How Knowledge-Based Local and Global Networks Foster Innovations in Rural Areas

Abstract

This paper deals with innovative entrepreneurs in rural areas, and the knowledge-related processes of business development in an institutionally thin region. It is well-known that businesses in peripheral areas benefit from extra-local knowledge flows. Here, we add to this literature through a focus on micro-businesses and through a fine-grained analysis of the interplay of different types of knowledge throughout the stages of the innovation biography. We present findings from three explorative case studies from the rural northeast of Germany. The results show that extra-local knowledge sparks the seed innovative idea and is important in marketing the final craft-product, but local ties are relevant in the actual production process. We conclude that global knowledge flows are conducive to innovation processes even of micro-businesses in peripheral areas. Therefore, rural development should not focus exclusively on fostering local networks.JEL Codes: O31, R11