Green-tech firm creation in Germany: the role of regional knowledge

Due to the increasing awareness on environmental issues, the necessity to implement more sustainable technologies is becoming a central theme for policy makers and economic agents. The beneficial effects of these technologies are not restricted to the environmental sphere, but also concern economic activity. In the present study, building on the knowledge spillovers theory of entrepreneurship, we look at the role of regional knowledge capabilities in facilitating green-tech firm creation in German regions. Exploiting the European Patent Office PATSTAT database in order to build regional knowledge measures, and official German government sources concerning regional green entrepreneurship activity, we consider both knowledge capacity and knowledge diversity aspects. We differentiate patents in terms of quality, using citation-based measures, and adopt a recombinant knowledge approach to account for knowledge heterogeneity. Results highlight the key role played by knowledge capacity measures, such as absorptive and innovative knowledge capacity, in promoting entrepreneurship. Although, among knowledge diversity measures only related diversity is found to promote the creation of new firms.