Connecting Regional Creativity to Firm’s Innovation: The Role of Social Capital

This paper investigates the importance of the home region as a source of talent – and specifically of individuals’ knowledge – for firm’s innovation. We exploit within-country regional variation to investigate the relationship existing between regional creativity, social capital and innovation. We create an original data-set combining data on regional creativity and social capital at the level of 21 regions with a large-scale data-set on innovation activities in a representative sample of nearly 5000 Italian manufacturing firms. After controlling for firm and regional level variables, we show that regional creativity is beneficial for firm’s innovation. However, in regions where the level of social capital is low, firms seem to be less able to capture the benefit deriving from regional creativity. In other words, social capital positively mediates the effectiveness of regional creativity on firm’s innovation. These findings are explained by the idea that social capital, promoting creative spillovers and increasing the frequency and the quality of communication, is fundamental for creating an external environment that is conducive to the acquisition of external knowledge by firms.