Innovation in the periphery: Compensation and exploitation strategies

Recent research has challenged the urban bias in economic geography and innovation studies, showing that highly innovative and competitive firms are also located in peripheral regions. So far, however, analyses has focused on how firms innovate despite their unfavourable location and little has been said about the innovation benefits of peripheral areas. Hence, this article identifies different compensation and exploitation strategies adopted by firms in order to overcome regional innovation constraints and to reap innovation benefits found in the periphery. Drawing on 20 in‐depth qualitative interviews with innovative firms situated in the Austrian periphery, our analysis reveals that innovation in peripheral regions is the outcome of a combination of compensation and exploitation practices. The uptake and composition of these strategies depend on the firm and regional characteristics, with firm size being the most influential factor.     

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.     

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.     

Nothing is in the Air

It has often been argued that “there is something in the air” which makes firms in high‐density environments—such as cities or clusters—more innovative. The co‐location of firms facilitates the emergence of serendipity and casual encounters which promote innovation in firms. We assess this hypothesis using data from a survey of Norwegian firms engaged in innovation partnerships. The results indicate that there may be “much less in the air” than is generally assumed in the literature. The relationships conducive to innovation by Norwegian firms emerged as a consequence of purpose‐built searches and had little to do with chance, serendipity, or “being there.”     

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.     

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.     

Regional inflation persistence in Turkey

The purpose of the current study is to investigate the degree of inflation persistence, its geographical variation, sources of cross‐regional variation, and presence of geographical/sectoral aggregation bias in national monetary policy. Our data set covers 26 NUTS‐2 level Turkish regions and monthly CPI inflation over the period 2003–2019. We first estimate the degree of regional inflation persistence by autoregressive regressions, check its robustness against the presence of structural breaks (by Bai–Perron's algorithm) and nonlinearities (by Markovian Regime Switching regressions). Second, we examine the possibility of geographical and sectoral aggregation bias. Third, we investigate the cross‐regional determinants of inflation persistence by panel data analysis, employing hybrid‐effects spatial panel regressions. We analyze the direct and indirect effects of the determinants and test for regional spillover effects. Three main results are obtained. First, estimated persistence degrees are heterogeneous across regions. The geographical pattern is empirically robust against structural breaks and nonlinearities. We find that inflation persistence is distributed in a spatially correlated manner. Second, when sectoral and regional aggregation bias is tested, only sectoral aggregation indicates a considerable level of bias. Third, we find that the presence of large firms in the region and a higher share of agricultural output in GDP leads to lower persistence, while an increased share of industrial output, and increased trade volume leads to higher inflation persistence. Moreover, we find spatial spillovers of price variability evident in regression analysis. From a policy standpoint, it is required that structural policy programs are targeted to maintain flexibility in the regions where persistence is high (i.e., providing market entry/exit, institutional quality, policy credibility, stimulation of SMEs). Moreover, sectors that have high persistence, such as Hotels and Restaurants (persistence degree 0.55) and Health Services (0.39) should be weighted more in CPI calculations.     

The Innovativeness and Heterogeneity of Foreign‐Invested High‐Tech Companies in Shanghai

China has taken a foreign direct investment‐based approach toward increasing its capital and knowledge base, and developing into an innovative economy. However, little quantitative evidence exists about the factors that drive innovations of foreign‐invested enterprises (FIEs) there. This paper uses survey data from high‐technology firms in Shanghai to discuss factors affecting their innovativeness. It takes the concepts of absorptive capacity, export orientation, and innovation‐related cooperation as a starting point. It highlights how the interplay of strategies and resources affects innovativeness and heterogeneity of FIEs. The most innovative FIEs are endowed with a strong human capital base and R&D activities, which at the same time target export markets and whose cooperative partners involve firms other than their parent company. The results underline the necessity to differentiate between the different types of FIEs when examining their innovativeness.     

Regional industrial restructuring: Asset modification and alignment for digitalization

This paper provides a conceptual framework to understand the innovation-based restructuring of industries in a regional context. The framework includes how firms create new assets, reuse existing assets, and overcome hampering barriers to support innovation processes. The framework also covers how such asset modifications take place at the innovation system level. A core argument is that innovation activity is strengthened and regional restructuring supported when firms’ internal assets are aligned with assets at the regional innovation system level. We illustrate the framework with empirical examples of how digitalization as an innovation process takes place in firms in traditional manufacturing industries and in local newspapers in the Agder region in southern Norway.     

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.     

The structure and proximity mechanism of formal innovation networks: Evidence from Shanghai high‐tech ITISAs

The discussion on innovation networks of patents or papers has attracted many economic geographers; however, the Industrial Technology Innovation Strategy Alliance (ITISA) has been ignored, although it is also an important innovation form of firms, and the formation mechanism of alliance innovation networks is unclear. This study is based on the data of Shanghai high‐tech ITISAs between 2010 and 2015, and employs the methods of social networks and negative binomial regression to analyse the actor structure, spatial structure, and proximity mechanism of innovation networks of Shanghai high‐tech ITISAs. Results highlight the following: (a) Firms comprise the largest number of actors in alliance innovation networks, and universities, research institutions, and industry associations also play some roles. (b) The local and rooted characteristics of the innovation networks of ITISAs are obvious. The spatial distribution of innovation partners is mainly in Shanghai, and a few innovation actors are located in neighbouring cities, such as Suzhou, Hangzhou, and Ningbo in the Yangtze River Delta Urban Agglomeration. (c) Proximity significantly promotes the formation of innovation networks in an ITISA and contributes to the improvement of innovation ability, and organizational proximity plays a greater role than geographical proximity or cognitive proximity.     

Interpersonal trust,invention, and innovation across European regions

Many studies in economics and regional science claim a positive link between interpersonal trust and innovation by demonstrating a positive effect of trust on patenting. This contrasts many findings from organization level studies on trust and innovation, who report a variety of findings including inverted-U type relations. A possible explanation is that trust exhibits different roles in invention and innovation, as the former relies on knowledge commons while the latter directly embeds commercialization and the market context. This study attempts to reconcile the two set of findings by studying indicators of invention and innovation in relation to trust at the same unit of observation, by using the regional variation in Europe. I study the relationship between interpersonal trust and patent applications (a measure of invention), trademark applications (a composite indicator) and the share of innovative sales in turnover by SMEs (a direct indicator of commercialization), across European regions. I show that trust positively affects trademark applications with an effect that is comparable to that on patent applications. However, trust exhibits an inverted-U type relationship with innovative sales. Results collectively point to a strong role of trust in all three creative activities, including a negative effect at the higher end when the indicator is directly contingent on commercialization and sales. I also estimate the extent of spatial spillovers in the effect of trust on all three creative outcomes.     

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.     

Mapping Regional and Sectoral Characteristics of Knowledge‐Intensive Business Services: Evidence from the Province of Quebec (Canada)

ABSTRACT The study presents original evidence on the characteristic features and innovation activities of knowledge‐intensive business services (KIBS). Based on a wide‐scale survey of 1,124 KIBS firms in Quebec (Canada), we explore empirically the extent to which KIBS from various sectors and regions differ in their characteristics and their uses of innovation practices. The results from the sectoral analysis reveal that KIBS display different characteristic features and innovation behaviours across sectors, thus suggesting that inter‐sectoral differences are important when explaining innovation activities in KIBS. The comparison between KIBS in large, medium, central, and resource regions shows that the characteristic features and the innovativeness of KIBS are rather similar, and little or no significant statistical differences were found between the different regions in the province of Quebec. Thus, overall, the results of our study seem to suggest that a location does not tend to make a difference in respect to characteristic features and innovation performance of KIBS.     

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.     

Networking policy and firm performance

This paper evaluates the effects of inter-firm networks (IFNs) on firms’ economic performance. This policy instrument has been implemented in Italy from 2009 to support mostly small and medium-size enterprises after the great economic crisis of 2007–2009. Starting from an original database of Italian manufacturing and service firms for the period 2010–2017, the paper develops in two steps: the first part, with “difference-in-differences” technique, is highlighted the positive effect on firms’ performance for those firms involved in an IFN. The second part investigates which characteristics of the IFN have better impacts on firm’s performance in the medium long-run. This study contributes to the network policy literature by revealing another instrument to foster cooperation and increase firms’ innovation and internationalisation, without the need to be geographically bounded.     

Technology Search and Firm Bounds in Biotechnology: New Firms as Agents of Change

Schumpeterian perspectives on industrial change suggest a relationship between new firms and the regionally specific technological bases for innovation. However, the links between such firms and the knowledge bases for innovation are more implicit than explicit. The innovation process in new firms reflects both the capabilities found within the firm as well as information sourcing from without. This paper seeks to articulate the nature of change in relationships between firms in science-based industries and the technological infrastructure accessed to support innovation, as such industries mature out of the birth phase. Innovation is treated as decision making, identifying the firm as innovator and agent of change. Survey research suggests that a shift in the sourcing of information, and an associated shift in the character of information accessed, occurred with maturation in the study industry, comprised of biotechnology firms in the U.S. “Early” and “later” forming firms show somewhat different technology sourcing patterns. Interviews were conducted to help interpret these findings. Implications for industry development are suggested.     

High Tech in the Deep South: Biomedical Firm Clusters inMetropolitan Atlanta

The relation between biomedical firms and their metropolitan region location in Atlanta, Georgia is examined as an empirical test of both innovative milieu agglomeration theory and place specific strategies for life science companies in the Deep South. This sectoral analysis utilizes questionnaires and targeted interviews to highlight the economic development role of real estate in suburban employment and residence sites (SEARS) and the intra-metropolitan directional migration of firms. Clustering of related industries is fostered by a shortage of appropriately configured laboratory and office space at the intermediate stage of the business growth cycle, encouraging information sharing and cooperative behavior via proximity by necessity. Lack of a key networking individual or mediating organization critically retards development of this potential growth engine.     

Implications of China's innovation policy shift: Does “indigenous” mean closed?

China's government aims to become an innovation nation and promotes the development of so-called indigenous innovation. Under this paradigm of state-encouraged innovation, however, it is unclear how domestic firms organize their innovation processes. We distinguish between two strategies in that respect: closed versus open innovation. Our findings suggest that firms with closed innovation processes collaborate in close geographic distance, rely on DUI-modes of learning, and collaborations are based on guanxi. In contrast, firms with open innovation processes collaborate over large distances and rely on STI-modes of learning that are not necessarily guanxi-based. The findings help to understand the heterogeneous nature of indigenous innovation in China.     

The Roles of Population,Place, and Institution in Student Diversity in American Higher Education

Student racial and ethnic diversity in higher education is an important and timely topic, as institutions, policy makers, and economists increasingly recognize the value that accrues at many levels of having a skilled and diverse student body and workforce. Students benefit from learning in a diverse environment; firms may benefit from a diverse workforce; and more demographically diverse regions may experience higher rates of economic growth. However, the forces governing institution‐level student diversity are poorly understood, as little prior research on the topic exists. This paper uses school enrollment data to parse out the contribution of institutional characteristics, geographical setting, and local demographic characteristics to student body diversity at each level of study. Results indicate that geographical location and local demographic composition play a role in student body diversity, as do the type and orientation of the institution. Institutional characteristics explain a lot of the variation in student body diversity and actual location of schools matters less than the demographic composition of young people around that location. Two broad conclusions emerge with regard to schools seeking to increase their student diversity. First, some may find their efforts hampered by circumstances outside their control (e.g., location). Second, the influence of public/private status and even school size suggests further research on the ways in which these factors influence student diversity so that eventual policy action can be more effective.