Innovation, Rurality and Human Capital in Food Processing

In the hope of supporting rural economies, some rural planners suggest fostering food processing firms in rural areas. Locating close to the source of necessary agricultural commodities might give the processors an advantage. However, emerging patterns of product innovations, which affect demand, and process innovations, which lower costs, are tied to firm-level capacities in research and development. Communities can become more efficient at supplying services, including research services, to a particular industry. This in turn lowers the costs of that industry, driving up demand for the services and so on. The agglomerations of service firms spin off supporting services, which accommodate yet more firms. Agglomerations of service firms are difficult to support in a rural community. Individual firms in rural areas have trouble meeting their own labour needs, let alone the needs of their service sector. The two forces of low transportation costs for commodity inputs versus lowered costs from agglomerations can leave the optimal location for a food processing firm unclear. Urban settings will deliver more agglomerations, but rural settings might allow for cheaper commodity inputs. One of the key factors in a firm’s success is the rate of innovation. This study looked at the rate of innovation in food processing firms across western Canada and tested whether this rate was affected by a firm’s location or by the human capital capacities of the firm or the region surrounding it