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Related variety, unrelated variety and the novelty content of firm innovation in urban and non-urban locations

Marte Solheim, Ron Boschma () and Sverre Herstad

No 1836, Papers in Evolutionary Economic Geography (PEEG) from Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography

Abstract: In this paper, we investigate whether the composition of experience-based knowledge accumulated by firms in urban and rural locations is reflected in the novelty content of their innovations. Looking at the manufacturing industry, and using Norwegian Linked Employer- Employee register data (LEED) merged with Community Innovation Survey (CIS) data, we find that unrelated experience variety within firms increases the probability of radical innovation, independently of firms' location, whereas related variety increases the probability of incremental innovation in large-city regions. These results demonstrate that innovation capacity cannot be understood from the single perspective of R&D efforts and strategy as it also depends on experiences accumulated in 'entire organizations' and the locations in which accumulation occurs. Moreover, they suggest that for manufacturing firms, urban locations are not hot spot for radical change. Instead, they support incremental innovative activities by facilitating effective sharing of knowledge between related sectors.

Keywords: immigration; Diversity; Innovation; Related Variety; Unrelated Variety; Urban; Rural (search for similar items in EconPapers)
JEL-codes: O31 P25 O15 O14 J24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cse, nep-geo, nep-ino, nep-lma, nep-sbm, nep-tid and nep-ure
Date: 2018-10, Revised 2018-10
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