Do local start-ups and knowledge spillovers matter for firm-level R&D investment?

Abstract

What happens to firm-level research and development (R&D) when urban locations have more knowledge spillovers and are more entrepreneurial? This article explores the potential tension between knowledge spillovers, start-ups and innovation effort in existing firms. The relationship is empirically tested using Swedish firm-level data and municipality-level data on start-ups. The results indicate that having more start-ups in urban municipalities is associated with lower firm-level R&D expenditure. However, this relationship is not linear, where the negative association between the level of new firm formation and firm-level R&D expenditure decreases with scale. This suggests that the relationship between local entrepreneurship and a business’ R&D decisions is conditioned by the extent of that entrepreneurship.

Research and innovation and the role of competition in family owned and managed firms

“…To measure the degree of competition faced by firms, the ES asks, “For the main market in which this establishment sold its main product, how many competitors did this establishment's main product face?”. In line with existing literature, such as Crowley and Jordan (2017), Mendi and Costamagna (2017), and Crowley and Jordan (2022), the natural log of the number of competitors in the main product market is used as a measure of competition. A higher number of competitors in a product market is expected to mean higher competition.…”