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Employers’ Agglomeration and Innovation in a Small Business Economy: The Italian Case

Giuseppe Croce (), Edoardo Di Porto (), Emanuela Ghignoni () and Andrea Ricci
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Andrea Ricci: ISFOL

Chapter 8 in Geographical Labor Market Imbalances. Recent Explanations and Cures, 2015, pp 167-192 from AIEL - Associazione Italiana Economisti del Lavoro

Abstract: This chapter analyzes the impact of agglomeration on product and process innovation in Italy. Our main goal is to gain a better understanding of the spatial dimension of innovative activities. Based on a unique firm-level source of data provided by ISFOL containing information on employers’ personal profiles, we attempt to shed more light into the black box of the local knowledge spillovers. To this end, besides standard density measures, we define and employ an original density indicator and perform a series of IV regressions. Different from the main strands of the literature on this topic, which envisages positive knowledge spillover effects stemming from agglomeration, we do not find significant evidence that agglomeration fosters innovation. In particular, when small businesses are considered, a negative and significant effect arises. Such evidence suggests that in denser areas detrimental congestion effects tend to prevail and discourage innovation. Moreover, for this subsample of firms, the employers’ personal profile prove to be a relevant boost for innovation.

Keywords: Product and process innovation; Agglomeration; Knowledge spillovers; Poaching; Employer’s education (search for similar items in EconPapers)
JEL-codes: D83 J24 O18 O31 R23 (search for similar items in EconPapers)
Date: 2015
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