Geography of Innovation

Economic geography is a sub-discipline that has looked at the role that innovation plays at geographical scales. Innovation theory looks at how innovation spreads and factors that lead to its development. Integration of innovation theory with geographic study has allowed scholars to explain why certain regions, such as California’s Silicon Valley, are consistently at the forefront of innovation.

Geographic locations are able to leverage their initiate advantages through feedback growth that attracts more talent and money. Over time, such capital and resources become not only established, but locations nearby often benefit as regional connections are made.[1] Such agglomerate economies, as they have been called by economists and geographers, have been focused on by both developing and developed economies, where policy has reflected heavy investment in limited area as these areas attract innovative-based growth.[2] Other results suggest that foreign direct investment (FDI), particularly in developing economies, has had a clear and significant impact on regional innovation for industries in specific areas.[3] In Germany, it was shown that an increase of one standard deviation in distance from investors led to an 8% reduction in investment.[4] On the other hand, investment by multinational companies or multinational enterprises (MNEs) in China has been shown to have less of a geographic effect, where corporate networks and social connectivity have influenced where innovative practices develop.[5]

Map of innovation clusters by McKinsey Digital.

References

[1] For more information on the role of geography in innovation, see:  Howells, J., and J. Bessant. 2012. “Introduction: Innovation and Economic Geography: A Review and Analysis.” Journal of Economic Geography 12 (5): 929–42.

[2] For more on how innovation clusters and governments invested in these clustered areas, see:  Feldman, Maryann P., and Jongmin Choi. 2015. “Harnessing the Geography of Innovation: Toward Evidence-Based Economic Development Policy.” In The Handbook of Global Science, Technology, and Innovation, edited by Daniele Archibugi and Andrea Filippetti, 267–89. Chichester, UK: John Wiley & Sons, Ltd.

[3] For more on the example of China’s regional innovation, see:  Wang, Yuandi, Lutao Ning, Jian Li, and Martha Prevezer. 2016. “Foreign Direct Investment Spillovers and the Geography of Innovation in Chinese Regions: The Role of Regional Industrial Specialization and Diversity.” Regional Studies 50 (5): 805–22.

[4] For more on investment and geographic effects in Germany, see:  Lutz, Eva, Marko Bender, Ann-Kristin Achleitner, and Christoph Kaserer. 2013. “Importance of Spatial Proximity between Venture Capital Investors and Investees in Germany.” Journal of Business Research 66 (11): 2346–54. doi:10.1016/j.jbusres.2012.04.016.

[5] For more on innovation by MNEs, see:  Wang, Yuandi, Lutao Ning, Jian Li, and Martha Prevezer. 2016. “Foreign Direct Investment Spillovers and the Geography of Innovation in Chinese Regions: The Role of Regional Industrial Specialization and Diversity.” Regional Studies 50 (5): 805–22.

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