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Measuring urban and rural establishment innovation in the United States

ABSTRACT What are the best proxies for innovation and do the best proxies vary by type of region? A commonly used and easily obtained measure is patenting, but there may be disadvantages to using it exclusively. We compare patents to 39 alternative innovation measures in terms of how they perform across tradeable urban and rural establishments. Data are from the USDA’s 2014 National Survey of Business Competitiveness, a survey with nearly 11,000 respondents, with a rural region over-sample (25% of establishments responding are urban and 75% are rural). We employ a bivariate probit model using as controls a number of establishment-level characteristics for our analysis. A log likelihood ratio test confirms that urban and rural establishments should be modeled separately. While patents may provide a reasonable measure of innovative activity for urban establishments, they are more a problematic measure for rural establishments. We conclude with a brief discussion of implications and study limitations.