Location, Location, Innovation: The Impact of Local Environmental Factors on Regional Innovation in Australia

Abstract

Abstract This paper investigates the determinants of innovation among Australian regions, focusing on the spatial dimension of innovation and innovative-related activities in creating spillover effects. Through `exploratory' and `confirmatory' spatial data analysis we find evidence that innovation activity is spatially dependent, and that there is evidence of spatial clustering of highly innovative regions. Applying spatial econometric techniques, we estimate a Spatial (panel) Durbin Model to control for spatial autocorrelation to analyse the driving forces of innovation throughout regions. We find that the number of university campuses within a region along with university research has a significant and positive effect on local levels of innovation. In terms of spillover effects, we find that population density creates a negative indirect effect; where neighbouring region's population density adversely impacts innovation levels.