Innovation and technology development in rural areas

Background and Objective

Rural regions are often considered less innovative than urban areas. The reasons for this include a lower number of research and development facilities, a reduced influx of new knowledge, and a limited pool of skilled workers. However, recent research indicates that there are indeed innovative rural regions where local companies practice specific types and strategies of technology development. As rural areas increasingly become the focus of policy measures and migration trends, a better understanding of their innovation capacity and value creation potential is essential. The aim of our research project, therefore, is to better comprehend the unique processes of innovation and technology development in rural regions. Based on this understanding, we derive recommendations for strengthening innovation performance and value creation in rural areas.

How can the peculiarities of innovation and technology development be identified? A preliminary approach involves distinguishing companies based on two paradigmatic types of innovation: the Science-Technology-Innovation (STI) mode on one hand, and the Doing-Using-Interacting (DUI) mode on the other hand. In the former, innovation is driven by in-house research and development departments and a high proportion of scientific personnel. In contrast, the latter type of innovation is based on practical experiential knowledge, acquired by professionally trained employees during the production process. This mode is related to workplace freedom and experimentation that can lead to incremental improvements in products, services, and processes. Currently, we lack a precise operationalization of these two innovation types. Addressing this gap is one of the objectives of our project.

The influx of new knowledge plays a crucial role in the innovation processes of companies. This is especially true for small and medium-sized enterprises (SMEs) that are prevalent in rural areas but have limited internal capacities. To compensate for this disadvantage, innovative SMEs collaborate with various partners such as suppliers, competitors, consumers, and public research institutions. However, the extent and configuration of these relationships remain underexplored. The insights gained by our research are intended to assist in improving the conditions for innovation-related collaborations in rural areas.

Approach

Our research project builds on a binary innovation typology and investigates the extent to which DUI- and STI-based innovations differ from each other on the input and output sides. We analyze whether and to what extent there are qualitative differences in terms of the absorption of external knowledge, the novelty of process or product innovations, or development indicators such as firm survival or revenue growth. In this way, the economic functions of the innovation types and their role in the regional innovation system are to be identified. Building on this, we examine the extent to which the spatial distribution patterns of the innovation types differ from each other and which factors are conducive to economic growth. Finally, we investigate the cooperation behavior of SMEs and large companies in rural areas.

Data and Methods

We employ time-series data from the Mannheim Start-up and Innovation Panel and we also analyze our own collected survey data. These company data will be combined with region-specific characteristics, particularly economic or innovation-related indicators at the district level. The data will be analyzed using quantitative methods (such as panel and negative binomial regressions). Specifically, variable selection techniques (e.g. Lasso regressions) will be employed. To capture the spatial dimension, geographically descriptive representations and spatial econometric methods will be used.

Our Research Questions

• What types and strategies of innovation and technology development do companies in rural regions employ compared to urban regions?
• Are there differences in innovation output or growth, as well as in their spatial distribution patterns, between the types of innovation?
• To what extent do collaborations in technology development play a role for companies in rural areas?