Abstract/Summary

This study demonstrates the importance and limits to external knowledge collaboration across different geographical dimensions and the most innovative UK industries(knowledge-intensive business services (KIBS), high-tech manufacturing, information and communication technologies (ICT), creative industries). Traditionally, this issue has presented a challenge for the geography of innovation, external knowledge sourcing and open innovation literatures, in terms of first identifying the phenomenon and second measuring it. We propose and estimate a structural model that estimates the knowledge production function with innovation inputs and outputs at the firm level. Our sample includes 19,510 observations and 17,859 firms, mainly from the UK Innovation Survey and the Business Registry. We demonstrate that external collaboration may bestow a significant advantage for innovation developed by the firm and in collaboration with other businesses, but there are limits to collaboration. They are likely to be better offset by firms in knowledge-intense sectors (KIS), while they remain consistent across collaboration with partners across four geographical regions. Our findings call for further research on innovation and revision of national and regional innovation policies.