The presence of larger inventive firms in cities helps smaller firms to be more inventive as well – eventually

While the positive effects of similar firms locating close to one another – so called agglomeration effects – are well known, do these positive spillovers also apply to large inventive firms? In new research, Carlo Menon examines the effect that companies which have a large number of patents have on patents granted by other companies in the same area. He finds that through knowledge spillover effects, a ten percent increase in the number of patents from Top Inventing Companies can lead to an increase in patents from smaller companies by about 2 percent over the following 4 to 8 years.