Regional Innovation Systems: Implications for Nonmetropolitan Areas and Workers in the South

ABSTRACT A public policy response to global competition is the creation of a geographic concentration of innovative activity (regional innovation systems [RIS]) that will enhance metropolitan economic development through knowledge spillovers, product development, and new firm spin‐offs. This article identifies three types of RIS in the thirteen southern states based on a cluster analysis of twenty indicators of innovative and entrepreneurial activity. Next, regression analysis is used to determine if the 1990–2000 growth rates of nonmetro county population, employment, and earnings were related to proximity to an RIS after controlling for other county characteristics associated with local economic development. The research findings indicate that nonmetro counties near an RIS experienced more rapid population and employment growth; however, changes in nonmetro growth rates varied by type of regional innovation system. In addition, proximity to an RIS had a stronger impact on nonmetro population change than on nonmetro job growth.     

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.     

Inside the Great Recession: University Products and Regional Economic Development

This article investigates the role of universities in the economic development of American metropolitan regions during the Great Recession (2007–2009) and the growth period prior to it (2001–2007). It develops a supply‐side conceptual framework on the role of universities in technology‐led regional economic development. Specifically, this framework highlights three “university products” that can be explicitly defined and measured: educational services, business services, and new knowledge or technology. The empirical test of this conceptual framework finds that the presence of universities is positively associated with regional economic performance during the Great Recession, mainly via the educational services product. Findings indicate that regions with a higher level of university science, technology, engineering, and mathematics graduates are more resilient to the economic recession.     

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.     

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.     

Firm Networks and Korean Subsidiaries in the United States

ABSTRACT This article examines the role of intra‐, inter‐, and extra‐firm networks in influencing the location and investment of Korean firms and their subsidiaries in the U.S. Based on a survey of Korean subsidiaries in the U.S. in 2004, this article finds that inter‐firm relations with customers and suppliers, as well as intra‐firm relations in the form of parent firms’ knowledge of the U.S. play an important role in locational decision. Korean subsidiaries’ relationships with U.S. places are strongly influenced by home‐based practices that favor hierarchical intra‐firm organization and embedded sociopolitical extra‐firm relationships that emphasize blood, school, and regional ties. Location in U.S. industrial clusters does not increase Korean subsidiaries’ level of autonomy from parent firm's control that could help facilitate the sourcing of local knowledge and resources. Only improved intra‐firm network positionality positively contributes to increased subsidiary autonomy. Overall, the findings indicate that while inter‐firm relations may be important in locational selection among Korean firms, network norms are largely maintained through intra‐firm and, to a lesser extent, extra‐firm relations.     

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.     

Drivers of Regional Efficiency Differentials in Italy: Technical Inefficiency or Allocative Distortions?

This paper estimates regional economic efficiency differentials at the firm level for the Italian manufacturing sector in the period 1998–2003. We implement an input distance‐function approach providing measures of both technical inefficiency and allocative distortions in the choice of input mixes. Our results confirm the substantial technical efficiency gap suffered by firms located in Southern regions, thus providing empirical support for the “structural and technological gap” interpretation of Italian dualism. On the other hand, the allocative distortions in the use of inputs show less‐remarkable regional differences. In terms of policy, our results suggest the need for a reallocation of public resources for development policies from business incentives to public investment.     

University‐industry‐government triple helix relationship and regional innovation efficiency in China

By utilizing panel data of provinces in China from 2012 to 2018, this paper measured innovation efficiency of each regional innovation system and the triple helix relationship of the university‐industry‐government system, then, empirically investigated the influence of the triple helix relationship on regional innovation efficiency. It has been found that: (1) the regional innovation efficiency in China increases slightly year by year, the regional differences are obvious, and university–industry bilateral cooperation is the tightest; (2) cooperation between universities and industries is most beneficial to improve regional innovation efficiency, cooperation between universities and governments significantly promotes scale efficiency in the long run, cooperation between industries and governments significantly promotes regional innovation comprehensive efficiency and pure technical efficiency, meanwhile inhibits scale efficiency, coordinated relation among universities, industries, and governments is beneficial to improve regional innovation comprehensive efficiency and scale efficiency. The research results provide useful theoretical support and policy enlightenment for improving regional innovation efficiency.     

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.     

Gibrat's Law in the “Third Italy”: Firm Growth in the Veneto Region

According to Gibrat's Law of Proportionate Effect, the growth rate of a given firm is independent of its size at the beginning of the period examined. While earlier studies tended to confirm the Law, more recent research generally rejects it. The aim of this paper is to test whether Gibrat's Law is confirmed, for the 1995–2005 period, for a large sample of firms active in the Veneto region of Italy. Controlling for firm age and size, findings show that the Law is not confirmed in the early stages of a firm's life cycle, with younger firms growing faster than established ones, whereas it cannot be rejected once a given threshold in terms of age is reached. These findings are consistent with the life cycle theory of the firm and with the hypothesis that fast growing small and medium‐sized enterprises may have played a role in the evolution and the structural transformation of local systems in the “Third Italy” during the 1990s and early 2000s.     

Extra‐Firm Networks and Firm Performance: A Study of South Korean Solar PV Firms and Industry Specific Government Actors

Extra‐firm actors have been acknowledged as vital to the success of green energy industries. This article deploys the firm network perspective to deliver a first of its kind analysis of specific extra‐firm actor impacts on firm performance in Korea's solar photovoltaic industry. Results are based on quantitative analyses of data from 60 firm respondents and augmented by interviews with eight government officials. Three research questions capture and compare firm and government actor perceptions pertaining to extra‐firm actor influences at the national, regional, and extra‐local scales, inclusive of place–place competition and cooperation. Results indicate that firms differ in perceptions related to the impact of 18 national level government institutes, R&D centers, associations, and academic societies on their success, and that perceptions vary by level of technology concerning a plethora of other related extra‐firm actor and support infrastructure impacts. A comparative perspective is presented based on government informant interviews.     

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.     

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.     

Regional Variations of Firm Births,Deaths and Growth Patterns in the UK, 1980–1991

One of the debates around new firm formation across sub‐national territories focuses on whether regional differences in industrial structure are more important influences than regional differences in individual industry performance. The present research, using Value Added Tax (VAT) registration data, attempts to make a contribution to this debate in the United Kingdom (UK) context using a shift‐share covariance model. Firm de‐registrations and, as a consequence, net changes in firm stocks are also analyzed with similar questions in mind. The findings show that although the effects of industrial mix are significant across most regions, in several key regional contexts the industrial competitive effect dominates. The issue of the role of regional industrial concentration forms a second major theme of this paper. This basically involves a questioning as to whether concentration is a positive or negative force for new firm formation. The results of this research indicate that industrial concentration, measured through localization, is more important for firm deaths than for firm births (although significant for both), but not particularly relevant to the understanding of the net outcome of entry and exit processes. In the UK, regions with higher levels of industry concentration seem to be associated overall with relatively lower levels of both firm births and deaths.     

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.     

The Governance of Global Production Networks and Regional Development: A Case Study of Taiwanese PC Production Networks

This article applies a global production networks (GPN) perspective to the trans‐border investments of Taiwanese personal computer (PC) companies in the Northern Taiwan, Greater Suzhou and Greater Dongguan regions. The findings of extensive field research are used to illustrate two conceptual arguments. First, we show the on‐the‐ground complexity of inter‐firm governance arrangements within the PC industry, thereby casting doubt upon attempts to reduce notions of governance to simplistic, industry‐wide categorisations. Second, by comparing Greater Suzhou and Greater Dongguan, we demonstrate that even within a single production system, there is geographical variation in the nature of the strategic coupling between the GPN and local institutional formations. We argue that conceptualising such geographical and organisational complexity is critical to understanding the regional development potential of GPNs.     

New Firm Formation and Industry Clusters: A Case of the Drugs Industry in the U.S.

The importance of new firms in regional growth led many scholars to probe the determinants of new firm formation. A close examination of cluster theory predicts that industry clusters can enhance new firm births as well as the productivity of existing firms. Linkages among firms and related institutions, which are the key characteritics of the cluster phenomenon, can serve as an important determinant of new firm formation. The network aspect of clusters helps nascent entrepreneurs find resources and information easier and faster than in an isolated environment. In addition, nascent entrepreneurs in industry clusters often have rich experience in existing local firms, which becomes important prior knowledge to explore new market opportunities. This study examines the effects of clusters on new firm formation. We found that the cluster based on knowledge sharing (i.e., knowledge–labor cluster) significantly affects the new firm formation process, whereas the cluster based on market transactions (i.e., value‐chain cluster) does not seem to play a role in new firm formation.     

Growth of Incumbent Firms and Entrepreneurship in Vietnam

This paper analyzes the relationship between the performance of incumbent firms and the net entry of new firms by combining various theoretical views of entrepreneurship. Different regression models to treat dynamics and endogeneity issues are applied to test the research hypothesis with regional micro‐data for 61 Vietnamese provinces from 2000 to 2008. The main finding is that net entry is associated with the performance of incumbent firms and the overall performance of the economy. Incumbents' growth and gross domestic product growth induce changes in the existing production system and stimulate the creation of an economic environment more favourable to new firm formation. Consistent with the hypotheses put forward within the “knowledge spillover,” the “error‐correction,” and other approaches, incumbents may generate new entrepreneurial opportunities not only for themselves but also for the whole society.     

Innovation in suburban development zones: Evidence from Nanjing,China

While suburban areas have been typically related with urban sprawl, low density, cheap land price and low‐end manufacturing industries, relatively little attention has been paid to the spatial organization of innovation in suburban areas. In some Chinese cities, development zones (kai fa qu) in their suburban areas which are generally regarded as major spaces for traditional manufacturing industries have been transforming into spaces for innovation. This paper provides a case study of Nanjing, the capital of Jiangsu province in Eastern China by investigating and explaining the learning and innovation processes in suburban development zones. Drawing upon a unique database on 733 state‐certified high‐tech firms in Nanjing from 2008 to 2012 which contains detailed information on their addresses and number of patents, we observe strong spatial disparity in the distribution of innovation. Suburban districts of Nanjing where its three national‐level development zones and many provincial‐level development zones are located have become major spaces for innovation of the city. The planning of industrial clusters in development zones, the place‐based investment in the suburbs, and the suburbanization of universities are three major mechanisms behind the learning and innovation processes in Nanjing’s suburban development zones.