Regions Matter: How Localized Social Capital Affects Innovation and External Knowledge Acquisition

Abstract

To introduce new products, firms often use knowledge from other organizations. Drawing on social capital theory and the relational view of the firm, we argue that geographically localized social capital affects a firm's ability to innovate through various external channels. Combining data on social capital at the regional level, with a large-scale data set of the innovative activities of a representative sample of 2,413 Italian manufacturing firms from 21 regions, and controlling for a large set of firm and regional characteristics, we find that being located in a region characterized by a high level of social capital leads to a higher propensity to innovate. We find also that being located in an area characterized by a high degree of localized social capital is complementary to firms' investments in internal research and development (R&D) and that such a location positively moderates the effectiveness of externally acquired R&D on the propensity to innovate

Toward a construct of liability of origin

“…A rich stream of research has suggested that the success of Silicon Valley relative to other regions can be attributed to the exchange of ideas and the local institutions geared towards fostering innovations (Saxenian, 1994). The concentrations of innovative firms and individuals within a geographical area can foster the diffusion of ideas, attracts investment and provides more opportunities for new ideas to flourish and become reality (Laursen et al, 2012). Indeed, scholars have demonstrated that being located in a region or an area helps to foster collaboration among firms leading to a higher propensity to innovate (Laursen et al, 2012).…”

Trapped or spurred by the home region? The effects of potential social capital on involvement in foreign markets for goods and technology

“…This body of work provides evidence of the existence of a positive relationship between social capital and economic performance in a geographically bounded area. Social capital is shown to facilitate collective learning and knowledge spillovers (Capello & Faggian, 2005;Masciarelli, 2011), labor productivity (Sabatini, 2008), economic growth (Beugelsdijk & Schaik, 2005;Knack & Keefer, 1997), productivity based on R&D investment and human capital (Tappeiner, Hauser, & Walde, 2008), product innovation (Laursen, Masciarelli, & Prencipe, 2012), and financial development (Guiso, Sapienza, & Zingales, 2004). While most contributions in this literature show that geographical-level variations in social capital give rise to variations in performance at the same geographical level, in this paper, we claim that regional-level differences in (potential) social capital affect firms' international involvement.…”

“…These include networks, participation in the community, and membership of citizens' associations. In selecting the items to include in our measure, we rely on previous empirical work (Beugelsdijk & Schaik, 2005;Hauser, Tappeiner, & Walde, 2007;Laursen et al, 2012;Putnam et al, 1993). Our PCA items include variables that indicate strong ties (Meeting friends regularly; Social meetings; Satisfaction over relationships with friends), and participation in social associations (Participation in cultural associations; Participation in voluntary associations; Monetary donations to associations; Participation in non-voluntary organizations; Number of voluntary associations per region).…”

The effects of production offshoring on R&D and innovation in the home country

“…Dichotomous indicators for product innovation have been used for instance by Ebersberger and Herstad (2011), by Nieto and Santamaria (2007), and by Laursen, Masciarelli, and Prencipe (2012). The economic relevance of product innovation measured by the sales share generated by new products has, for instance, been used by Cassiman and Veugelers (2006), by Laursen and Salter (2006), and by Schmiedeberg (2008).…”