A study on innovation capacity and entrepreneurial activity at a sub-regional level: The case of the Basque Country

We aim at gaining our understanding on the relationship between innovation capacity, entrepreneurial activity and regional competitiveness at a sub-regional level, by taking into account the heterogeneity of inner locations within a region. Our results show, on the one hand, that high and rapid growth firms benefit from local agglomeration economies which lead to incremental innovation-type R&D activities (i.e., exploitation of synthetic- knowledge) emerged in non-metropolitan areas where new ventures are more focused on "Development" activities rather than on "Research" activities. On the other hand, ventures located in metropolitan areas are more related to "Research" activities (i.e., exploration of analytical-knowledge leading to radical innovation) which particularly take place in universities and technology centers sited in urban (or nearby) areas. Any advancement on regional development will depend on a balanced concentration of different types of innovation and entrepreneurial activities at a sub-regional level considering the idiosyncrasy and singularity of each sub-region.