Using Feser's Input-Output Model of Technological Affinities to Target Innovation Investments to Regional Industrial Value Chains

Abstract:     
Our interest in writing this article is to create a bridge between the scholarly and academic research on technological innovation and a private sector, for-profit business model that implements the ideas on innovation and entrepreneurship, primarily in metro regional economies.

Professor Edward Feser, (1997), pioneered a modification in the conventional regional input-output analysis of regional economic structure. Feser's modification added the step of factor analysis to the national input output tables in the technical coefficients matrix, commonly called the A matrix.

The additional step of factor analysis allowed for the discovery of underlying technological affinities in manufacturing and production technology that exist between different industrial sectors. Most cases of radical innovation involve the market commercialization of technology in products and services that are "new-to-the-world," and are not obvious. Feser's method results in the discovery of technological affinities that do not, on first glance, appear to be in obviously related industrial sectors.

This same idea of "shared specific knowledge" between what first appear to be unrelated industrial sectors was described by Bryce and Winter, (2006), as the "general inter-industry relatedness index." Bryce and Winter provide the example of the shared knowledge relatedness between the Metal and Partitions Sector, (SIC 2542), and the Automatic Vending Machines Sector, (SIC 3581).

When the goal of regional economic development is shifted from industrial recruitment to targeting private equity investments, then analyzing the region's strengthening core regional technological competencies is the essential first step.

The analytical results of the Feser method would suggest to private investors which industrial sectors in the region would be potential investment targets because they were "members" of the regional industrial clusters whose inter-industrial multiplier relationships were not obvious.

Number of Pages in PDF File: 9

Keywords: Feser's input output regional model, regional value chains, high tech clusters, regional capital investments

JEL Classification: L16, M13, O16, O31, O32, O33, O34, O38, R58

working papers series