Spatial diffusion of industrial innovation and regional development

Industrial innovation has long been recognized as a major agent in fostering regional economic growth. Thus the objective of the study was to identify the factors responsible for the spatial diffusion of industrial innovation and to examine the effect of innovation on regional development in Israel and in Germany. The desire to develop peripheral regions exists in many countries throughout the world. In Israel, this des ire has been translated into public policies whose aim is to develop the Northern Galilee and Southern Negev regions. In Germany, government programs in the form of investment allowances and the development of industry-related infrastructures were designed in order to promote the economic growth of lagging regions. We hypothesized that innovation is more prevalent in a group of fastest-growing industries (FGI) than in a group of slower-growing industries Thus, the first task was to identify FGIs in the two countries - Germany and Israel The second task was to collect data from a randomly selected sampie of industrial plants. Altogether, more than 400 industrial plants belonging to the fastestgrowing industrial branches (electronics, metals, and plastics) in both countries were included In the study. These industrial plants are located in three distinct geographical areas: center, intermediate, and peripheral. In the last stage, in order to test the hypotheses that the expenditure on R&D, the percentage of highly skilled labor, a firm's size and age as weH as its location and local milieu atfect the probability of the firm to innovate (regardless of the industrial branch to which it belongs), we employed simple statistical models, along with more complex, multivariate, discrete-choice models (Logit-type models). In general, there exists a strong similarity in the frequency of industrial innovation in both countries: i.e., the rate of innovation in hi-tech firms is statistically and significantly higher than that found in "traditional" firms. On the other hand, the pattern and spatial variations in the rate of innovation in Israel is much more pronounced and visible than in Germany. In Israel, as one progresses from the center toward the periphery, the rate of innovation, among all firms, gradually and systematically diminishes. A final workshop was held at the Interdisciplinary Institute for Applied Cultural Science at the University of Karlsruhe, Karlsruhe, Germany, on December, 17, 1998. Here the researchers presented the findings of the study, and a very interesting and penetrating discussion ensued. The study, methodology, results, and conc1usions were all very well received. The workshop conc1uded with a call for a continuation of research in line with the current study.