49 Pages Posted: 27 Jan 2012 Last revised: 29 Oct 2015
Date Written: January 2012
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 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