Agglomeration Externalities in National Systems of Innovation: The Role of Industrial Diversity and Competition on Countries’ Innovative Levels

Duarte, Marcelo Pereira; Carvalho, Fernando Manuel Pereira de Oliveira; Ferreira, Manuel; Ferreira, Manuel Portugal

http://hdl.handle.net/10400.8/14838

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Authors

Duarte, Marcelo Pereira

Carvalho, Fernando Manuel Pereira de Oliveira

Ferreira, Manuel

Ferreira, Manuel Portugal

Abstract(s)

Economic geographers, industrial economists and innovation scholars have long debated the impact of agglomeration externalities on innovation, often with conflicting results. We argue that rather than focusing on which agglomeration externality most influences innovation, we should gain a deeper understanding of how agglomeration externalities influence innovation. Drawing on the concept of national systems of innovation (NSI), we examine the role of industrial diversity and domestic competition as contingency factors that affect the relationship between national innovation inputs and outputs. Using secondary data from 86 countries, we developed interaction models, and our findings indicate that industrial diversity positively influences the relationship between innovation inputs and outputs. Additionally, we found that the relationship between innovation inputs and outputs is strengthened at higher levels of diversity and competition. Also, the positive effects of institutions on innovation outputs increase with high industrial diversity and medium to high domestic competition. Similarly, the positive marginal effect of human capital and research on innovation outputs is strengthened by increasing industrial diversity, although a medium-low level of competition can undermine this effect. This study contributes to the ongoing debate on agglomeration externalities and the NSI literature by highlighting the role of industrial diversity and competition in shaping national innovation outcomes.

Keywords

agglomeration externalities competition industrial diversity moderation analysis national systems of innovation

URI

http://hdl.handle.net/10400.8/14838

Citation

Duarte, M. P., Carvalho, F. M. P. D. O., & Ferreira, M. P. (2025). Agglomeration Externalities in National Systems of Innovation: The Role of Industrial Diversity and Competition on Countries’ Innovative Levels. SAGE Open, 15(1), 21582440251316935.