The effect of regional resources on innovation: a firm-centered approach

The current environment of high competitiveness has made innovative firms, especially job-creating ones, central to regional economic growth. Most of previous studies have not considered the interactions between internal and regional factors, and has focused on product innovation performance. This paper aims to fill both gaps in the literature on the regional determinants of firm innovation. Assuming a firm-centered approach, the main goal of the paper is to analyse whether the regional resources determine firm innovation either in a direct way or by shaping the effect of the firm’s internal resources. We used multilevel modelling and panel data methodology in a sample of 2141 Spanish manufacturing firms over the period 2008–2014. More specifically, we assume fixed slopes and estimate a three-level logistic random intercept models (observations: level 1; firms: level 2; regions: level 3). Our results show that the internal factors are the cornerstone of firm innovation. Nevertheless, there is also a ‘regional effect’ in the firms’ propensity to innovate. Particularly, the effect of the region’s resources in explaining the differences across firms in product innovation is more substantive than in process innovation. In this last case, regional factors play a subtler role by shaping the effect of its internal drivers. Policy-makers should be conscious of the need of keeping a bottom–up approach (or a firm-centered approach) when designing regional innovation policies. In this respect, policies aimed at promoting the size, export activities and R&D intensity of firms could be effective to increase the number of firms that can benefit from the exploitation of the region’s resources.