The effect of innovation network size and public R&D investment on regional innovation efficiency

Although central governments are expanding research and development (R&D) investment in peripheral areas in many countries, interregional differences in innovation efficiency remain an unsolved problem. Hence, we evaluate the regional efficiencies of technology development and commercialization in South Korea using two-stage data envelopment analysis. This study first calculates the efficiencies, and then uses the efficiency values to test the hypotheses. Using nonparametric tests, we analyze whether the two contextual factors of innovation network size and public R&D, cause differences in the regional innovation efficiencies. The results show that commercialization efficiency is statistically higher in regions where the innovation network is larger than average. In particular, technology development efficiency is higher in regions where R&D is more public-focused than average, even though the local innovation network is small. The findings indicate that governments should consider policies combining public investment with network building to improve efficiencies and generate technological and commercial value from regional innovation.