Government support for firm-level innovation in less innovation-intense regions

Kevin Mulligan

Regional Studies, Regional Science, 2024, vol. 11, issue 1, 632-644

Abstract: Regional innovation intensity is a crucial external factor that influences firm-level innovation outcomes. Firms located in less innovation-intense regions typically under-perform equivalent firms in more innovation-intense regions. Research to-date suggests that the effectiveness of government support for firm-level innovation varies markedly, depending on a firms’ location. However, almost no evidence exists on the effectiveness of government innovation support, in the specific case of firms located in less innovation-intense regions. To fill this gap in the literature, this paper addresses the following research question: What impact does government innovation support have on firm-level innovation in less innovation-intense regions? The analysis draws on the World Bank’s 2010 Business Environment and Enterprise Performance Survey, for five South American countries. Results show that subsidised firms, located in less innovation-intense regions, significantly underperform matched-unsubsidised firms in higher innovation-intensity regions. This result suggests that regional innovation-intensity is a crucial factor in determining the effectiveness of government innovation subsidies.

Date: 2024
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DOI: 10.1080/21681376.2024.2402484

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