WANG Yongjin, ZHANG Guofeng:Population Agglomeration, Communication Externality and Firm Innovation

Abstract：In the wake of rapid urbanization, could population agglomeration encourage firm innovation by promoting the communication of knowledge among people? This paper proposes a novel mechanism through which agglomeration exerts its influence on firm innovation.To test the viability of this mechanism, we first construct the communication intensity index at the industry level, which captures the importance of communication for each industry.And then we empirically test this hypothesis by exploiting the 1998-2007 NBS firm data.The hypothesis is strongly born out of the data, which means that communication externality by population agglomeration promotes the firm innovation significantly.And furthermore, the impact for the industries with intensive communication is stronger.In addition, we control the endogeneity by using the population density in 1920, and the conclusion remains valid.

Keywords： Population Agglomeration    Communication Intensity    Firm Innovation

source:Finance & Trade Economics ,No.5,2015