Building innovative capacity in regional entrepreneurship and innovation (eco)systems: Startups versus incumbent firms

Abstract

This article studies how three sets of regional factors—knowledge, agglomeration, and openness—impact and interact differently with startups and incumbent firms in their innovative capacity building. Based on a large dataset of Chinese high-tech firms, regression analysis shows that the speed of growing startup innovative capacity relies positively on regional knowledge stock and localization economies. In addition to regional knowledge stock, incumbent innovative capacity building benefits from urbanization economies and regional openness. Favorable regional factors, including the presence of universities and the clustering of knowledge-intensive peers, also enable startups (but not incumbents) to leverage internal knowledge assets into their innovative capacity. The results suggest that it is not only the access to the external knowledge environment but also proactive endeavors to cross-fertilize between internal and external knowledge that underlie the eco-systemic nature of startup innovative capacity building.