We examine empirically how internal and external factors affect technological
innovation and profitability of photonics firms. Gwangju city designated
photonics industry as the regional leading industry to be fostered. But capital
metropolitan areas (CMAs) have attracted the majority of photonics firms. We
explore how these regional locations affect R&D performance and profitability
of photonics firms by employing panel random effect model, Driskoll-Kraay
estimation method, and generalized estimating equations. We find that the
location effect of the CMAs on innovation is insignificant while the location
effect of Gwangju is significant and positive. On the other hand, the location
effect of the CMAs and of Gwangju on profitability is found to be insignificant.