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Oxford Economic Papers 2007 59(Supplement 1):i105-i126; doi:10.1093/oep/gpm032
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© Oxford University Press 2007 All rights reserved

What made southwest German firms innovative around 1900? Assessing the importance of intra- and inter-industry externalities

Jörg Baten*, Anna Spadavecchia{dagger}, Jochen Streb{ddagger}, and Shuxi Yin§

*Department of Economics, University of Tübingen and CESifo, Mohlstrasse 36, D-72074 Tübingen, Germany; e-mail: Joerg.baten{at}uni-tuebingen.de
{dagger}University of Reading
{ddagger}University of Hohenheim
§University of Tübingen and Hohenheim


  Abstract

This paper investigates the impact of clustering on the innovative activity of firms. The study, one of the few using firm-level data, is based on a newly constructed dataset, including information on patents and 2407 manufacturing firms located in the state of Baden at the turn of the 20th century. The analysis assesses the importance of intra- and inter-industry externalities, among other determinants, for the innovative activity of firms in the sample. The results show that both types of externalities were important, with the former being more important for the whole sample and the latter for small firms. Moreover, consistent with Winter's theory of ‘technological regimes’, our results show that firms differ in the type of knowledge base they utilize in their innovative activity, a result rich in policy implications.

Key Words: JEL classifications: O31 • O33 • N63 • N93 • R11


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