Proximity and Innovation in Italian SMEs

Morone, Piergiuseppe; Petraglia, Carmelo and Testa, Giuseppina (2008): Proximity and Innovation in Italian SMEs. Unpublished.

Abstract

Abstract: In this paper we assess the relevance of both knowledge creation and diffusion processes in affecting Italian SMEs’ propensity to innovate. In doing so a knowledge production function (KPF) is estimated for a representative sample of small and medium manufacturing firms over the period 1998-2003. To account for endogeneity of R&D effort in the KPF, we estimate a Heckman selection model on R&D decisions and obtain two main results. First, we do not find the probability of being engaged in intramural R&D activities to be significantly related to firm size. Second, for those firms engaged in R&D activities, the intensity of R&D effort increases with firm size. Then, the KPF is estimated for three different samples of firms using a standard probit where the probability that SMEs will innovate depends upon intramural R&D effort, regional and industrial spillovers and a vector of interaction and control variables. The main results obtained from this second set of regressions are the following: first, we find the probability to innovate to be positively related to sectoral spillovers, the magnitude of such impact being decreasing in firms’ size. Second, knowledge diffusion via geographical proximity enhances the probability of the recipient firm to innovate only if it has an appropriate endowment of human capital.

• Item Type: MPRA Paper
• Language: English
• Keywords: Innovation, knowledge, spillovers, firm size
• Subjects: L - Industrial Organization > L6 - Industry Studies: Manufacturing; O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development; C - Mathematical and Quantitative Methods > C2 - Econometric Methods: Single Equation Models; Single Variables > C25 - Discrete Regression and Qualitative Choice Models; Discrete Regressors

References

Asheim B.T., 2000. The Learning Firm in the Learning Region: Workers Participation as Social Capital, DRUID Summer 2000 Conference, Rebild, Denmark, June 15-17.

Bank of Italy, 2005. Summary of the Reports on economic developments in the Italian regions in 2004. Rome

Barba Navaretti G., Bugamelli M., Faini R., Schivardi F. and Tucci A., 2007. Le imprese e la specializzazione produttiva dell’Italia. Dal macrodeclino alla microcrescita?. Presented at the conference “I vantaggi dell’Italia” Fondazione Rodolfo Debenedetti, Rome, 22 May 2007

Barrios S., Goerg H. and Strobl E., 2003. Explaining firms’ export behaviour: R&D spillovers and the destination market. Oxford Bulletin of Economics and Statistics 65(4), 475-496

Becattini G., 1987. Mercato e forze locali: il distretto industriale. Bologna: Il Mulino.

Boschma R.A. 2005. Proximity and innovation: a critical assessment. Regional Studies 39(1), 61-74

Boschma R. A. and Lambooy J.G., 1999. Evolutionary economics and economic geography. Journal of Evolutionary Economics 9, pp. 411-429.

Cantwell J. and Santangelo G. D., 2002. The new geography of corporate research in information and communication technology (ICT), Journal of Evolutionary Economics 12, pp. 163-197.

Capitalia, 2002. Indagine sulle imprese manifatturiere. Ottavo rapporto sull’industria italiana e sulla politica industriale. Rome

Capitalia, 2005. Indagine sulle imprese manifatturiere. Nono rapporto sull’industria italiana e sulla politica industriale. Rome

Cohen W.M., 1995. Empirical studies on innovative activity in Stoneman, P. (ed.). Handbook of the Economics of Innovation and Technological Change, Oxford, Blackwell.

Crépon B., Duguet E. and Mairesse J., 1998. Research, innovation and productivity: an econometric analysis at a firm level. Economics of Innovation and New Technology 7(2), 115-158

Faini R. and Sapir A., 2005. Un modello obsoleto? Crescita e specializzone dell’economia Italiana, in T. Boeri, R. Faini, A. Ichino, G. Pisauro and C. Scarpa (eds.), Oltre il Declino. Il Mulino, Bologna

Forsman M. and Solitander N., 2003. Knowledge transfer in clusters and networks. Journal of International Business Studies – Literature Review, 3 Freeman C. and Soete L., 1997. The Economics of Industrial innovation, 3rd Edition, The MIT Press, Cambridge.

Giuliani E. and Bell M., 2005. The micro-determinants of meso-level learning and innovation: evidence from a Chilean wine cluster. Research Policy 34 (2005) 47–68

Griffith R., Huergo E., Mairesse J. and Peters B., 2006. Innovation and productivity across four European countries. NBER Working Paper 12722

Griliches Z., 1991. The search for R&D spillovers. NBER Working Paper No. 3768

ICE, 2007. Rapporto ICE 2006 – 2007. L'Italia nell'economia internazionale. Rome

Jaffe A., 1986. Technological opportunity and spillovers of R&D: evidence from firms patents, profits, and market value. American Economic Review 76 (5), 984-1001

Howells J.R.L., 2002. Tacit Knowledge, Innovation and Economic Geography. Urban Studies, 39(5–6), 871–884

Kuznets S., 1962. Inventive activity: problems of definition and measurement. In: R.R. Nelson (Ed.) The rate and direction of Inventive activity. National Bureau of Economic Research Conference Report, Princeton University Press, 19-43

Morone P., Sisto R. e Taylor R., 2006. Knowledge Diffusion and Networking in the Organic Production Sector: A Case Study. EuroChoices, 5(3).

Morone P., Petraglia C. and Testa G., 2007. Research, Knowledge Spillovers and Innovation. Birkbeck Working Papers in Economics and Finance, 0713

Morone P. and Testa G., 2008. Firm growth, size and innovation. Economics of. Innovation and New Technology, 17(4), 311-329

Panne van der G., 2007. Issues in measuring innovation. Scientometrics, 71(3), 495–507

Piergiovanni R., Santarelli E. and Vivarelli M., 1997. From which source do small firms derive their innovative inputs? Some evidence from Italian industry. Review of Industrial Organization 12(2), 243-258

Pinch S., Henry N., Jenkins M. and Tallman, S., 2003. From ‘industrial districts’ to ‘knowledge clusters’: a model of knowledge dissemination and competitive advantage in industrial agglomeration. Journal of Economic Geography 3(4), 373-88

Porter M., 1998. Clusters and the new economics of competition. Harvard Business Review, November-December, 77-90

Rogers E. M., 1995. Diffusion of innovations. New York, Free Press.

Singh J. 2003. Social networks as drivers of knowledge diffusion. Harvard University. mimeo

Schumpeter J.A., 1942. Capitalism, Socialism and Democracy. New York, Harper.

Smith K., 2006. Measuring Innovation, in: J. Fagerberg, D.C. Mowery, R.R. Nelson (eds.), The Oxford Handbook of Innovation, Oxford University Press.

Technopolis Group, 2006. Strategic Evaluation on Innovation and the Knowledge Based Economy in relation to the Structural and Cohesion Funds, for the programming period 2007-2013. A report to the European Commission, DG Regional Policy. Country report: Italy

Valente T.H., 1995. Network models of the diffusion of innovations. Cresskill, N.J.. Hampton Press.