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

49 Pages Posted: 27 Jan 2012  

Ajay 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

Multiple version iconThere 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

Agrawal, Ajay 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

Ajay Agrawal (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6
Canada

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Iain M. Cockburn

Boston University Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States
617-353-3775 (Phone)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Alberto Galasso

University of Toronto - Strategic Management ( email )

Canada

Alexander Oettl

Georgia Institute of Technology - Strategic Management Area ( email )

Atlanta, GA 30332
United States

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