Effects of Cities on Firm-level Innovation - Empirical Studies for Germany

The relevance of cities has grown markedly. Not only that the process of urbanization,
i.e. the growing concentration of population in cities, has accelerated.
Cities are also referred to as sources of creativity and innovation. This dissertation
relates to the connection between firm-level innovation and cities in Germany
by comprising three empirical studies that assess the effects of cities on innovation
in firms and their underlying mechanisms. It develops along the following
key questions: Apart from the general finding of innovation being concentrated
in cities, are there industries exhibiting stronger tendencies to allocate their innovative
activities in cities? Does being located in or close to a city demonstrably
foster innovation in firms? Which city-specific assets promote the innovativeness
of firms?
The first study applies a micro-geographic approach based on postcodes in order
to assess the spatial patterns of firm-level R&D activities and their connection
to cities. Based on a method developed by Duranton and Overman (2005), it
develops measures that integrate cities in industry-specific spatial analyses of innovation.
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The second contribution is devoted to distance-based effects of cities on
innovation in Knowledge Intensive Business Services (KIBS). Setting up a Knowledge
Production Function (KPF), it quantifies the effects of cities on different
types of innovation by simulating innovation likelihood progressions depending
on distances of establishments to cities. The third study is designed as a case study.
It investigates which city-specific assets foster innovation in Knowledge Intensive
Service (KIS) firms.
The results of the analyses show that cities above average host innovative activities
of research-intensive services. Moreover, being located in a city maximizes
the likelihood of most types of innovation pursued by KIBS. The case study suggests
that the innovativeness of city-located KIS is connected to both cooperation
with city-based external partners and the usage of city-specific innovation
support infrastructures. For economic policies aiming at regional convergence
the substantiated allocation patterns and beneficial effects of cities on innovation
in knowledge-intensive (business) services pose a challenge as they are likely to
induce considerable regional differences regarding innovative performance and
hence economic growth.