Political Institutions in Swedish Regions: The Effect on the Innovation Imperative of the Firm

Abstract: This master essay examines whether regional political institutions affect the imperative of firms to invest in innovation. It uses multilevel modelling techniques to explicitly test the spatial dimension of regional institutional embeddedness of the innovation process using micro-data on manufacturing firms in Sweden. The main argument of this essay is that firms are embedded in a region and that the quality of the political environment of that region matters to the innovation investment imperative. Political institutions, as measured by voting shares, are argued to be signaling mechanisms to firms on the durability and stability of committing investment in innovation as well as a proxy variable for civic engagement in the region that would allow communities to overcome collective action problems which can be important to the innovation process particularly when this process relies on tacit information that are spatially sticky. The thesis found positive albeit statistically insignificant results of the hypotheses apart from size of the firm mattering to the innovation investment schedule of the firm.