Local Knowledge Spillovers and Innovation Persistence of Firms

32 Pages Posted: 25 Feb 2020

See all articles by Adelheid Holl

Adelheid Holl

CSIC, Institute for Public Goods and Policies

Bettina Peters

Center for European Economic Research (ZEW)

Christian Rammer

ZEW – Leibniz Centre for European Economic Research - Industrial Economics and International Management Research

Date Written: 2020

Abstract

Recent empirical evidence has shown that firm’s innovation behavior exhibits high persistency but not much is known about potential contingencies affecting the degree of persistence. This paper focuses on the role of the local knowledge environment and asks how local knowledge spillovers affect firms' innovation persistence. The empirical analysis draws upon a representative panel data set of firms in Germany from 2002-2016, complemented by detailed geographic information of patent activity over discrete distances to proxy local knowledge spillovers. Based on correlated random effects probit models that control for state dependence, unobserved individual heterogeneity and endogenous initial conditions, our results corroborate former evidence that persistency in innovation is driven by true state dependence. More importantly, we find that the local patenting activity positively moderates firms´ degree of persistency in innovation behavior. This is a novel firm-level mechanism that can explain the widening of spatial disparities in innovation performance. Estimations with different distance bands show that the strength of knowledge spillovers that contribute to innovation persistence via true state dependence declines rather rapidly with increasing distance.

Keywords: Innovation, persistence, location, knowledge spillovers

JEL Classification: O31, R1, D22

Suggested Citation

Holl, Adelheid and Peters, Bettina and Rammer, Christian, Local Knowledge Spillovers and Innovation Persistence of Firms (2020). ZEW - Centre for European Economic Research Discussion Paper No. 20-005, Available at SSRN: https://ssrn.com/abstract=3543416 or http://dx.doi.org/10.2139/ssrn.3543416

Adelheid Holl (Contact Author)

CSIC, Institute for Public Goods and Policies ( email )

Madrid, 28037
Spain

Bettina Peters

Center for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany
+496211235174 (Phone)
+496211235170 (Fax)

HOME PAGE: http://www.zew.de

Christian Rammer

ZEW – Leibniz Centre for European Economic Research - Industrial Economics and International Management Research ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

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