Jesper Lindgaard Christensen

The strategic importance of location: Location decisions and the effects of firm location on innovation and knowledge acquisition

Classical and neo-classical location theory prescribes the choice of firm location to be guided by cost factors and infrastructure in the region. These cost reducing factors may lead firms to localize close to main customers or suppliers thus reducing cost of interfirm transactions by this proximity. Another parameter may be that co-locating firms may benefit from access to shared resources like infrastructure, and a local, specialized labour market. Location of traditional production activities might to a large extent still be determined by cost factors and other traditional location factors, such as mentioned above, as well as in the paper by Doeringer et al. in this issue. The recent trend of outsourcing production to low cost Asian countries, especially China, is an indication of this. Additionally, it has been argued that although logistics and transportation technologies have improved immensely, the complexity of logistics has increased, as has the demand for speedy and frequent deliveries (McCann & Sheppard, 2003). Just-in-time manufacturing and distribution accentuates this. There is empirical evidence showing that at the aggregate level transportation costs as a share of total output have truly decreased substantially. But disaggregating the data shows that the fall in costs is accounted for by industries where frequencies of transactions have remained constant over time, typically mature industries like raw materials, agricultural products and some manufacturing products (Hummels, 1999; Glaeser, 1998). This indicates that there is still a role to play for traditional location theory in explaining how firms locate especially in these types of

An NSI in Transition? Denmark

This major book presents case studies of ten small country national systems of innovation (NSIs) in Europe and Asia, namely, Denmark, Finland, Hong Kong, Ireland, the Netherlands, Norway, Singapore, South Korea, Sweden and Taiwan. These cases have been carefully selected as examples of success within the context of globalization and as ‘new economies’ where competition is increasingly based on innovation.

The Development of Geographical Specialization of Venture Capital

Many regions have realized that access to capital is an important prerequisite for establishment and growth of businesses, and have therefore focused policies to ensure an adequate supply of risk capital. The growth of the venture capital industry in the 1990s put pressure on venture capital firms (VCFs) to act more strategically. Many VCFs have thus specialized along one or more dimensions: certain industries, stages of development of the firm, or geographical areas. A theoretical dichotomy is developed in this paper to explain regionally focused venture capital. A competence-based theoretical view sees increased competition in the industry as promoting the growth of geographical specialization, while, according to financial theory, it would lead to diversification in order to spread risk. The empirical analysis illustrates the development in the average distance between VCFs and their Danish portfolio firms. All venture capital investments are included. Findings suggest that the process of geographical specialization follows an inverted V-shaped curve. This is interpreted in light of the developments in competition and in the competencies in the market. VCFs search broadly for investment opportunities in the first phase of the emergence of the venture capital industry, but when competition increases they tend to confine themselves to investments within a closer geographical distance. The implications of these findings are important both for funds-of-funds, regional governments, and VCFs.Many regions have realized that access to capital is an important prerequisite for establishment and growth of businesses, and have therefore focused policies to ensure an adequate supply of risk capital. The growth of the venture capital industry in the 1990s put pressure on venture capital firms (VCFs) to act more strategically. Many VCFs have thus specialized along one or more dimensions: certain industries, stages of development of the firm, or geographical areas. A theoretical dichotomy is developed in this paper to explain regionally focused venture capital. A competence-based theoretical view sees increased competition in the industry as promoting the growth of geographical specialization, while, according to financial theory, it would lead to diversification in order to spread risk. The empirical analysis illustrates the development in the average distance between VCFs and their Danish portfolio firms. All venture capital investments are included. Findings suggest that the process of geographical specialization follows an inverted V-shaped curve. This is interpreted in light of the developments in competition and in the competencies in the market. VCFs search broadly for investment opportunities in the first phase of the emergence of the venture capital industry, but when competition increases they tend to confine themselves to investments within a closer geographical distance. The implications of these findings are important both for funds-of-funds, regional governments, and VCFs.

Patterns and Collaborators of Innovation in the Primary Sector: A Study of the Danish Agriculture, Forestry and Fishery Industry

Based upon a large-scale survey and case studies of innovation we explore patterns of innovation activities in the Danish agricultural, forestry and fishery industries. Our primary focus areas are the sources and capabilities of innovation. We demonstrate that despite the fact that this industry is often regarded as low-tech there are still substantial innovation activities going on. Around 23 per cent of the 640 firms surveyed had product and/or process innovation, 24 per cent had other types of innovation. A total of 46 per cent had some type of innovation. Firms delivering directly to end-users were more likely to be innovative than those delivering to the processing or wholesale links of the value chain. Many of the innovative firms had no collaboration on innovation, and respondents generally claim that stimuli for innovation were primarily internal. We also demonstrate that the industry has a very well developed extended knowledge base, which is a vital source of information and knowledge for innovation. This may explain why traditional survey instruments do not fully capture the external sources of innovation.

Should government support business angel networks? The tale of Danish business angels network

Policies promoting informal venture capital generally and business angel networks (BANs) in particular have gained increased attention in recent years. As a consequence, BANs are now widespread across Europe. However, there continues to be a debate whether BANs should be supported with public money. This article discusses the possible rationale for governments to support BANs and what criteria to apply when evaluating such networks. The article is based on an in-depth observation study of the whole life cycle of a national BAN – the Danish Business Angel Network (DBAN) – and a comparison with a similar national angel network in Wales. Results show that applying traditional evaluation criteria for assessing BANs may provide only a partial picture. DBAN was squeezed between political pressures, impatience and lack of understanding of the broader benefits of an angel network. It was therefore left to die. This contrasts Wales where Xenos was shown more patience and persistence and it was rapidly integrated into the investment community. The implication is that lack of consistent funding, even in economic downswings, may erase the position and awareness of BANs in the capital markets. When governments consider whether to provide continuing support to BANs they should evaluate not only their immediate effectiveness but also whether BANs should be considered a part of the general small business support infrastructure.Policies promoting informal venture capital generally and business angel networks (BANs) in particular have gained increased attention in recent years. As a consequence, BANs are now widespread across Europe. However, there continues to be a debate whether BANs should be supported with public money. This article discusses the possible rationale for governments to support BANs and what criteria to apply when evaluating such networks. The article is based on an in-depth observation study of the whole life cycle of a national BAN -- the Danish Business Angel Network (DBAN) -- and a comparison with a similar national angel network in Wales. Results show that applying traditional evaluation criteria for assessing BANs may provide only a partial picture. DBAN was squeezed between political pressures, impatience and lack of understanding of the broader benefits of an angel network. It was therefore left to die. This contrasts Wales where Xenos was shown more patience and persistence and it was rapidly integrated into the investment community. The implication is that lack of consistent funding, even in economic downswings, may erase the position and awareness of BANs in the capital markets. When governments consider whether to provide continuing support to BANs they should evaluate not only their immediate effectiveness but also whether BANs should be considered a part of the general small business support infrastructure.

INTRODUCTION: PRODUCT INNOVATION – ON WHY AND HOW IT MATTERS FOR FIRMS AND THE ECONOMY

The aim of this book is to contribute to the understanding of product innovation – how it takes place and how it affects the economy. Our analysis of product innovation links it to interactive learning and to the performance of firms. On the basis of unique data sets and detailed case studies we study the interconnections between these three elements from different angles. We believe that the book will prove helpful for managers, employees and policy makers as well as for all those in academia who wants to understand the role of product innovation in the economy.

Innovation policy: how can it best make a difference?

Research has documented the impact of innovation on industrial and wider economic development (Fagerberg, Srholec, and Verspagen 2010) and today innovation policy is invariably linked to economic growth in general (OECD 2007) and long-term, sustainable growth in particular (OECD 2010; European Commission 2015). Innovation policy is now discussed as a separate policy and academic field (Christensen and Fagerberg 2016) but it is important to bear in mind that the discussion on a proactive or reactive innovation policy is also part of a current, broader discussion on the role of the state; to what extent the state should intervene; and if it should have an initiating or a supporting role. The development towards understanding how the innovation process unfolds and which factors influence innovation has had an impact on innovation policy. This regards not only the often discussed implications of moving from an understanding of innovation as a linear process towards a more systemic and interactive model (Lundvall 2007; Edquist 2011, 2014), but also that innovation is now embedded in a different context than it was previously. Nevertheless, holistic innovation policies have relatively low status and legitimization compared to other, more established policies (Edquist 2014). Moreover, the scope and scale of problems that innovation is expected to address have expanded. Societal challenges like climate change have e.g. been seen as something that will come closer to a solution by way of introducing more innovation into the energy production and consumption (Criscuolo and Menon 2015). The papers included in this issue contribute various answers to the question of how innovation policy can best make a difference.

Facilitating Cluster Evolution in Peripheral Regions: The Role of Clusterpreneurs

In the last decades cluster initiatives1 and cluster policy have become central features of policy promoting growth at regional, national, and European level. Many regional and national government’s policies aim at imitating successful clusters in the belief that their local areas may also capture the benefits of new high-technology firm formation and expected economic growth (Cooke, 2001a; Feldman et al., 2005) despite the fact that there is little empirical evidence to support a rationale for such policy, as the link between clustering and economic performance remains under-studied (Stuart and Sorenson, 2003; Maine et al., 2010). Both academic models (Brenner, 2004) and a number of consultant-made guidelines, even guidebooks (such as DTI, 2004; Rosenfeld, 2002), have been developed to assist the policy decision process.2 This promotion of high-tech clusters is not confined to urban areas but also often takes place in peripheral regions, such as in the example studied in this chapter, the possible development of a biomedical cluster in the region of North Jutland in Denmark.

Knowing Where to Go: The Knowledge Foundation for Investments in Energy Innovation

Energy policies around the world are increasingly focussed on promoting the transition towards a more sustainable energy system. Evidence-based decision-making regarding such policies need a solid knowledge foundation. We take stock of our existing knowledge in terms of the statistics and data that forms the basis for research, policy and business decision making regarding investments in the energy sector. The available measurement techniques and data on energy production and investments inform such debates, yet we call for improvements. A number of challenges relate to a true identification of the sector, the measurement of technological change and industry dynamics, and a comprehensive overview of the investments and investors in this sector. We argue that especially activities and barriers regarding investments and investors should be thought into the knowledge foundation we need for wise decision-making. This information is important not only in a research and policy context, but also for practical reasons. Potentially, the quality and amount of statistics may create virtuous or viscous cycles of investment behaviour because investment areas only covered by weak statistical evidence may receive limited attention from investors, which may in turn render fewer incentives for producing better statistics.

The Small, the Young and the Innovative. A Panel Data Analysis of Constraints on External Innovation Financing

This article investigates how access to external financing for innovation activities is affected by firm-specific structural, behavioral and outcome characteristics. External financing represents a critical factor in determining industrial evolution and technical change as well as firms ability to survive, grow, and engage in innovative activities. Some characteristics of firms particularly associated with innovative and entrepreneurial ventures driving technological change are said to cause information asymmetries between financiers and finance seekers, making them less likely raise necessary external capital to fund innovation projects. Yet, there is little known about how different combinations of these characteristics affects their access to external financing and how contextual factors matter. Deploying a two-stage Heckman probit model on a panel data set spanning the period 2000-2013 and covering 1,169 Danish firms, we test hypotheses derived from the literature regarding the impacts of firms structural, behavioral and outcome characteristics on the firms likelihood to get constrained in their access to external innovation finance. In line with earlier research we find that indeed the type of innovation matters for the access to external finance, but in a more nuanced way than generally portrayed. While incremental innovation activities have little negative effect on the access to external finance, radical innovation activities tend to be penalized by capital markets.The access to external finance often represents a critical factor determining a firm?s ability to survive, grow and engage in innovative activities. This study attempts to enrich existing research by investigating the effects of the recent financial crisis as well as the demand side on the access to external finance. Whereas most previous literature has used ad-hoc, cross-sectional survey data or rough innovation indicators like R&D-expenditures, we use a longitudinal data set that spans 13 years covering 1397 unique firms and has consistent questioning and methodology. We test hypotheses derived from the literature that point to characteristics of firms such as their age, size, innovativeness may impact both their demand and their likelihood of being financially constrained. Overall we do confirm that such characteristics matter to demand and constraints, however, there are also indications in the results that modify and reject such a priori assumptions. Specifically, we find evidence that the effect of innovation per se on capital demand and supply is not uniform in, but rather interdependent with other firm characteristics. We furthermore find the type of innovation to matter. While incremental innovation is usually rewarded by financers, the results for more radical or technology based innovations are more ambiguous. We attribute these findings to the fact that financiers apparently are able to cope with asymmetries of information and other reasons for credit rationing in a small, dense region where innovation activities are primarily incremental and non-science based.