Does local creative employment affect firm innovativeness? Microeconometric evidence from Italy

This paper assesses the existence of knowledge externalities in the form of creative employment spillovers that affect firms’ innovative performances. Drawing on a large sample of Italian manufacturing firms, a knowledge production function augmented with regional creative workforce indicators is estimated. The results show that the regional density of creative employment has a positive effect on firm innovativeness. This effect is particularly marked when considering the core of creative employment, although this is subject to diminishing returns. The higher density of creative professionals influences innovation only after reaching a critical mass. The results also show that the effect of creativity is greater than that of human capital.