Why are Some Regions More Innovative than Others? The Role of Firm Size Diversity
University of Toronto - Rotman School of Management; National Bureau of Economic Research (NBER)
Iain M. Cockburn
Boston University School of Management; National Bureau of Economic Research (NBER)
University of Toronto - Strategic Management
Georgia Institute of Technology - Strategic Management Area
NBER Working Paper No. w17793
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.
Number of Pages in PDF File: 49
Date posted: January 27, 2012
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