Do firms in clusters innovate more?

This paper analyses whether firms located in strong industrial clusters or regions are more likely to innovate than firms outside these regions. The study examines innovative activity using a database of innovations in the UK. The innovative record of 248 manufacturing firms during 8 years (1975-1982) is examined and related to employment in the region where they are located, and other variables. The results show that a firm is considerably more likely to innovate if own-sector employment in its home region is strong. On the other hand, the effect of strong employment in other industries does not appear to be significant. This may indicate that congestion effects outweigh any benefits that may come from diversification within clusters. The limitations of the data, however, do not allow for any definitive Conclusion. (C) 1998 Elsevier Science B.V. All rights reserved.