In this chapter knowledge capital is seen as a specific combination of subsets of human and social capital, much as real estate capital combines physical and social capital. Knowledge capital is a key factor that drives economic growth and development. Knowledge is different from information; it is more complex and multifaceted, as it can be private or public. It can be embodied in machinery or tacit knowledge in humans, but dissemination processes cause its disembodiment. Scientific knowledge has become an increasingly important precondition for the emergence of investments in industrial research and development. The broad spectrum of new technologies in the pharmaceutical, biotechnological, information and transportation industries would have been unthinkable without earlier fundamental creativity in mathematics, physics, chemistry and biology. Scientific breakthroughs almost always occur many decades before being exploited by entrepreneurial innovators. Rogers Hollingsworth has shown that the increasing complexity of many products and production systems requires a reorganization of scientific research with a greater emphasis on multidisciplinary departments and laboratories. The possibility of exploiting advantages of a diversified scientific knowledge base also points toward increasing dynamic comparative advantages of locating universities and research institutes in large cities. Quantitative analyses of science networks show that the San Francisco Bay Area, Boston, London, Tokyo, Paris and Randstad (Amsterdam) are the most important nodes in the world of science, with Beijing, Seoul and Shanghai exhibiting the highest growth rates in science output among large cities. The advantages of dynamic interactions between scientific creativity and industrial development will reinforce the long-term sustainable growth in regions that host large-scale agglomerations of scientific research.
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