Innovation and the Growth of Cities

Innovation and the Growth of Cities

Zoltán J. Ács

This new and original book by Zoltan Acs explores the relationship between industrial innovation and economic growth at the regional level, and reaches conclusions as to why some regions grow but others decline. While the analysis draws on industrial organization, labor economics, regional science, geography and entrepreneurship, the book focuses on innovation and the growth of cities by the use of endogenous growth theory.

Chapter 8: Employment, Wages and R & D Spillovers

Zoltán J. Ács

Subjects: economics and finance, economics of innovation, evolutionary economics, geography, cities, innovation and technology, economics of innovation, urban and regional studies, cities


8. Employment, wages and R&D spillovers 8.1 INTRODUCTION Localized clusters of high-technology firms, such as California’s famous Silicon Valley or Boston’s Route 128, are of significant interest to policymakers and economists alike. For in addition to favorable effects on international competitiveness and their role in structural change, such clusters generate considerable regional benefits in terms of jobs, growth and economic development. Understanding the determinants of the spatial distribution of high-technology activities is therefore important for both regional and industrial policy. Traditional explanations of locational choice refer to transportation costs and proximity to raw material, fuel or labor inputs as major factors in the agglomerative process. A recent body of literature in which spillovers play a major role distinguished information spillovers with respect to their origin. This literature has developed in response to research by Krugman (1991), Henderson (1988), and Glaeser et al. (1992). In the first approach externalities work within industries. Concentrated industry structures, it is argued, are advantageous due to the internationalization of spillovers. Local concentration within an industry is therefore supportive of growth (Romer 1990). A very different position has been attributed to Jacobs (1969). Jacobs perceives information spillovers from other industries to be more important for the firm than within-industry information flows. Heterogeneity not specialization is seen as the most important regional growth factor. Glaeser et al. analyze the six largest industries in each of 170 US cities. Their results are consistent with the presence of Jacobs-type externalities. Industries will grow sluggishly in cities with high...

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