Papers in Evolutionary Economic Geography

June 1, 2017

# 17.10 Local Discoveries and Technological Relatedness: the Role of Foreign Firms

Filed under: 2017 — Tags: , , , , — mattehartog @ 5:07 pm

Alessia Lo Turco and Daniela Maggioni

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We explore the role of local intra and extra-regional product-specific capabilities in foster ing the introduction of new products by firms active in the Turkish manufacturing sector. We model firms’ product additions to their product basket as dependent on extra and intra-regional knowledge. We find that regional “discoveries”, that is newly introduced products never produced before in the region, are positively and significantly affected by external related knowledge spurring from foreign firms active in the same location as well as by firm internal capabilities. Technologically related intra-regional knowledge spillovers and extra-regional knowledge spilling from imported inputs do not play a relevant role. The former, however, matter when we extend the analysis to all new products introduced by firms, regardless of their previous presence in the regional production basket. We interpret this evidence as foreign affiliates bringing new and exclusive capabilities which are missing in the region where they locate, thus providing a stimulus for regional production diversification and upgrading. This hypothesis is validated by exploring the heterogeneous role of the different intra and extra-regional knowledge sources according to products’ complexity.

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