Industrial innovation: Direct evidence from a cluster-oriented policy

Citation

Falck O, Heblich S & Kipar S (2010) Industrial innovation: Direct evidence from a cluster-oriented policy. Regional Science and Urban Economics, 40 (6), pp. 574-582. https://doi.org/10.1016/j.regsciurbeco.2010.03.007

Abstract
Can local industrial policies increase local firm competitiveness? Cluster-oriented policies targeted at selected industries have just such a goal and are very popular among politicians, despite the controversy surrounding these policies in academia. Thus, it would appear useful to discover if cluster-oriented policies are effective. This paper evaluates the cluster-oriented policy introduced in Bavaria, Germany, in 1999. The policy's goal was to foster innovation and regional competitiveness by stimulating cooperation. Using difference-in-difference-in-differences estimates, we find for different innovation measures that the cluster-oriented policy increased the likelihood of becoming an innovator in the target industries by 4.6 to 5.7 percentage points. At the same time, R&D expenditures decreased by 19.4% on average for firms in target industries, while access to external know-how, cooperation with public scientific institutes, and the availability of suitable R&D personnel increased.

Keywords
Difference-in-differences; Difference-in-difference-in-differences; Cluster policy; Industrial policy

Journal
Regional Science and Urban Economics: Volume 40, Issue 6