RoutledgeTaylorFrancisGroupEconomics of InnovationandNewTechnologyAOATechnolISSN:1043-8599(Print)1476-8364(Online)Journalhomepage:http://tandfonline.com/loi/gein20InternalandexternalfactorsininnovationpersistenceCristianoAntonelli,FrancescoCrespi&GiuseppeScellatoTo cite this article: Cristiano Antonelli,Francesco Crespi &Giuseppe Scellato (2013) Internaland external factors in innovation persistence,Economics of Innovation and New Technology,22:3,256-280,DOl:10.1080/10438599.2012.708135To link to this article: http://dx.doi.org/10.1080/10438599.2012.708135Published online: 02 Aug 2012.中8Submit your article to this journal C[.lil Article views: 603View related articles QCiting articles: 16 View citing articles FullTerms&Conditions ofaccess and usecanbefoundathttp:/tandfonline.com/action/journallnformation?journalCode=gein20Download by: [Wilfrid Laurier University]Date: 02 August 2016, At: 00:11
Full Terms & Conditions of access and use can be found at http://tandfonline.com/action/journalInformation?journalCode=gein20 Download by: [Wilfrid Laurier University] Date: 02 August 2016, At: 00:11 Economics of Innovation and New Technology ISSN: 1043-8599 (Print) 1476-8364 (Online) Journal homepage: http://tandfonline.com/loi/gein20 Internal and external factors in innovation persistence Cristiano Antonelli , Francesco Crespi & Giuseppe Scellato To cite this article: Cristiano Antonelli , Francesco Crespi & Giuseppe Scellato (2013) Internal and external factors in innovation persistence, Economics of Innovation and New Technology, 22:3, 256-280, DOI: 10.1080/10438599.2012.708135 To link to this article: http://dx.doi.org/10.1080/10438599.2012.708135 Published online: 02 Aug 2012. Submit your article to this journal Article views: 603 View related articles Citing articles: 16 View citing articles
EconomicsofInnovationandNewTechnology,2013RoutledgeVol.22,No.3,256280,http://dx.doi.org/10.1080/10438599.2012.708135InternalandexternalfactorsininnovationpersistenceCristiano Antonelliab, Francesco Crespib.c* and Giuseppe ScellatobdaDipartimento di Economia,Universita di Torino,Torino,Italy,bBRICK (BureauofResearch onInnovation,ComplexityandKnowledge),CollegioCarloAlberto,Torino,Italy;DipartimentodiEconomia,Universita Roma Tre,Rome,ItalyDipartimentodi Ingegneria Gestionale e dellaProduzione,Politecnico di Torino,Torino, Italy(Received14September2011;finalversionreceived25June2012)This paper contributes to the analysis of the persistence of innovation activities, asmeasured bytotal factor productivity (TFP),and explores its internal andextemal deter-minants stressing its path-dependent characteristics.The external conditions,namely thequality of local knowledge pools and the strength of the Schumpeterian rivalry, alongwith the internal conditions (the actual levels of dynamic capabilities, as proxied bywagelevels and firm size)exert a specific and localised effect upon the persistent intro-duction of innovations.Amultiple transition probability matrixes (MTPMs)approachhasbeen implemented tocapturethecontingenteffectsofexternal factorson long-terminnovation persistence.The empirical analysis of the dynamics of firm-level TFP forasampleofapproximately7000Italianmanufacturingcompaniesobservedduringtheyears1996-2005isbasedonboththe comparison of differenttransitionprobabilitymatrixes and on dynamic discrete choice panel data models.The evidence provided bythe test ofMTPMs in sub-periods suggests that innovation persistence is path-dependent,as opposedtopast-dependent.Keywords: knowledge cumulability;knowledge extermalities; innovation; persistence;sequential Markov chains; path dependence; TFPJELClassification:O31C23;C25;L201.IntroductionAccording to the conventional economic wisdom, innovation is an exogenous randomshock.The economics of innovationimpingesupontheviewthat innovation isthedeliberate and intentional result of the ability of firms togenerate newknowledge and to applyit to new products,processes, organisational methods, combinations of inputs and newmarkets (Nelson and Winter 1982; Dosi et al. 1988; Fagerberg, Mowery, and Nelson2005).This approach leads to two quite distinct explanations of innovation persistence. Thefirst, consistent with the resource-based theory of the firm, contends that innovation per-sistence is the result of intrinsic characteristics of the firm. Innovation capabilities are*Corresponding author.Email:crespi@uniroma3.it2013Taylor&Francis
Economics of Innovation and New Technology, 2013 Vol. 22, No. 3, 256–280, http://dx.doi.org/10.1080/10438599.2012.708135 Internal and external factors in innovation persistence Cristiano Antonellia,b, Francesco Crespib,c* and Giuseppe Scellatob,d aDipartimento di Economia, Università di Torino, Torino, Italy; bBRICK (Bureau of Research on Innovation, Complexity and Knowledge), Collegio Carlo Alberto, Torino, Italy; cDipartimento di Economia, Università Roma Tre, Rome, Italy; dDipartimento di Ingegneria Gestionale e della Produzione, Politecnico di Torino, Torino, Italy (Received 14 September 2011; final version received 25 June 2012) This paper contributes to the analysis of the persistence of innovation activities, as measured by total factor productivity (TFP), and explores its internal and external determinants stressing its path-dependent characteristics. The external conditions, namely the quality of local knowledge pools and the strength of the Schumpeterian rivalry, along with the internal conditions (the actual levels of dynamic capabilities, as proxied by wage levels and firm size) exert a specific and localised effect upon the persistent introduction of innovations. A multiple transition probability matrixes (MTPMs) approach has been implemented to capture the contingent effects of external factors on long-term innovation persistence. The empirical analysis of the dynamics of firm-level TFP for a sample of approximately 7000 Italian manufacturing companies observed during the years 1996–2005 is based on both the comparison of different transition probability matrixes and on dynamic discrete choice panel data models. The evidence provided by the test of MTPMs in sub-periods suggests that innovation persistence is path-dependent, as opposed to past-dependent. Keywords: knowledge cumulability; knowledge externalities; innovation; persistence; sequential Markov chains; path dependence; TFP JEL Classification: O31; C23; C25; L20 1. Introduction According to the conventional economic wisdom, innovation is an exogenous random shock. The economics of innovation impinges upon the view that innovation is the deliberate and intentional result of the ability of firms to generate new knowledge and to apply it to new products, processes, organisational methods, combinations of inputs and new markets (Nelson and Winter 1982; Dosi et al. 1988; Fagerberg, Mowery, and Nelson 2005). This approach leads to two quite distinct explanations of innovation persistence. The first, consistent with the resource-based theory of the firm, contends that innovation persistence is the result of intrinsic characteristics of the firm. Innovation capabilities are *Corresponding author. Email: crespi@uniroma3.it © 2013 Taylor & Francis Downloaded by [Wilfrid Laurier University] at 00:11 02 August 2016
257EconomicsofInnovationandNewTechnologytime-invariant endowments that display their effects.Innovation persistence isfully drivenby the initial allocation of innovation capabilities: firms are able to learn (Penrose 1959;Stiglitz1987;TeeceandPisano1994;LangloisandFoss1999).The second explanation posits that innovation persistence is a path-dependent processin which the probability of introducing an innovation at time t is influenced by the intro-duction of an innovation at time t -1. However, the transition probability might changeovertimebecause of the effects of contingent events and specifically because of changinglevels of knowledge externalities.Thegeneration of newknowledge and the introductionof innovations are the conditional results of a creative and localised reaction that occurswhen firms faceunexpected events inbothfactor and product markets.Some contextualand ever-changing conditions,however,arenecessarytomakethereaction creativesothatit leads to the introduction of an innovation, as opposed to an adaptation. In the latter case,the lack of contextual characteristics would enable firms to change techniques in a giveneetechnical space but would not lead to the introduction of a productivity-enhancing novelty(Schumpeter1947)To contend with unexpected events in factor and productmarkets and the subsequentout-of-equilibrium conditions, firms try and mobilise their internal stocks of knowledgethroughlearningprocesses.Theprobability that thefirm's reaction leads to the successfulintroductionofan innovationdependsonaccesstoavailableexternalknowledge.In otherwords, the firm's reaction to unexpected events becomes creative when the competenceaccumulated through internal learning processes and access to external knowledge poolscombine(Antonelli2008,2011)According tothis view,proximity,knowledge governanceand the communicationchannels that link firms might enhance the process of knowledge generation, favouringinteractions among agents with diverse knowledge bases. Indeed, firms cluster mainly forthese specific reasons(Swann, Prevezer, and Stout 1998; Baptista and Swann 1999).Long-distance coordination among agents andknowledge interactions can also berealised throughorganised proximity (Torre and Rallet 2005). In this context, knowledge governance mech-anisms and the characteristics of knowledge structureare particularly relevant (Quatraro2012)Beginning with the seminal contribution by Griliches (1979), a rich and detailed arrayof empirical studies confirm the pervasive role of technological spillover in favouring theeconomicperformances ofclusteredfirms in terms ofoutput,employment, labour produc-tivity and total factor productivity (TFP).The subsequent literature has interpreted theseempiricalfindings as reliableclues to assessing the positive effects ofknowledge externali-tiesonthe rate of introduction oftechnologicalchangesbyfirms thatare ableto use externalknowledge as an input in their own innovation processes (Acs, Anselin, and Varga 2002;Fritsch 2002, 2004; Fritsch and Franke 2004).Building on this literature, we advance the hypothesis that innovation persistence ispath-dependent, as opposed to past-dependent, because it is the result of not only theinternal characteristics offirms,astheresource-based theory ofthefirm claims,butalsothechangingcharacteristicsofthecontextinwhichfirmsarelocated.Knowledgeexternalitiesarestrictlynecessaryforfirmsreactionstobecomecreative.Whenandifthecharacteristicsof the context change,the results of the innovative effortalso change.Hence,innovationpersistence can no longerbe regarded as theresult of an intrinsic capability ofthefirm thatbehaves as an endowment,given once and lasting forever; rather, it should be regarded asthe conditional resultofa systemic and interactiveprocessthatkeeps changingovertime(Antonelli and Scellato, forthcoming)
Economics of Innovation and New Technology 257 time-invariant endowments that display their effects. Innovation persistence is fully driven by the initial allocation of innovation capabilities: firms are able to learn (Penrose 1959; Stiglitz 1987; Teece and Pisano 1994; Langlois and Foss 1999). The second explanation posits that innovation persistence is a path-dependent process in which the probability of introducing an innovation at time t is influenced by the introduction of an innovation at time t − 1. However, the transition probability might change over time because of the effects of contingent events and specifically because of changing levels of knowledge externalities. The generation of new knowledge and the introduction of innovations are the conditional results of a creative and localised reaction that occurs when firms face unexpected events in both factor and product markets. Some contextual and ever-changing conditions, however, are necessary to make the reaction creative so that it leads to the introduction of an innovation, as opposed to an adaptation. In the latter case, the lack of contextual characteristics would enable firms to change techniques in a given technical space but would not lead to the introduction of a productivity-enhancing novelty (Schumpeter 1947). To contend with unexpected events in factor and product markets and the subsequent out-of-equilibrium conditions, firms try and mobilise their internal stocks of knowledge through learning processes. The probability that the firm’s reaction leads to the successful introduction of an innovation depends on access to available external knowledge. In other words, the firm’s reaction to unexpected events becomes creative when the competence accumulated through internal learning processes and access to external knowledge pools combine (Antonelli 2008, 2011). According to this view, proximity, knowledge governance and the communication channels that link firms might enhance the process of knowledge generation, favouring interactions among agents with diverse knowledge bases. Indeed, firms cluster mainly for these specific reasons (Swann, Prevezer, and Stout 1998; Baptista and Swann 1999). Longdistance coordination among agents and knowledge interactions can also be realised through organised proximity (Torre and Rallet 2005). In this context, knowledge governance mechanisms and the characteristics of knowledge structure are particularly relevant (Quatraro 2012). Beginning with the seminal contribution by Griliches (1979), a rich and detailed array of empirical studies confirm the pervasive role of technological spillover in favouring the economic performances of clustered firms in terms of output, employment, labour productivity and total factor productivity (TFP). The subsequent literature has interpreted these empirical findings as reliable clues to assessing the positive effects of knowledge externalities on the rate of introduction of technological changes by firms that are able to use external knowledge as an input in their own innovation processes (Acs, Anselin, and Varga 2002; Fritsch 2002, 2004; Fritsch and Franke 2004). Building on this literature, we advance the hypothesis that innovation persistence is path-dependent, as opposed to past-dependent, because it is the result of not only the internal characteristics of firms, as the resource-based theory of the firm claims, but also the changing characteristics of the context in which firms are located. Knowledge externalities are strictly necessary for firms’ reactions to become creative. When and if the characteristics of the context change, the results of the innovative effort also change. Hence, innovation persistence can no longer be regarded as the result of an intrinsic capability of the firm that behaves as an endowment, given once and lasting forever; rather, it should be regarded as the conditional result of a systemic and interactive process that keeps changing over time (Antonelli and Scellato, forthcoming). Downloaded by [Wilfrid Laurier University] at 00:11 02 August 2016
258C.Antonellietal.Thepresent paperbuilds on therecognition thatexternal technologicalknowledge repre-sentsan augmentingandfacilitatingfactorintheintroductionoftechnological innovationsand extends this concept by arguing that external knowledge is a keyfactor in determiningapath-dependentinnovationpersistencecharacterisedbycontextual andconditionalrecur-sive feedbacks. The paper elaborates the hypothesis that the introduction of innovations isthe persistent,emerging property ofan economic system characterised by knowledge cumu-lability and complementarity,both inside and outside offirms.Indeed,the introduction ofnewtechnologies and new organisational methods affects the system in two ways: it engen-ders further series of unexpected events and Schumpeterian rivalry and makes availablenewknowledge spillovers that add to the existing stock of external knowledge.Knowledge cumulability consists of the inter-temporal, diachronic indivisibility ofknowledge.Itis well-known that the arrovian economics ofknowledge assumes that knowl-edge is characterised by indivisibility and non-exhaustibility.Knowledge vintages add onand build up a stock of knowledge that is not exhausted because of repeated use.Indivisibilitymanifests in cumulability and complementarity among the different unitsofknowledge.Inparallel totheunits of knowledgethatareinternallypossessedby eachagent,external units of knowledge possessedby other agents also play a central role.Thegeneration of newknowledge is possibleonlyby‘standing on the shoulders of giants',thatis, through access to and use of the existing stock ofknowledge.The existing knowledgebase, however, is located both inside each firm and in the other agents that belong to thesamesystem (ColombelliandvonTunzelmann2011).As Peter Swann has convincingly shown,the structure of the system changes endoge-nouslybecauseofthe changing modes of interaction amongfirms,their entry and exitand their growth.The introduction of innovations is itself a major factor of change in thearchitecture of the system.The external conditions in which firms are embedded are simul-taneouslya consequenceanda cause oftherecursivefeedback that supports thepersistenceofinnovation activities (Swann, Prevezer,and Stout1998;Baptista and Swann 1998,1999;Beaudryand Swann2009)Internalandexternalknowledgecumulabilityaffectthedynamicsofeconomicprocessesbecause the knowledge base that each firm can access and use internally and externallyshapes the probability of the generation of new knowledge. Such effects can change overtime because the rates ofaccumulation and the conditions of access are notfixed. Inventionsand scientific breakthroughs can make some portions of the stock ofknowledge obsolete.Changes in the structure of interactions and transactions can modify access to externalknowledge.As such, the effects of internal and external knowledge cumulability are typi-cally path-dependent ratherthan past-dependent. In theformer case, the effects ofhysteresisare qualified and shaped bythe contingentchanges that occur in theprocess.In thelattercase, the process is shaped by the initial conditions only.The dynamics of the process areinfluenced by a weak irreversibility that allows changes in the process to alter both therate and the direction of the dynamics with typical path-dependent effects (David 1997,2007).With this approach in the background, the aim of this work is threefold. First, we con-tribute to the literature on the persistence of innovation by providing an empirical analysisbased onTFP measures.Second,wequalifythecharacteristicsof thispersistenceandexplore its external determinants by specifically examining the role of regional contextand the characteristics of the product markets in shaping this process. Third, we discuss indetail the methodological and theoretical implications of theuse of TPMs with reference toMarkovchains theory
258 C. Antonelli et al. The present paper builds on the recognition that external technological knowledge represents an augmenting and facilitating factor in the introduction of technological innovations and extends this concept by arguing that external knowledge is a key factor in determining a path-dependent innovation persistence characterised by contextual and conditional recursive feedbacks. The paper elaborates the hypothesis that the introduction of innovations is the persistent, emerging property of an economic system characterised by knowledge cumulability and complementarity, both inside and outside of firms. Indeed, the introduction of new technologies and new organisational methods affects the system in two ways: it engenders further series of unexpected events and Schumpeterian rivalry and makes available new knowledge spillovers that add to the existing stock of external knowledge. Knowledge cumulability consists of the inter-temporal, diachronic indivisibility of knowledge. It is well-known that the arrovian economics of knowledge assumes that knowledge is characterised by indivisibility and non-exhaustibility. Knowledge vintages add on and build up a stock of knowledge that is not exhausted because of repeated use. Indivisibility manifests in cumulability and complementarity among the different units of knowledge. In parallel to the units of knowledge that are internally possessed by each agent, external units of knowledge possessed by other agents also play a central role. The generation of new knowledge is possible only by ‘standing on the shoulders of giants’, that is, through access to and use of the existing stock of knowledge. The existing knowledge base, however, is located both inside each firm and in the other agents that belong to the same system (Colombelli and von Tunzelmann 2011). As Peter Swann has convincingly shown, the structure of the system changes endogenously because of the changing modes of interaction among firms, their entry and exit and their growth. The introduction of innovations is itself a major factor of change in the architecture of the system. The external conditions in which firms are embedded are simultaneously a consequence and a cause of the recursive feedback that supports the persistence of innovation activities (Swann, Prevezer, and Stout 1998; Baptista and Swann 1998, 1999; Beaudry and Swann 2009). Internal and external knowledge cumulability affect the dynamics of economic processes because the knowledge base that each firm can access and use internally and externally shapes the probability of the generation of new knowledge. Such effects can change over time because the rates of accumulation and the conditions of access are not fixed. Inventions and scientific breakthroughs can make some portions of the stock of knowledge obsolete. Changes in the structure of interactions and transactions can modify access to external knowledge. As such, the effects of internal and external knowledge cumulability are typically path-dependent rather than past-dependent. In the former case, the effects of hysteresis are qualified and shaped by the contingent changes that occur in the process. In the latter case, the process is shaped by the initial conditions only. The dynamics of the process are influenced by a weak irreversibility that allows changes in the process to alter both the rate and the direction of the dynamics with typical path-dependent effects (David 1997, 2007). With this approach in the background, the aim of this work is threefold. First, we contribute to the literature on the persistence of innovation by providing an empirical analysis based on TFP measures. Second, we qualify the characteristics of this persistence and explore its external determinants by specifically examining the role of regional context and the characteristics of the product markets in shaping this process. Third, we discuss in detail the methodological and theoretical implications of the use of TPMs with reference to Markov chains theory. Downloaded by [Wilfrid Laurier University] at 00:11 02 August 2016
259Economics of Innovation and NewTechnologyThe remainder of the paper is structured as follows.Section 2 reviews the literature onthis matter. Section 3 outlines the hypotheses and the research design of this study. Section4presentstheeconometricevidence.Theconclusionsummarisesthemainresults2.Priorresearchon innovationpersistenceIn a special issueof theInternational Journal of Industrial Organizationdedicated totheeconomicsofpathdependence,Malerba,Orsenigo,and Petretto(1997)pavethewayto theanalysis of the persistence of innovation activities now explored by a growing literature,which is synthesised in Table 1.Earlier studies can be grouped into two subsets: those that build on the analysis oflargesamples of patents and empirical studies that use data from innovation surveys.The persis-tence of innovation has been addressed by studying various factors,such as technologicalspecialisation(Malerba,Orsenigo,andPetretto1997),cross-countryandcross-sectorevo-lution (Cefis and Orsenigo 2001; Raymond et al.2010; Clausen et al.2012), the empiricalproperties of thedistribution of persistence(Cefis 2003)and thediversetypologiesof inno-vative activities (Roper and Hewitt-Dundas 2008; Martinez-Ros and Labeaga 2009; Peters2009;LeBas,Mothe,andNguyen2011;Antonelli,Crespi,and Scellato2012)Some convergentconclusions appeartohavebeen reached byprevious studies,althoughtheyhaveemergedfromdifferentcontexts.Inparticular,bothinnovatorsandnon-innovatorsshowed a strong tendencyto remain within their states.The evidence shows that the degreeof persistence varies according to the innovation indicator adopted (Duguet and Monjon2004).While the works that have used patents as indicators suggest that persistence isweak, exhibiting strong values only in the case oftop patentees,empirical analyses basedon surveydatafound strongerevidence of innovation persistence.Several factorshavebeen associatedwiththepresenceofpersistenceininnovativeactivities.Among thesefactors,firm size,profitabilityand theintensityofR&D activitieswere shown to be crucial, confirming the hypothesis that theaccumulation of knowledgeovertimetendstoinduceastatedependencein innovativebehaviourandthattheavailabilityof internal funds enhances the ability to continuously engage in innovation (Cefis andCiccarelli 2005; Lathamand Le Bas2006; Peters2009).The evidence suggesting that R&D-based innovation activities tend to be associatedwith higher persistence appears to be of particular importance because it helps to explaintwo important results emerging from the previous literature.First, several contributionshighlighted that innovation persistence is stronger in high-tech, science-based industrieswhereR&Dactivitiesareconcentrated (Raymond etal.2010;Clausen etal.2012).Sec-ond,when different innovation output indicators havebeen considered,product innovationwhich is very often linked to R&D investments (Crespi and Pianta 2007),tends to becharacterised by higher persistence than process innovation (Martinez-Ros and Labeaga2009; Antonelli,Crespi, and Scellato 2012).In thisrespect,the complementarities amongdifferent types of innovation activities emerged as crucial in shaping different patterns ofpersistence (Clausen et al. 2012; Antonelli, Crespi, and Scellato 2012), including the caseoforganisational innovation.In thereviewedstudies,attention hasbeenpaidprimarilytointernalfactorsthatconsiderpersistencetobetheresultoffirmcharacteristics,whiletheroleofexternalknowledgeandlocal context in shaping innovation persistence is almost totally neglected. In this respect,our paper adds totheprevious literaturebecause itis thefirst attemptto consider exter-nal factors in determining innovationpersistence.Building onprevious analyses showingthat successful innovative activity ismore likelyto occur within strong industrial regions
Economics of Innovation and New Technology 259 The remainder of the paper is structured as follows. Section 2 reviews the literature on this matter. Section 3 outlines the hypotheses and the research design of this study. Section 4 presents the econometric evidence. The conclusion summarises the main results. 2. Prior research on innovation persistence In a special issue of the International Journal of Industrial Organization dedicated to the economics of path dependence, Malerba, Orsenigo, and Petretto (1997) pave the way to the analysis of the persistence of innovation activities now explored by a growing literature, which is synthesised in Table 1. Earlier studies can be grouped into two subsets: those that build on the analysis of large samples of patents and empirical studies that use data from innovation surveys. The persistence of innovation has been addressed by studying various factors, such as technological specialisation (Malerba, Orsenigo, and Petretto 1997), cross-country and cross-sector evolution (Cefis and Orsenigo 2001; Raymond et al. 2010; Clausen et al. 2012), the empirical properties of the distribution of persistence (Cefis 2003) and the diverse typologies of innovative activities (Roper and Hewitt-Dundas 2008; Martínez-Ros and Labeaga 2009; Peters 2009; Le Bas, Mothe, and Nguyen 2011; Antonelli, Crespi, and Scellato 2012). Some convergent conclusions appear to have been reached by previous studies, although they have emerged from different contexts. In particular, both innovators and non-innovators showed a strong tendency to remain within their states. The evidence shows that the degree of persistence varies according to the innovation indicator adopted (Duguet and Monjon 2004). While the works that have used patents as indicators suggest that persistence is weak, exhibiting strong values only in the case of top patentees, empirical analyses based on survey data found stronger evidence of innovation persistence. Several factors have been associated with the presence of persistence in innovative activities. Among these factors, firm size, profitability and the intensity of R&D activities were shown to be crucial, confirming the hypothesis that the accumulation of knowledge over time tends to induce a state dependence in innovative behaviour and that the availability of internal funds enhances the ability to continuously engage in innovation (Cefis and Ciccarelli 2005; Latham and Le Bas 2006; Peters 2009). The evidence suggesting that R&D-based innovation activities tend to be associated with higher persistence appears to be of particular importance because it helps to explain two important results emerging from the previous literature. First, several contributions highlighted that innovation persistence is stronger in high-tech, science-based industries where R&D activities are concentrated (Raymond et al. 2010; Clausen et al. 2012). Second, when different innovation output indicators have been considered, product innovation, which is very often linked to R&D investments (Crespi and Pianta 2007), tends to be characterised by higher persistence than process innovation (Martínez-Ros and Labeaga 2009; Antonelli, Crespi, and Scellato 2012). In this respect, the complementarities among different types of innovation activities emerged as crucial in shaping different patterns of persistence (Clausen et al. 2012; Antonelli, Crespi, and Scellato 2012), including the case of organisational innovation. In the reviewed studies, attention has been paid primarily to internal factors that consider persistence to be the result of firm characteristics, while the role of external knowledge and local context in shaping innovation persistence is almost totally neglected. In this respect, our paper adds to the previous literature because it is the first attempt to consider external factors in determining innovation persistence. Building on previous analyses showing that successful innovative activity is more likely to occur within strong industrial regions Downloaded by [Wilfrid Laurier University] at 00:11 02 August 2016