Grants and innovations: Funding world innovations, interregional knowledge transfer, or neighbourhood copycats

When funding innovations, policy makers often prioritize explorative innovations because of their novelty, overlooking the varied newness within exploitative innovations. By focusing on the imitative nature of exploitative innovations, we distinguish between local imitation — simple replication — and interregional imitation, which involves cross-regional knowledge transfer that is critical for industry renewal and national competitiveness. Examining 4,093 startups, we advocate for a nuanced approach to grantmaking that is tailored to a firm’s industry and strategic position as defined by its entrepreneurial orientation (EO). Our results show that grants foster explorative innovation in high EO startups, while low EO startups contribute through interregional knowledge transfer. This highlights the importance of recognizing high and low EO as different strategic approaches in innovation policy and emphasizing interregional knowledge transfer as an important source of market novelty.