Tolerance, Agglomeration and Enterprise Innovation Performance: A multilevel analysis of Latin American regions
Abstract
Research inspired in part Richard Florida´s (2002) work on the creative class has drawn attention to the influence tolerance, openness and cultural or social diversity play not only for the economic development of cities but also for entrepreneurship and innovation. The tolerance – innovation link may be explored at the individual firm level as well as at the macro-level (city, region, or nation). In this paper, we go beyond most studies by adopting a multi-level regression approach to investigate how tolerance at the regional level impacts on enterprise-level innovation performance across the regions of 7 Latin American nations: Chile, Colombia, Mexico, Peru, Argentina, Ecuador and Uruguay. We use hierarchically clustered data in which aggregate indicators of the level of regional tolerance based on the results of the World Values Survey are linked to enterprise-level measures of innovation performance based on the World Bank’s Enterprise survey. By differentiating innovators both in terms of the degree of novelty of their innovations on local or national markets and in terms of their degree of integration into the international economy, we are able to develop results relevant to understanding processes of diffusion of new knowledge into the regional economies of Latin America. Firstly, our results show that firms whose main markets are local or national are more likely to develop new-to-the market product innovations if they engage in some export activity. Secondly, the results show that firms whose main markets are local or national benefit in their new-to-the market innovation activities by being located in relatively high tolerance regions. We interpret these results in terms of the potential role played by ‘gatekeeper’ firms in a developing country context, that link the local economy to external sources of knowledge and contribute to its local diffusion. We argue that high levels of local tolerance can contribute to the localized learning processes involving face-to-face contact between users and producers as well as cooperation with local organizations that contribute to the diffusion new knowledge and products into a regional economy.
