Why are Some Regions More Innovative than Others? The Role of Firm Size Diversity | Zendy

Ajay Agrawal | Zendy; Iain Cockburn | Zendy; Alberto Galasso | Zendy; Alexander Oettl | Zendy

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Why are Some Regions More Innovative than Others? The Role of Firm Size Diversity

Author(s) -

Ajay Agrawal,

Iain Cockburn,

Alberto Galasso,

Alexander Oettl

Publication year - 2012

Publication title -

entrepreneurship

Language(s) - English

Resource type - Reports

DOI - 10.3386/w17793

Subject(s) - diversity (politics) , business , economic geography , geography , psychology , political science , law

Large labs may spawn spin-outs caused by innovations deemed unrelated to the firm's overall business. Small labs generate demand for specialized services that lower entry costs for others. We develop a theoretical framework to study the interplay of these two localized externalities and their impact on regional innovation. We examine MSA-level patent data during the period 1975-2000 and find that innovation output is higher where large and small labs coexist. The finding is robust to across-region as well as within-region analysis, IV analysis, and the effect is stronger in certain subsamples consistent with our explanation but not the plausible alternatives.

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