Innovative Companies' Survival and The Region - Isn't it just being there?

At least since Schumpeter published his work ‘The Theory of Economic Development’ (1912), a wide body of literature has focused on the evolutionary process behind firm growth and survival. Recently a growing interest is devoted to the variable ‘location’ as a critical factor, shaping firm performance. However, less attention has been paid to the region-specific characteristics that may play a relevant role in determining the growth and survival of a firm. Some works see university-based knowledge spillovers as one such factor (Audretsch and Lehmann 2005, Cassia et al. 2009). We extend this approach to the regional innovator network (RIN), promoting region-specific knowledge spillovers. RINs can be defined as networks that are built up by actors which cooperatively engage in the creation of new ideas and then economize the results (Cantner and Graf 2007). This economization can be realized within an existing firm or by the formation of a new venture. We focus in this paper on new ventures and investigate the influence a RIN has on their performance. If a new venture is connected to a well functioning RIN, knowledge spillovers may result in new ideas, promoting firm’s survival. Moreover, it is not irrelevant to which network a firm is connected since RINs may have different network characteristics. This paper intends to analyze those hypotheses theoretically and to test them empirically. Two data bases are used. First, patent data delivers RINs for all Thuringian sub-regions. The second data base we use contains information on innovative ventures founded in the period between 1990 and 2006, drawn from the register for commercial and private companies in Thuringia. Preliminary results for the innovator network of Jena show that there is a significant influence of the connection to the RIN of Jena on the survivability of Thuringian firms. Additionally, we find that the effect is promoted by regional proximity. Moreover, the effect is increasing until the eighth year and decreases afterwards until it vanishes. This result may confirm studies which found that there is a significant influence of social capital at the early stages of a firm’s life.