Understanding the Inputs into Innovation: Do Cities Substitute for Internal Firm Resources?
23 Pages Posted: 3 May 2006
Date Written: January 2007
Abstract
We examine whether there is a tradeoff between employing internal (firm) resources and purchased external (local) resources in process innovation. We draw on a rich data set of Internet investments by 86,879 U.S. establishments to examine decisions to invest in advanced Internet technology. We show that the marginal contribution of internal resources is greater outside of a major urban area than inside one. Agglomeration is less important for firms with highly capable IT workers. When firms invest in innovative processes they act as if resources available in cities are partial substitutes for both establishment-level and firm-level internal resources.
Keywords: innovation, agglomeration, localization of substitution, internal and external resources
JEL Classification: R30, O33, L86
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Digital Dispersion: An Industrial and Geographic Census of Commerical Internet Use
By Chris Forman, Avi Goldfarb, ...
-
The (Teaching) Role of Universities in the Diffusion of the Internet
By Avi Goldfarb
-
The Diffusion of the Internet and the Geography of the Digital Divide in the United States
-
Broadband Adoption and Content Consumption
By Lorin M. Hitt and Prasanna Tambe
-
The Internet and Local Wages: Convergence or Divergence?
By Chris Forman, Avi Goldfarb, ...
-
Innovation and the Evolution of Market Structure for Internet Access in the United States
-
Diffusion of Information and Communication Technologies to Businesses
By Chris Forman and Avi Goldfarb
-
Local Government Broadband Initiatives
By Sharon E. Gillett and William Lehr
-
From Wires to Partners: How the Internet Has Fostered R&D Collaborations within Firms