Spatial sorting of innovative firms and heterogeneous effects of agglomeration on innovation in Germany
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Spatial sorting of innovative firms and heterogeneous effects of agglomeration on innovation in Germany Annekatrin Niebuhr1,2 · Jan Cornelius Peters1,3 · Alex Schmidke1
© Springer Science+Business Media, LLC, part of Springer Nature 2019
Abstract We examine the effects of agglomeration, differentiating between urbanization and localization economies, on four distinct types of innovation in manufacturing and services. Furthermore, estimating multilevel panel regression models, we investigate the sorting of highly innovative firms into dense urban and/or specialized regions by considering both observable and unobservable firm characteristics. The results indicate that spatial sorting is important. A large portion of the regional differences in firm innovation rates is due to firm characteristics. Estimates that ignore unobserved heterogeneity at the firm level still point to a positive and significant impact of localization economies on different types of innovation. However, once we include firm fixed effects and distinguish between manufacturing and services, only some weak indication for positive effects of localization on radical innovations of manufacturing firms remains. In addition, the probability to adopt an existing product by an manufacturing firm seems to be positively influenced by urbanization economies. For the service sector, in contrast, we find adverse effects of localization on different kinds of innovation and no important effect of urbanization. Keywords Agglomeration economies · Spatial sorting · Firm innovation · Localization · Urbanization JEL Classification D22 · O31 · R12
Accepted for publication in the special section “A social perspective of knowledge-based innovation: mobility and aggregation”: October 07, 2019. * Jan Cornelius Peters [email protected] Annekatrin Niebuhr [email protected] 1
IAB Nord, Regional Research Network of the Institute for Employment Research, Institute for Employment Research, Projensdorfer Str. 82, 24106 Kiel, Germany
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Empirical Labor Economics and Spatial Econometrics, Department of Economics, ChristianAlbrechts-Universität zu Kiel, Olshausenstr. 40, 24098 Kiel, Germany
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Present Address: Institute of Rural Studies, Johann Heinrich von Thünen Institute, Bundesallee 64, 38116 Braunschweig, Germany
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1 Introduction The concentration of research and development (R&D) and innovation in space is a wellestablished finding of regional scientists (Audretsch and Feldman 2004). Specifically, there is comprehensive evidence for a positive relationship between regional innovation performance and agglomeration (e.g., Sedgley and Elmslie 2004; Andersson et al. 2005; Carlino et al. 2007). Higher innovation rates in urban than in rural regions are also observed at the firm level (Naz et al. 2015). Agglomeration economies and in particular localized knowledge spillovers are supposed to give rise to these spatial patterns of innovation (Audretsch and Feldman 1996; Bottazzi and Peri 2003). However, com
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