When Local Interaction Does Not Suffice: Sources of Firm Innovation in Urban Norway

Abstract

The geographical sources of innovation of firms have been hotly debated. While the traditional view is that physical proximity within city-regions is key for the innovative capacity of firms, the literature on ‘global pipelines’ has been stressing the importance of establishing communication channels to the outside world. This paper uses a specifically tailored survey of the level of innovation of 1604 firms of more than ten employees located in the five largest Norwegian city-regions (Oslo, Bergen, Stavanger, Trondheim, and Kristiansand) in order to determine (a) the geographical dimension of the sources of innovation, and (b) the factors behind the propensity to innovate in Norwegian firms. The results stress that, while interaction with a multitude of partners within Norwegian city-regions or with other national partners has a negligible effect on firm innovation, those firms with a greater diversity of international partners tend to innovate more and introduce more radical innovations. The results also highlight that the roots of this greater innovative capacity lie in a combination of firm (size of firms, share of foreign ownership, and sector) and cultural (the level of open-mindedness of managers) characteristics.