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

Agrawal, Ajay K.; Cockburn, Iain M.; Galasso, Alberto; Oettl, Alexander

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

NBER Working Paper No. w17793

49 Pages Posted: 27 Jan 2012 Last revised: 13 Feb 2022

See all articles by Ajay K. Agrawal

Ajay K. Agrawal

University of Toronto - Rotman School of Management; National Bureau of Economic Research (NBER)

Iain M. Cockburn

Boston University Questrom School of Business; National Bureau of Economic Research (NBER)

Alberto Galasso

University of Toronto - Strategic Management

Alexander Oettl

Georgia Institute of Technology - Strategic Management Area

There are 2 versions of this paper

Date Written: January 2012

Abstract

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.

Suggested Citation: Suggested Citation

Agrawal, Ajay K. and Cockburn, Iain M. and Galasso, Alberto and Oettl, Alexander, Why are Some Regions More Innovative than Others? The Role of Firm Size Diversity (January 2012). NBER Working Paper No. w17793, Available at SSRN: https://ssrn.com/abstract=1992829