The Geography of Innovative Firms

Craig A. Chikis, Benny Kleinman and Marta Prato

No 34010, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Firms conducting R&D across multiple local markets account for most U.S. innovation. We study how their geographic scope affects growth and whether it is socially optimal. We develop a spatial growth model with multi-market firms that generate local knowledge spillovers. In equilibrium, firms may expand into too few or too many markets, depending on the sensitivity of spillovers to their local footprint. We estimate the model using data on R&D locations, patents, and citations, and find that firms under-invest in geographic expansion. Through model counterfactuals, we show that welfare gains from policies promoting broader geographic expansion are higher than traditional R&D subsidies.

JEL-codes: E0 F0 L0 O0 R0 (search for similar items in EconPapers)
Date: 2025-07
New Economics Papers: this item is included in nep-bec, nep-cse, nep-geo, nep-gro, nep-ino, nep-sbm, nep-tid and nep-ure
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