The contrasting effects of active and passive cooperation on innovation and productivity: Evidence from British local innovation networks

This paper studies the contrasting effects on innovations and productivity arising from active cooperation in innovation activities among competitors and from passive cooperation induced by these activities’ spillovers. A three-stage productivity function is estimated showing that firms’ innovations are supported by their active cooperation within their local innovation network of suppliers and customers and by passive cooperation through sectors’ spillovers. Contrary to this, active cooperation in innovation activities among competitors reduces their innovation rates and, indirectly, productivity. Hence, innovation policies and strategies aimed at restraining active cooperation among competitors, while encouraging it within a firm's local innovation network, may contribute to the system-wide introduction of process and product innovations and ultimately productivity.