What Agglomeration Externalities Impact the Development of the Hi-tech Industry Sector? Evidence from the Russian Regions

Abstract

This paper continues the ongoing debate on the importance of agglomeration externalities that may impact innovation development and the high-technology sector in regional economies. Previous studies suggest that the evidence for agglomeration externalities is strongly context-specific. We aimed to expand this discussion to Russian regions by utilising statistical evidence. We constructed a panel dataset with 83 regions and used various spatial econometrics and statistic techniques to test our hypothesis. Our study made two essential contributions. First, we found that regions with a high density of used high technologies tended to co-locate next to each other. Secondly, the localization of employment, sales volume, and paid wages in the electrical equipment, electronic, and optical equipment sector demonstrated a positive association with hi-tech usage density. These externalities suggest the presence of positive direct or indirect spillover effects among regions in Russia within the examined industry sector. However, the localization of investment did not display any association and, thus, does not suggest the presence of any spillover effects. These contrasting findings reveal the peculiarities of Russian business reality, such as vast territories of the country, uneven infrastructure, lack of funding, and small cooperate networks. The federal government is expected to provide appropriate financial and legal support to stimulate clustering processes and innovative activities. Recommendation for further research is provided at the end of the paper.