The impact of innovation and innovation subsidies on economic development in German regions

Abstract

Public innovation subsidies in a regional environment are expected to unfold a positive economic impact over time. The focus of this paper is an assessment of the long-run impact of innovation and innovation subsidies in German regions. We scrutinize this by an estimation approach combining panel model and time series characteristics and using regional data for the years 1980 to 2014. The results show that innovation and innovation subsidies in the long run have a positive impact on the economic development of regions in Germany. This supports a long-term strategy for regional and innovation policy.

Evolution and co-evolution of regional innovation processes

“…Uwe Cantner, Eva Dettmann, Alexander Giebler, Jutta Günther and Mariia Kristalova access the long-term regional impact of innovation subsidies by combining panel models and time series characteristics for the period 1980-2014 (Cantner, Dettmann, Giebler, Günther, & Kristalova, 2019, in this issue). The authors compile a comprehensive data set and focus on gross domestic product (GDP) and employment change as dependent variables in their analysis of 75 West German planning regions.…”

SME segmentation and regional development agencies’ innovation support measures

“…In 2019, the introduction of a Cohesion Policy and Smart Specialisation as a regional development strategy includes a particular focus on the advantages of the regional innovative specialization (Capello & Kroll, 2016;Foray, 2004). This underlines the importance of regional aspects and institutions for the improvement of the economic performance (Cantner et al, 2019). This is also where RDAs should increase their efforts to analyse the regional potential and channel their support to the areas that are more strategically important or with the highest growth potential.…”

“…The economic performance of the European regions was found to be positively associated with R&I activities and can also be affected by socioeconomic and institutional settings (Bilbao-Osorio & Rodriguez-Pose, 2004;Cantner et al, 2019;Rodríguez-Pose & Crescenzi, 2008). The literature on the endogenous growth models has been followed by numerous empirical studies analysing the impact of R&D expenditures on the growth of total factor productivity (Cantner et al, 2019). Significant empirical evidence shows that R&D and innovation have a positive impact on total factor productivity (Lopez-Rodriguez & Martinez-Lopez, 2017; Mohnen & Hall, 2013) and that there is a causal relationship between innovation and economic growth (Guloglu & Tekin, 2012).…”

“…In a long-term perspective, the presumed co-evolution of subsidies, innovations and regional performance can be analysed. Cantner et al (2019) show that, with a certain time delay, innovation subsidies and innovation activities may have a positive long-term impact on the regional SMEs' growth. While the positive effect of innovation is not surprising, the long-term, statistically significant, positive effect of innovation subsidies is somewhat unexpected.…”

“…Thereby, interactions of innovating actors play a crucial role in the process (Broekel et al, 2015;Fritsch, 2004), and geographical proximity does matter in order for the synergistic effects to take place (Audretsch & Feldman, 1996). The positive effects created by the regional agglomeration are typically associated with the work of Marshall (2013), and in this context, positive externalities accrue to other factors in production (Cantner et al, 2019) as well as those in R&I activities (Saxenian, 1994).…”