Barriers and Limitations in the Development of Industrial Innovation in the Region



1. Introduction

The contribution of innovation to regional growth has been widely identifies and documented
in the literature (Davelaar, 1991; Feldman, 1994; Feldman and Kutay, 1997; Davelaar and
Nijkamp, 1997; Frenkel and Shefer, 1997). This result from the relation between innovation,
competitiveness, and economic growth (Schmookler 1966; Rosenberg, 1972, 1976, 1994;
Nelson and Winter, 1982; Freeman, 1974; Freeman et al., 1982; Romer, 1990, 1994;
Bertuglia et al., 1995; Bertuglia et al., 1997; Nijkamp and Poot, 1997).

Advanced economic activities tend to possess a high market value, resulting in a competitive
advantage at least during the first stage of the diffusion process. Thus, these activities provide
new and at times unique opportunities for the development of firms, the expansion of their
market shares, profitability and employment growth. Therefore regions characterized by a
high level of technological innovation will show a greater acceleration of economic growth
(Grossman and Helpman 1990a, 1990b, 1991, 1994; Krugman, 1979, 1991, 1995; Stokey,
1995).

Entrepreneurs who seek to maximize their profits, are motivated to invest in regions where the
greatest profits can be achieve, given some pre-spectified level of probability of the risk
involved owing to uncertainties (Shefer and Frenkel, 1998).

Due to the great contribution of the innovative activities to the economy of the region, it is of
great interest to identify the barriers and obstacles that limit the development of innovative
activities in the region. Thereby address an efficient policy in order to minimize such
limitations. Evidences indicate the differential characters of industrial firms that belong to
different sectors (Frenkel, 2000; Frenkel and Shefer, 1997). These differences appear in the
firm’s attributes and the character of the production milieu where they are located that could
supply a supportive infrastructure and encouraging the development of innovation. Thus, it is
appropriate to inquire the differences between the firms in the important they ascribe to the
various factors that hinder and limit the development of innovation, in regard to their
geographical location and branch affiliation. An effective policy will then have a positive
influence on the spatial diffusion of innovation by raising the attractiveness of the region to
innovative firms.

The objective of this study is to identify the significant factors that address barriers and
limitations in front of spatial innovations, based on database gathered through field survey of



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