What determines technological hits? Geography and firm competencies in biotechnology vs. “traditional” chemicals

Myriam Mariani, MERIT and Sant'Anna School of Advanced Studies, Pisa, Italy

This paper uses data on European patents in five chemical sectors to estimate how much of the value of an innovation depends on the characteristics of the organisation to which the inventors are affiliated, and how much it is affected by the characteristics of the location in which it is invented. The results indicate that there are two innovation models according to different sectoral characteristics. The probability of developing technological “hits” in the “traditional model” of innovation (in materials, organic chemicals, pharmaceuticals and polymers) does not benefit from the geographical proximity of the inventors to external sources of knowledge spillovers. It critically depends on economies of scale in R&D internal to the firm. By contrast, the “biotechnology model” of innovation benefits from localised geographical spillovers, and generates high value innovations from technological specialisation at the firm level.

Date: 01 April-00 0000