Related to whom? The impact of relatedness to regional frontier firms on radical innovations

Abstract

This paper aims to explain the emergence and diffusion of novel combinations in Germany. On the one hand, it scrutinizes on the effect of internal technological diversity. On the other hand, it looks at interactions with other actors and assesses whether relatedness to the overall regional knowledge base or rather being related to specific regional actors improves radical inventive activity in German organisations. It is demonstrated that the emergence of radical novelty is positively influenced by an optimal degree of internal diversity as well as relatedness to actors at the technological frontier. However, for this radical novelty to diffuse, rather diverse actors and relatedness to the regional knowledge base is important. The results call for a more fine-grained picture in the relatedness debate and deliver interesting insights for inventive organisations in terms of partner choice and policy-makers for future initiatives.