Specialized Markets and the Behavior of Firms: Evidence from the United Kingdom’s Regional Economies

Abstract

A key feature of the South East regional economy in recent decades has been the development of several intermediate markets in specialized business services. This article investigates whether the greater development of specialized markets in the South East is associated with different competitive and technological behaviors of innovative firms in this region when compared with firms in the Industrial Heartland regions of the West Midlands, North West England, and York-shire and Humberside. We find greater buying and selling of technology by firms and the presence of technological externalities in the South East, even when the services-intensive nature of the region’s production is accounted for. Industrial Heartland firms, in contrast, more frequently collaborate with domestic suppliers who are also an important source of technology. They also have greater collaboration with higher education institutes.