Abstract
We use an augmented version of the UK Innovation Surveys 4–7 to explore firm-level and local area openness externalities on firms’ innovation performance. We find strong evidence of the value of external knowledge acquisition both through interactive collaboration and non-interactive contacts such as demonstration effects, copying or reverse engineering. Levels of knowledge search activity remain well below the private optimum, however, due perhaps to informational market failures. We also find strong positive externalities of openness resulting from the intensity of local interactive knowledge search—a knowledge diffusion effect. However, there are strong negative externalities resulting from the intensity of local non-interactive knowledge search—a competition effect. Our results provide support for local initiatives to support innovation partnering and counter illegal copying or counterfeiting. We find no significant relationship between either local labour quality or employment composition and innovative outputs.
Highlights
Interest in the local dimension of economic development has intensified in recent years stimulated by discussion of creative cities, intelligent cities and agglomeration (Carney et al, 2011)
It is well established that the ability to access and absorb external knowledge is central to innovation for most firms (Chesbrough, 2006; Dahlander and Gann, 2010), and that the knowledge underlying innovation has some degree of spatial specificity (Storper and Venables, 2004; He and Wong, 2012; Toedtling et al, 2011)
We measure the extent of firms’ non-interactive knowledge search in a similar way using information from a question which asks: ‘How important to your firm’s innovation were each of the following data sources?’ Here, we focus on four non-interactive knowledge contacts: conferences, trade fairs, exhibitions; scientific journals and trade/technical publications; professional and industry associations; technical, industry or service standards
Summary
Interest in the local dimension of economic development has intensified in recent years stimulated by discussion of creative cities, intelligent cities and agglomeration (Carney et al, 2011) This has led to an increasing focus on the role of local conditions on innovation performance with strategic implications as firms search to establish coherence between their organisational strategies and their context, and maximise the value of organisational assets and capabilities (Akgun et al, 2012; Vaccaro et al, 2012). Reflecting debates about the impact of counterfeiting on innovation (Qian, 2014), in localities where copying or imitation are common it will be more difficult for firms to appropriate the full benefits of any innovation These opposing (positive) knowledge diffusion and (negative) competition effects create the potential for either positive or negative local spillovers.
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