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