The causal interaction between innovations, specialization, start-ups, qualifications, and subsidies: a spatial VAR analysis for various industries in Germany

Abstract The interaction between innovation, specialization, qualification, start-ups, and public subsidy has been a topic in many papers. This paper extends the existing studies in three ways. First, various two-digit industries are studied separately so that differences among industries can be examined. Second, while all existing approaches in this field use regions as observation unit, the approach taken here uses data on the level of municipalities and aggregates this data according to travel distances. Hence, the approach is less influenced by the so-called modifiable aerial unit problem (MAUP). Third, the VAR-LiNG approach is applied, which has the advantage that causal relationships can be detected and that the direction of the causal effects can be identified. We confirm the claim of a strong importance of industries not only for innovation systems but beyond that for more local relationships between economic aspects. Overall, a quite clear finding is that nearly all relationships that contain patents, either as impulse or response, show positive effects for high-tech or medium–high and high-tech industries and mixed results for the other industries.