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1. The geography of innovation in the Luxembourg metropolitan region:an intra-regional approach Vincent Dautel Olivier Walther CEPS/INSTEAD (Luxembourg) DIME Workshop: Regional innovation and growth Pécs, Hungary, March 31-April 1, 2011
2. The geography of innovation in the Luxembourg metropolitan region 0. Background (1) Little attention has been paid at the study of innovation at the intra-regional level using micro-level data, especially with regard to metropolitan regions (2) Previous literature usually does not clearly separate between location effects and the effects of firms’ characteristics (3) Studies of functional regions usually assume that location characteristics should affect all firms in a given functional unit in the same way
3. The geography of innovation in the Luxembourg metropolitan region 1. Objectives What are the local determinants of innovation? Distinguish between the impact of the local milieu and firms’ characteristics What about the intra-regional level? Is innovation dependent on functional regions in Luxembourg? Is innovation dependent on accessibility to the centre? Hypothesis: firms located in Luxembourg-City and close to the centre of gravity are more innovative
4. The geography of innovation in the Luxembourg metropolitan region 2.1 Local external economies Urban regions provide a favourable environment in terms of external factors They limit transaction costs and provide better access to markets They provide a dense institutional context which favours business relations Marshallian agglomeration economies (labour supply, knowledge spillovers, linkages) The concentration of firms and workers in space improves interactions between social actors and hence the propensity to innovate
5. The geography of innovation in the Luxembourg metropolitan region 2.2 Spatial attractiveness and spatial selection of firms Spatial attractiveness: Innovative firms tend to be located in areas where resources resulting from previous innovation success are available (Feldman 1994). This locational choice is a strategic decision linked to knowledge externalities (Audretsch et al. 2003). However, firms will not automatically move to their ideal location: importance of sunk costs, founder preferences, or other factors such as grants offered by the (local) government have a role to play. (2) Spatial selection of firms: Local competition encourages innovation by forcing firms to innovate or fail (Porter 1990) or to exit (Melitz and Ottaviano 2008).
6. The geography of innovation in the Luxembourg metropolitan region 3.1 Data Firms Community Innovation Survey (CIS2006) in Luxembourg Information: types of innovation carried out, innovation success and firms’ characteristics Space Functional urban regions are defined as a set of municipalities between which there is intense labour market commuting Accessibility is defined as the time needed to cover the distance between the centre of gravity and every surveyed firm using the existing road network
7. The geography of innovation in the Luxembourg metropolitan region 3.2 Functional regions and centre of gravity
8. 3.2 Accessibility according to functional regions The geography of innovation in the Luxembourg metropolitan region Concentration 95% of the firms need less than 40 minutes to access the centre Luxembourg-City: best accessibility Some densities are bimodal
9. 3.3. Stylized facts on the Luxembourg functional regions The geography of innovation in the Luxembourg metropolitan region The propensity to innovate and the innovation vary greatly between the Luxembourg functional regions Table 1: Propensity to innovate and innovation output across functional regions However, firms’ profiles, which differ across regions, are likely to explain most of these discrepancies Large difference are found between functional region regarding: firms’ economic activity, size, group membership, nature of the market and % employees with higher education
10. 4.1 Econometric approach The geography of innovation in the Luxembourg metropolitan region The following model is used: Y= f(X, loc, u) According to ‘average’ enterprise characteristics, predicted probabilities are computed in order to estimate profile effects and agglomeration effects (1) Profile_effect=Y1*loc/Y1* with Y1*= a.Xi ; Y1*loc =a.Xloc,j (2) Agglo_effect=Y2*loc/Y1*loc with Y2*loc =a2.Xloc, j + b.locj Additional specifications are considered for the accessibility estimations: a ‘sliding bandwidth’ of five minutes is retained for estimating Y*. (1) and (2) are smoothed by regressing these measures on accessibility using a local polynomial regression.
11. 4.2 Propensity to innovate across functional regions The geography of innovation in the Luxembourg metropolitan region Close links between profile and agglomeration effects are found
12. 4.3 Propensity to innovate according to accessibility The geography of innovation in the Luxembourg metropolitan region Some diversity is found within functional units regarding firms’ profile effects and agglomeration effects
13. 4.4 Output of innovation activities across functional regions The geography of innovation in the Luxembourg metropolitan region Profile effects decrease more linearly across functional units Agglomeration effects higher than profile effects in Luxembourg-City, the Suburban Area and the Commuter Area
14. 4.5 Innovation output according to accessibility The geography of innovation in the Luxembourg metropolitan region Accessibility highlights higher variability of agglomeration effects when considering innovation output Profile effects: high only for firms closer to the centre
15. 5. Conclusion The geography of innovation in the Luxembourg metropolitan region Innovation varies at the infra-regional level of the Luxembourg Metropolitan area  - First evidence of a close link between profile effects and agglomeration effects at the infra-regional level  - Profile and agglomeration effects may differ within the functional units - Innovation activities are organized around one main centre, located in Luxembourg-City
16. Thank you for your attention Vincent Dautel Olivier Walther CEPS/INSTEAD (Luxembourg) DIME Workshop: Regional innovation and growth Pécs, Hungary, March 31-April 1, 2011