Three Essays on the Geography of Innovation: The Role of Transportation Networks and Institutions

Abstract

The long-term growth of economies depends crucially on their capacity to introduce technological progress. Innovation and technological change are at the heart of economic growth. The diffusion of knowledge and ideas is a key element for innovation performance of firms, regions and countries. At the heart of this diffusion process are the inventors and their interactions. Inventors build their knowledge over time by interacting with others and learning from them. As knowledge is the main input to produce more knowledge, this process can lead to a sustained growth path. However, there is a large body of literature reporting evidence that there is a growth slowdown because the flow of new ideas becomes more costly. The factors behind this slowdown are that the knowledge becomes specialized and the growing need for always bigger research teams, as they are the source of the most creative ideas. Several factors can boost or slow down the process of diffusion and innovation. This thesis digs deeper on the relationship between transport connectivity and knowledge diffusion, as physical infrastructures may provide a broader reach to otherwise localized knowledge spillovers. The second chapter of this dissertation, with the title "Transportation Networks and the Rise of the Knowledge Economy in 19th Century France", exploits an episode of French history to study the impact of the largest-scale construction of railroads on innovation performance. Railways triggered economic relations and cultural environments, stimulated commerce and created new economic opportunities. I report solid evidence that rail stations work as gates providing access to the network for the citizens of France. Access is important because the network creates meaningful connections to cantons that are inhabited by inventors and ultimately fosters innovation. In addition, places that are better connected to the global city of Paris have a higher chance to innovate in a new technology. The intuition is that Paris can work as a gatekeeper of knowledge that connects the national innovation systems to global innovation networks. Chapter 3, "Rails and innovation: Evidence from China", establishes a relationship between the roll-out of the high-speed rail network and patenting activity in China. We apply a novel historical instrument to provide causal evidence that the opening of a high-speed rail station is associated with the increase of innovation performance at the city level. In a second stage, we argue that cities are more likely to develop comparative advantage in a new technology after increasing its connectivity, via the high-speed rail network, with other cities already specialized in that technology. We complement these findings with gravity equations using cross city co-applications and patent citations. In Chapter 4, "Religiosity and Innovation in 19th Century France", we investigate the relationship between the anti-scientific agenda promoted by the Catholic Church and technological progress. We take advantage of a law that re-established divorces in 1884 to propose, as a novel proxy for religiosity, the number of divorces per capita. Our results suggest a negative effect of religiosity on innovation performance. In terms of policy, the findings of chapter 2 and 3 suggest that transportation networks can trigger technological progress. The results reveal that the effect is not only driven by the first-tier cities but also from the more peripheral areas. The investments in efficient and meaningful transportation projects can spur the knowledge diffusion process. Knowledge diffusion can contribute to the reduction of the consistent inequalities among mega cities and places that are left behind. The preliminary findings of the chapter 4 suggest that places which were less affected by the anti-scientific agenda of religious institutions experience a higher increase in the ideas closer related to economic and technological progress. I believe that the inventors located in these places get benefited from the institutional setting which stimulates the flow of crucial ideas. In general, transportation networks and better institutions can promote knowledge diffusion and to enhance technological progress. This is an important, especially in our days since novel ideas are getting harder and harder to find and high-quality invention activity concentrates disproportionately in the super star cities.