The effect of the small-firm dominated ecology on regional innovation
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The effect of the small‑firm dominated ecology on regional innovation Hsini Huang1 Received: 16 September 2019 / Accepted: 17 May 2020 © Springer-Verlag GmbH Germany, part of Springer Nature 2020
Abstract Small firms are often viewed as the remedy of regional development and growth, but there is little empirical evidence if the cluster of innovative small firms thrives regional innovation performance. This paper attempts to answer a timely policy question of “How vital is small-firm dominated ecology for regional innovation?” by investigating the mix of firm size within a region. The results find that the effect of the proportion of small firms in a region is nonlinearly associated with the regional innovation activity, proposing that a mix-model of large and SME firms induces more innovation commercialization. The results of this study shed some light for policymakers to assess the “knowledge searching” strategies of firms when choosing locations. JEL Classification O31 · O40
1 Introduction Innovation is a key feature of competitive advantage to continue growing in the knowledge-based economy for firms, regions, and nations. At the micro level, firms increasingly rely on integrating external knowledge with their existing capabilities in order to achieve successful R&D and innovation. At the macro level, innovations take place in the context of an environment and are the result of the interactions between players in the same innovative system (McCann and Arita 2006). However, a region represents the aggregation of the individual firms participating the ecology, the question to what composition of firms contributes to the regional innovation system remains unanswered.
* Hsini Huang [email protected] 1
Graduate Institute of Public Affairs and Department of Political Science, National Taiwan University, No. 1, Section 4, Roosevelt Road, Social Science Building Room 704, Taipei 10617, Taiwan
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Studies of firm colocation and innovation are ample. The agglomeration theory explains the importance of colocation that the external resources could be accessed by firms collocated in the same industrial district. From the seminal work of Marshall (1920), he emphasizes the advantages of geographic proximity and the influx of many specialized firms (Marshall 1920, IV.X.21). Later, the regional innovation system approach (RIS) provides a good framework to understand the economic and social interactions between actors across different institutions and sectors, which drive innovation and spillover of knowledge (Asheim et al. 2011), for example the learning region, the innovative milieu, and clusters of knowledge-based industries (Cooke and Morgan 1994; Porter 1990). As Porter (1990) advocated, the competitive advantage of a cluster comes from competitions and collaborations between organizations in the cluster, including external profits, unintended knowledge flows (Audretsch and Feldman 1996), business trades, and skilled labors (Oughton and Whittam 1997; Swann and Prevezer 1996). The i
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