Recent Research: Are International Connections More Important Than Local Partners in Innovation?

Innovative firms rely on global pipelines and communication more than local interactions to increase their innovative capacity, according to a working paper by Rune Dahl Fitjar and Andres Rodriguez-Pose. The authors examine the practices of 1604 firms in the five largest urban regions of Norway, and find that international cooperation is the main source of product and process innovation. While other studies have emphasized the complementary nature of global and local innovation pipelines, the authors find little evidence that local interactions lead to radical or incremental technological advancement. This conclusion comes with several caveats, but suggests that the roots of innovative capacity lie in factors that drive a firm to establish links to more distant institutions and resources.

Fitjar and Rodriguez-Pose begin by confronting the assertion that "local and global interaction operate together in fostering firm-level innovation within regions and are perfectly complementary." This belief is particularly prominent in Norway and has been proposed as the key to developing successful products and processes. The authors, however, believe that this complementary relationship has not been sufficiently demonstrated, and that past studies have distorted their results by relying on the concept of clusters.

Firms that have chosen to co-locate with other firms and institutions linked to their industry are more likely than the average company to make use of local innovation pipelines. In particular, technology companies that have located within a region known for a particular industry are likely to make use of regional networks, programs and partnerships. This may, however, not necessarily be true for other firms, even firms that are innovation-oriented.

To demonstrate this point, the authors spoke with a large number of business managers with more than ten employees in Norway's urban regions without focusing on any particular industry. In phone surveys, they inquired about their firm's innovation history, the sources of innovation and whether their innovation partners were located within the region, in the country or international. The managers also were asked about the nature of these relationships and the nature of their business.

In the authors' analysis, the presence of international partners was closely linked to firm innovation, while the presence of local partners was not. Also, the presence of local partners was not correlated with the presence of international partners. In fact, a firm that was more oriented toward local partnerships was less likely to engage in helpful international partnerships.

The authors are cautious to warn that these findings may not be universal, even within Norway. More research is needed to differentiate between industries, types of managers and the varieties of local networks. The work also requires a closer look at the stage of development of the firms in question and whether international partnerships are merely correlated with firms that have already attained a degree of successful innovation.

Read "When Local Interaction Does Not Suffice: Sources of Firm Innovation in Urban Norway" at: http://ideas.repec.org/p/imd/wpaper/wp2011-05.html.