Urban Agglomeration and Firm Innovation: Evidence from Asia

Liming Chen (), Rana Hasan () and Yi Jiang ()
Additional contact information
Liming Chen: Asian Development Bank
Rana Hasan: Asian Development Bank
Yi Jiang: Asian Development Bank

No 616, ADB Economics Working Paper Series from Asian Development Bank

Abstract: This paper presents evidence on the spatial distribution and effects of urban agglomeration on firm innovation. It uses a unique dataset that consistently defines city boundaries and identifies firms’ innovation-related activities across 25 developing countries in Asia. We find firm innovation to be highly concentrated at the city level. We also find substantial gains from increases in city population in terms of firms’ propensity to introduce process and product innovations and undertake research and development (R&D) activities. These gains remain even after addressing concerns regarding endogeneity through the use of historical population data as instruments. In addition, we present evidence that knowledge spillovers are an important channel through which agglomeration effects occur, specifically through the presence of top-tier universities in a given city and by raising the effectiveness of firms’ R&D efforts. These findings confirm the existence and significance of urban economies of scale in augmenting the knowledge flows that generate innovation.

Keywords: agglomeration economies; innovation; knowledge spillovers (search for similar items in EconPapers)
JEL-codes: O10 O30 R11 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2020-07-10
New Economics Papers: this item is included in nep-com, nep-cse, nep-geo, nep-ino, nep-sbm, nep-sea and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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