Abstract/Summary

We identify and measure the returns to regional, national and international knowledge collaboration for innovation in firms with different productivity levels. Drawing on the unbalanced panel of 17,859 innovative firms in the United Kingdom during 2002–2014, we find that the least productive firms are more likely to achieve higher returns from knowledge collaboration regionally, while the most productive firms that collaborate regionally limit their innovation. Knowledge collaboration with partners nationally increases innovation sales and propensity to innovate in both the least and most productive firms. High productivity firms have higher returns from knowledge collaboration with European and international partners, unlike the least productive firms. Firms that experience greater market risks are able to appropriate innovation outputs, invest in R&D and digital capabilities and are exporters have higher propensity to innovate and grow their innovation output. Firm productivity and geography of knowledge collaboration as two boundary conditions shaping firm’s innovation.