Research, Knowledge and Open Innovation: Spatial Impacts upon Organisation

This paper reports elaboration and testing of a new theoretical approach to understanding economic development. The focus is on micro-economic geography, informed by theoretical insights on spatial monopoly, on the knowledge capabilities of firms and their networks, and on ‘open innovation’. Sectors in focus are ICT and Biotechnology. Typically in the past, in-house research and innovation in these sectors, like others, used to be the norm for large corporations. However, during the 1990s it became clear that a significant shift in location of R&D by large firms was occurring through outsourcing to smaller, specialist research-intensive firms and public research organisations (PROs). These research suppliers were often co-located not in metropolitan centres but, for example, university towns. Although economists noted the phenomenon of what is nowadays termed ‘open innovation’ they failed to offer any analysis of its economic geography. This is an important lacuna since it leaves undecided which are the beneficiary regions, what specific knowledge assets they combine, and whether ‘economic governance’ may assist in broadening the spatial domain of such knowledge advantage. Results of this research reported here suggest the hypothesised processes can be observed in UK ICT and biotechnology and that advantage accrues to collaborating but not always to geographically proximate firms. There are important sectoral variations as well as some similarities in this between UK ICT and biotechnology firm practices.