2015. We find out at the firm level, government R&D funding has a significant and positive influence on firms' innovation, but government R&D funding generates a crowing-out effect the innovation performance of on-site firms with more R&D investment themselves. At the sub-park level, innovation service agencies of sub-parks do not exert an important role in influencing firms' innovation, and they even have negative moderating effects on the relationship between firm R&D investment and firm innovation performance. It reflects the mismatch between innovation service of STPs and firms' needs in China.     

The Role of Pre‐Entry Experience of Firm Founders in Peripheral Regions: Routines,Business Contacts,and Local Starting Conditions

This paper investigates how spinoffs in peripheral regions can profit from the work experience of their founders. More specifically, it discusses which firm routines and business contacts entrepreneurs gather through their prior work experience, and how this experience influences the organizational structure and orientation of the newly founded firm. The transfer of capabilities from parent firm to spinoff has been identified as important aspect of industrial clustering, but empirical evidence from peripheral areas is still sparse. It compares 22 semi‐structured interviews with founders of manufacturing firms from different peripheral regions in Switzerland to investigate whether routine and network transfer differs in varying peripheral contexts. The results show that not only inherited routines are important, but also inherited business contacts. Further, instead of simply reproducing acquired routines and networks, founders employ a mixture of continuity and change to find a good trade‐off between relying on well‐proven practices and introducing novelty. Finally, the geographical proximity of inherited business contacts seems to have an influence on the implementation strategy founders choose. Entrepreneurs with strong inherited local business contacts do not have to invest as much in building up new business contacts as those entrepreneurs in more isolated locations.     

Firm Demography and Regional Development: Evidence from Italy

This article contributes to the literature on firm demography and regional development in at least three different ways. First, consumption, rather than employment, which is the most common variable seen in literature, is used to measure the impact of firm demography on regional development. Second, while the literature is mainly focused on the relationship between new business formation and regional development, we investigate both entry and exit flows of firms. Third, we decompose each of these flows into spatial and sectoral components. The empirical investigation looks at the Italian regions with reference to the period 2004–2009. Results seem to be substantially divergent between the South and the rest of Italy.     

Firm employment growth in China: The role of marketization and regional economic factors

Very heterogeneous patterns of firm employment growth characterize the Chinese provinces, suggesting the existence of a relationship between these and regional factors. This empirical work explores this topic by providing novel evidence of the role played by regional institutional and regional factors in firm employment growth in China during the decade 1998–2007, an important period in the Chinese transition towards a market economy. The results show that controlling for the internal determinants of firm performance, the firms located in provinces converging faster towards a market economy, exhibiting relatively better patterns (in terms of agglomeration, endowment of human capital, innovation and environmental protection) tend to expand their employment relatively more. These findings confirm the existence of a macro–micro-connection as to what firm heterogeneity is concerned, as they reveal a differential growth channel along the regional dimension. In particular, local progress in government–market relationships appears as the most relevant dimension of marketization process. Given the regionally decentralized institutional system in China and considering its process of transformation, these findings inform local authorities concerned with the promotion of regional employment.     

Regional Variation of Firm Size and Growth: The Portuguese Case

This paper analyses the patterns of firm growth of manufacturing firms across Portuguese regions. In particular, we compare firm size and growth in order to investigate 1) whether region‐specific characteristics, interpreted as generating localization economies, exert any influence on firm growth and size, and 2) whether there is evidence of persistence in firm growth across regions. Using an extensive dataset of Portuguese manufacturing firms and applying parametric and semi‐parametric approaches, we found that, in eleven of the eighteen analyzed regions, firm growth is related to firm size and therefore firms have no equal probabilities of attaining a particular growth rate within any given period. Moreover, the results uncovered that firms experience serial correlation in their growth patterns in all regions and region‐specific characteristics, such as industrial diversity, entrepreneurship potential, and workforce qualities, engender differences in the way firms grow. Thus, this paper adds to the literature by showing how geographic location matters to firm size and growth.