Firms’ knowledge search and local knowledge externalities in innovation performance

Stephen Roper, James H. Love*, Karen Bonner

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


We use an augmented version of the UK Innovation Surveys 4–7 to explore firm-level and local area openness externalities on firms’ innovation performance. We find strong evidence of the value of external knowledge acquisition both through interactive collaboration and non-interactive contacts such as demonstration effects, copying or reverse engineering. Levels of knowledge search activity remain well below the private optimum, however, due perhaps to informational market failures. We also find strong positive externalities of openness resulting from the intensity of local interactive knowledge search—a knowledge diffusion effect. However, there are strong negative externalities resulting from the intensity of local non-interactive knowledge search—a competition effect. Our results provide support for local initiatives to support innovation partnering and counter illegal copying or counterfeiting. We find no significant relationship between either local labour quality or employment composition and innovative outputs.

Original languageEnglish
Pages (from-to)43-56
Number of pages14
JournalResearch policy
Issue number1
Early online date29 Oct 2016
Publication statusPublished - 1 Feb 2017

Bibliographical note

© 2016 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY license(


  • externalities of openness
  • innovation
  • local knowledge system
  • UK


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