Innovation, scaling-up, and local development in peripheral regions: do establishments scale-up locally?

Abstract A growing number of researchers suggest that there is no necessary connection between local firm-level innovation and local development. There are two connected arguments: first, many analysts suggest local innovation should be understood as a social and institutional process: from this perspective, just focusing on firms is too narrow. Second, regional economists view firms – especially innovative ones – as geographically mobile, tending to move away from regions which don’t offer them adequate support or resources. In this paper, we consider this second approach, exploring the degree to which innovators in peripheral regions purchase local services and scale-up their operations locally – two mechanisms that should connect firm-level innovation to local development. We find that peripheral innovators are more likely to use non-local services; their external expansion is also more likely to occur non-locally. If these results, obtained from cross-sectional analysis of a sparse data-set, are indicative of persistent processes, then they shed light on why firm-level innovation is disconnected from regional development in peripheral regions.