Localization of Knowledge and the Mobility of Engineers in Regional Networks

Abstract

K nowledge, once generated, spills only imperfectly among firms and nations. We posit that since institutions and labor networks vary by region, there should be regional variations in the localization of spillovers. We investigate the relationship between the mobility of major patent holders and the localization of technological knowledge through the analysis of patent citations of important semiconductor innovations. We find that knowledge localization is specific to only certain regions (particularly Silicon Valley) and that the degree of localization varies across regions. By analyzing data on the interfirm mobility of patent holders, we empirically show that the interfirm mobility of engineers influences the local transfer of knowledge. The flow of knowledge is embedded in regional labor networks. (Knowledge; Spillovers; Mobility; Regions; Networks) Ideas, because they have no material content, should be the least spatially-bounded of all economic activities. Being weightless, their transport is limited only by the quality and availability of communication. Since ideas serve both as the inputs and outputs in their own production, their location need be constrained neither by the happenstance of the spatial distribution of raw materials, energy, and labor, nor by that of demand and markets.Yet, there is good reason to believe that the production of ideas may be, contrary to its economics, prescribed within spatial boundaries. In his comparative analysis of nations published in Industry and Trade (1920), Alfred Marshall noted that economic activity was drawn to regions rich in the "atmosphere" of ideas. Vibrant regions are those that produce knowledge externalities that denote the spillover of ideas from innovating firms to other firms. 1 The existence of these stable regions implies that these externalities are also localized; that is, they do not spill perfectly over spatial borders. Yet, the economic treatment of externalities largely assumes them to be "there"-such as embodied in capital goods-rather than a property that itself deserves to be explained. Knowledge externalities, however, are not simply generated by a given technology. The relationship among firms, universities, star scientists, and engineers strongly conditions the extent by which knowledge spills over. The importance of regions in economic development has been a persistent, though often lost, theme in economic sociology. Jane Jacobs (1969) put forth an argument that the growth of cities is based on a positive cycle of linkages among industries; the social and economic linkages among diverse activities gen- 1 We use externalities and knowledge spillovers interchangeably to denote the benefit of knowledge to people, or to firms, not responsible for the original investment in the creation of this knowledge.2 See Allison and Long (1987) for evidence that institutional affiliation provides a significant spur to productivity; also Crane (1965) on invisible colleges, and Brown and Deguid (1991) on communities of practice.

Patents, technological inputs and spillovers among regions

“…Strong evidence is provided for both the US and Europe that knowledge flows measured by patent citations are bounded within a relatively narrow geographical range (Jaffe, Trajtenberg and Henderson, 1993;Almeida and Kogut, 1999). Empirical analysis also shows that the production of new scientific and technological knowledge has a predominant tendency to cluster spatially.…”

Technological change, rent and income inequalities: A Schumpeterian approach

“…This is a flow measure that directly reflects the increase in the stock of technological knowledge available in an economic system. 5 Accordingly, patents have been extensively used in the management and economics literature to measure knowledge flows (e.g., Griliches, 1990;Jaffe et al, 1993 and1998;Almeida and Kogut, 1999;Popp, 2003 and2005;Alcacer and Gittelman, 2006). As such, patent data are potentially more precise than other measures of innovation since they refer to concrete and successfully terminated knowledge generating activities that are the result of the recombination of codified knowledge based on research and development efforts and the stock of tacit knowledge based upon learning processes.…”

Do Local Knowledge Spillovers Matter for Development? An Empirical Study of Uruguay’s Software Cluster

“…The second proxy, LKS_L, captures the often found proposition in the spillover literature that the higher the firm's labour turnover, the more the firm's new local employees will represent a channel for free knowledge acquisition (e.g., Almeida and Kogut (1999). Thirdly, LKS_I refers to the importance, to the firm, of knowledge and new ideas that tend to get shared and sparked off spontaneously through informal contacts with other local parties such as universities, suppliers, clients, and even competitors.…”