The effect of the small-firm dominated ecology on regional innovation

Small firms are often viewed as the remedy of regional development and growth, but there is little empirical evidence if the cluster of innovative small firms thrives regional innovation performance. This paper attempts to answer a timely policy question of "How vital is small-firm dominated ecology for regional innovation?" by investigating the mix of firm size within a region. The results find that the effect of the proportion of small firms in a region is nonlinearly associated with the regional innovation activity, proposing that a mix-model of large and SME firms induces more innovation commercialization. The results of this study shed some light for policymakers to assess the "knowledge searching" strategies of firms when choosing locations.