Recent Research: Harnessing Geographic Knowledge Spillovers to Fuel Regional Growth

[Editor's Note: SSTI is excited to welcome Phillip Battle to its staff as a policy analyst. The author of this article, Phil recently received his Master in Public Affairs degree from the LBJ School at the University of Texas at Austin. His area of research interest is technology policy and economic development.]



A forthcoming article from Regional Studies suggests that despite the rise of the Internet as a global medium for the distribution of knowledge, location still matters within the innovation community. Proximity and industry networks speed the transmission of new technologies, which in turn accelerates regional growth.



Thomas Döring of the University of Cassel and Philipps-University Marburg and Jan Schellenbach of Philipps-University Marburg present more than 50 years of theory and empirical research examining the spread of knowledge across regional economies. The article explores several hypotheses about how and why the dissemination of new technologies is limited by proximity and, more importantly, why disadvantaged regions persistently fail to benefit from technological advances.



The authors differentiate knowledge from information. Knowledge is a broader category of understanding, which encompasses the ability to solve problems but may be difficult to transmit through language, codified science or media.



Empirical evidence suggests all knowledge, even that which is made public and non-excludible, is more efficiently diffused though personal, informal relationships. Tacit knowledge, understanding and skills transmitted by the movement and interaction of human capital, is the most effective vehicle for the spread of new technologies. Even though industry research may be published in publicly available outlets, proximity and participation in industry networks remain more important in securing access to new knowledge.



This knowledge does not spread uniformly. Many regions continually miss out on the productivity benefits of new technologies. Disadvantaged regions tend to experience an ever-widening technology gap. Döring and Schellenbach cite the work of Marjolein Canils, holding that knowledge tends to spread first to neighboring R&D centers, and then to the periphery of those centers. The likelihood of absorption in periphery areas is determined by the usefulness of the new knowledge in light of already accumulated knowledge.



Firms and economies clearly benefit from the accumulated knowledge within the region and from the presence of strong networks of firms, R&D laboratories, and venture capital. Firms gain access to regionally stored knowledge through formal networks and partnerships and also through informal means, such as social networks between managers and the movement of local labor.



Sophisticated models created within the New Economic Geography literature explain the growth rate of regions based on the accumulation of knowledge. Tacit knowledge is received incrementally through flows between regions and networks and fuels productivity gains. Growth rates increase based on the amount of accumulated, but still relevant, knowledge.



The authors are hesitant to make normative claims about the value of regional policies specifically intended to maximize the benefit of knowledge spillovers. Döring and Schellenbach recommend further study on the subjects of research proximity and the mechanisms of regional knowledge spillovers. A more advanced understanding of these phenomena could yield insights into site selection, labor resources, and the development of disadvantaged areas.



Empirical studies within the literature, however, have already demonstrated the value of building strong local and regional networks. These networks exert an essential, significantly positive impact on innovative activity." Regions with strong formal and informal networks, built through technology councils, networking events and industry partnerships, have a clear competitive advantage over other regional economies.



What Do We Know About Geographical Knowledge Spillovers and Regional Growth? - A Survey of the Literature is available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=753386.



Links to this paper and 4,000 additional TBED-related research reports, strategic plans and other papers can be found at the Tech-based Economic Development (TBED) Resource Center, jointly developed by the Technology Administration and SSTI, at http://www.tbedresourcecenter.org/.