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Abstract:
The diffusion of knowledge plays an important role in both the creation and distribution of wealth. Attempting to construct a competitive advantage, managers of firms often seek to spread valuable knowledge widely across subunits of the organization, while simultaneously preventing its diffusion outside the firm to rivals. In the interest of stimulating local economies, regional planners and leaders of technological communities may also aim for an uneven flow of knowledge: rapid diffusion within geopolitical or community boundaries, but not beyond them. We argue that the degree of information inequality across social boundaries will reach its peak when moderately complex knowledge underlies these differences. Such knowledge generates the greatest disparities across boundaries because preferential access to private information - established through the relatively more dense social networks within these borders - provides the greatest advantage in assimilating and building on knowledge when that information involves an intermediate degree of interdependence. To test this proposition, we examine patent data, comparing citation rates across three types of social boundaries. Our findings establish that knowledge complexity moderates the proportion of future citations: (i) within versus outside the firm, (ii) geographically proximate to, versus distant from, the inventor, and (iii) internal versus external to the technological class - thereby supporting the idea that moderate knowledge complexity drives a wedge between the transfer of information internally and its diffusion across social boundaries.

Diffusion, Patents, Agglomeration

Abstract:
Sociological investigations of economic exchange pay particular attention to the manner in which institutions and social structures shape transactions among economic actors. Extending this line of inquiry, we explore how interfirm networks in the US venture capital (VC) market from 1986 to 1998 affect the spatial patterns of exchange. We present evidence suggesting that geographic and industry spaces represent natural boundaries that contain the transmission of information about potential investment opportunities. In turn, the highly circumscribed flow of information within these spaces contributes to the geographic- and industry-localization of venture capital investments. After establishing this finding, the majority of our empirical analyses document that the social networks in the venture capital community ? built up through the industry's extensive use of syndicated investing ? facilitate the diffusion of information across geographic and industry boundaries and therefore expand the spatial radius of exchange. We show that VCs that build axial positions in the industry's co-investment network can obtain information from distant sources and hence expand the scope of their investments over time. Consistent with the sociologist's general view of markets, variation across actors in their positioning within the structure of a market appears to differentiate market participants in their ability to overcome boundaries that otherwise would curtail exchange.

Abstract:
In the past, research has linked the advancement ofscience to increased innovation and to economic growth.However, littleresearch has sought to explain these relationships.This paper examinesthe impact of the norm of publication, or the more rapid dispersal ofinformation, on increases in innovation and economic growth. To study this effect, the researchers analyze three groups of focalpatents. A literature review of past research regarding science andtechnological advances is provided.Then, the empirical basis of thisresearch is discussed, noting that this study investigates patents, theirreferences to non-patent prior art, and their forward citations.Citationrates and citation distribution is explained in relation to the six hypothesesof this research.The data utilized for this research consist of sampleutility patents, yielding a sample size of 16,728 references.The sevencategories used to sort the references are presented, and citation rates andcitation distribution are further discussed in terms of the dataanalysis. The findings indicate that referencing patents that reference anypublication display a large number of citations from future patents.Alternative explanations for these findings are discussed.(AKP)

Academic research, Patents, Economic growth, Technology innovation, Publications, Science, Information dissemination, Innovation process

Abstract:
Scientists, social scientists and politicians frequently credit basic science with stimulating technological innovation, and with it economic growth. To support this idea, researchers have shown that patents based on university research receive more citations - a measure of patent importance - than those developed outside of academia. That research and much of the rhetoric it supports implicitly assumes that the application of scientific methods enables the invention of higher quality technologies. Nevertheless, another possibility exists. The norm of "communism" and the related practice of publication may speed the diffusion of information developed in the scientific community. By examining patent data, this paper seeks to determine to what extent do quality differences versus communication explain the citation premium accorded to university and science-based patents. The analyses suggest that heightened communication explains a substantial amount of the difference, a result with important implications for both future research and public policy.

science, technological innovation, patents, diffusion

Abstract:
Like all politics, all entrepreneurship is local. Individuals launch firms and, if successful, expand their enterprises to other locations. But new firms must start somewhere, even if their businesses are conducted largely or exclusively on the Internet. Likewise, policymakers at local and state levels increasingly recognize that entrepreneurship is the key to building and sustaining their economies' growth. Although this is a seemingly obvious proposition, it represents something of a departure from past thinking about how local, state, or regional economies grow. Historically, state and local policymakers have put their energies into trying to attract existing firms from somewhere else, either to relocate to a particular area or to build new facilities there. Such smokestack chasing - or, in this cleaner era, simply firm chasing - often has degenerated into what is essentially a zero-sum game for the national economy. When one city or state offers tax breaks or other financial inducements to encourage firms to locate new plants or headquarters, and succeeds, some other city or state loses out in the process. Local, state, and regional economic development centered on entrepreneurship, however, is a fundamentally different phenomenon. The formation and growth of new firms, especially those built around new products or ways of doing things, wherever this occurs, is clearly a positive sum game, not just for the locality, but for the nation as a whole. This essay provides a guide to policymakers and citizens to what is known about the effects of various local and state policies aimed at fostering entrepreneurially driven growth. There is also much we do not know; thus, the essay identifies subjects that require further research.

entrepreneurship, policy, urban, city, local, state, regional, roadmap, economy

Abstract:
Although received wisdom suggests that scientific research increases the rate of technological advance, little research considers why and how this acceleration occurs. By treating invention as a process of recombining interdependent technological components, we gain traction on this issue. Inventors searching these combinatoric spaces face a "complexity catastrophe" that limits the usefulness of their efforts when they attempt to combine multiple interdependent components (Fleming and Sorenson, 2000). Scientific knowledge allows inventors to overcome the difficulties inherent in searching these spaces by improving their understanding of these interactions, essentially providing them with a map of the technological landscape. Thus, inventors can more effectively take advantage of the useful synergies between technological components, while avoiding many of the deleterious interactions. Our empirical analyses of patent citations support this model. Inventions that arise without the understanding provided by scientific research decline precipitously in usefulness as they combine increasingly interdependent components. Meanwhile, inventions that draw from previous scientific research do not exhibit this complexity catastrophe; their usefulness actually increases as the degree of interdependence rises. Scientific understanding also appears to alleviate much of the uncertainty associated with combining increasingly interdependent components.

basic science, recombinant search, technology management, complexity

Abstract:
Studies have consistently found that social structure influences who transacts with whom, and that actors appear to benefit when exchange occurs embedded within these relations rather than in an unstructured market. This paper argues that the apparent benefits of embedded exchange can arise from an endogenous mechanism: Actors offer better terms of trade and allocate more resources to transactions embedded within existing social relations, thereby contributing to the ostensible advantages of such exchange patterns. In the motion picture industry, not only do distributors show a preference for carrying films involving key personnel with whom they had prior relations, but also they tend to favor these films when making decisions regarding their release (opening dates and the level of promotion). After controlling for the effects of these decisions, films with stronger prior relations to the distributor perform worse at the box office. The results reveal that, rather than benefiting from repeated exchange, distributors produce these effects through their own efforts.

social networks, exchange, film industry

Abstract:
Organizations trade off between short-run operational advantages and long-run adaptive ability. They vary along this dimension through the degree of interdependence created by the structure of production. This study focuses on one structural characteristic - vertical integration - that creates this interdependence. Integrating vertically can allow the organization to benefit contemporaneously from efficiencies in production, market power, and synergy. Nevertheless, vertical integration severely limits the organization's ability to adapt because boundedly rational managers find the optimization of operations difficult when making highly interdependent choices. As the volatility of the environment increases though, the returns to learning decrease. Thus, firms that organize for efficiency suffer less from inertia in these environments. Tests of these hypotheses on the growth rates and exit rates of computer workstation manufacturers from 1980 to 1996 support this thesis.

vertical integration, computer industry, complementarity, organizational learning

Abstract:
Although prior empirical research has established an association between science and the widespread diffusion of knowledge, the exact mechanism(s) through which science catalyzes information flow remains somewhat ambiguous. This paper investigates whether the knowledge diffusion associated with science-based innovation stems from the norm of openness and incentives for publication, or whether scientists maintain more extensive and dispersed social networks that facilitate the dissemination of tacit knowledge. Our analysis supports the first mechanism: We track the movement of knowledge with patent citations, and find that science-based innovations diffuse more rapidly and widely, even after controlling for the underlying social networks of researchers as measured using information on prior collaborations. We also find that publication and social networks act as substitutes in the diffusion of knowledge.

Abstract:
Using a panel of U.S. metropolitan areas from 1993 to 2002, we find that an increase in the local supply of venture capital (VC) positively affects (i) the number of firm starts, (ii) employment, and (iii) aggregate income. Our results remain robust to a wide variety of specifications, including ones that address potential endogeneity in the supply of venture capital. The magnitudes of the effects, moreover, imply that venture capital stimulates the creation of more firms than it directly funds. That result appears consistent with either of two mechanisms: One, would-be entrepreneurs that anticipate a future need for financing more likely start firms when the supply of capital expands. Two, companies funded by venture capital may transfer tacit knowledge to their employees thereby enabling spinoffs, and may encourage both their own employees and others to become entrepreneurs through demonstration effects.

Venture capital, financial intermediaries, entry, employment, wage bill

Abstract:
Recent research in strategy has called attention to the fact that particular positions in inter-firm networks may serve as a source of competitive advantage for the firms occupying them. This empirical literature has nonetheless found it difficult to separate the effects of positions from those of firm capabilities and resources. We develop a general model for addressing this issue analytically. Our results suggest that agents can enjoy a competitive advantage due only to their positions, but only when several conditions hold, most notably: (i) the agent has relationships to at least three other firms; and (ii) the agent does not hold too strong a position. We also assess the stability of competitive advantages, finding that, while capabilities and resources can confer a stable competitive advantage, positional advantage is not robust to the activities that others might use to diffuse them.

social networks, strategy, biform games

Abstract:
We find that the enforcement of non-compete clauses significantly impedes entrepreneurship and regional growth. Based on a panel of metropolitan areas in the United States from 1993 to 2002, our results indicate that, relative to regions in states that enforce non-compete covenants, an increase in the local supply of venture capital in states that restrict them has significantly stronger positive effects on (i) the number of patents, (ii) the number of firm starts, and (iii) employment. We address potential endogeneity issues in the supply of venture capital by using endowment returns as an instrumental variable. Our results point to a strong interaction between financial intermediation and the legal regime in promoting entrepreneurship and growth.

Venture capital, financial intermediaries, legal institutions, entry, employment, innovation, wages

Abstract:
Many theories either implicitly or explicitly assume that individuals readily move to locations that improve their financial well being. Other forces, however, counteract these tendencies; for example, people often wish to remain close to family and friends. We introduce a methodology for determining how individuals weight these countervailing forces, and estimate how both financial incentives and social factors influence the probability of geographic mobility in the Danish population from 2002 to 2003. Our results suggest that individuals respond to opportunities for higher pay elsewhere, but that their sensitivity to this factor pales in comparison to their preferences for living near family and friends.

Location choice, Regional migration, Social factors, Economic incentives

Abstract:
This article introduces a special issue of the Journal of Engineering and Technology Management devoted to exploring how patterns of social networks and interaction among scientists affect diffusion of innovation and knowledge. The history of science and technology has traditionally examined the individual genius. A newly developing approach, social network analysis, looks at patterns of relationships among scientists as predictors of innovation. It focuses on who an individual knows rather than his or her personal characteristics. Implicit is the assumption that access to knowledge can determine success at innovation and development of research. This scholarship on social networks in research and development has had a boost from the availability of patent data, which allows study of innovation and information flow within and among organizations. The content of the five special-issue papers are summarized. They explore issues of knowledge spillovers, collaboration frequency, knowledge diffusion, social networks, team composition, employment patterns, and project performance. (TNM)

Social networks, Employment, High technology firms, R&D, Innovation process, Knowledge transfer, Knowledge spillovers, Social networks

Abstract:
This paper develops a theory of invention by drawing on complex adaptive systems theory. We see invention as a process of recombinant search over technology landscapes. This framing suggests that inventors might face a "complexity catastrophe" when they attempt to combine highly interdependent technologies. Our empirical analysis of patent citation rates supports this expectation. Our results also suggest, however, that the process of invention differs in important ways from biological evolution. We discuss the implications of these findings for research on technological evolution, industrial change, and technology strategy.