Human Creativity and the Case Against Regional Specialization: Theory, Case Studies and Policy Implications

Date of issue was Spring 2001.Regional specialization has long been thought to be both the logical outcome of market competition and the best geographical setting for innovation. Partly as a result of this belief, policies promoting regional specialization through “industrial clusters” have enjoyed worldwide popularity in the last decade. In recent years, however, a heated debate as to whether local diversity or specialization of economic activity is the best incubator of technological change and economic growth has been raging. Some authors argue that local diversity is more conducive to development through interindustry “dynamic knowledge externalities,” while others pretend to show that local specialization, by allowing a better allocation of resources and/or increased competition is more likely to do so. One of the reasons that this debate remains so controversial is that there is no clear understanding of the processes by which knowledge “spills over” from ia particular application domain to others. The purpose of this paper is therefore to point out some shortcomings of traditional approaches to the study “knowledge spillovers” and to suggest an alternative based on how knowledge is actually created and exchanged by individuals. Evidence is drawn from the history of technology, some Baltimore cases related to research activities conducted at the Johns Hopkins University and from a survey of Southern Quebec inventors. Much available evidence illustrates how by offering a greater number and variety of problems to be solved, as well as much wider pools of knowledge and other resources, a diversified city is more likely to foster innovation. While the processes by which individuals combine resources in a new way occur spontaneously on a large scale, some policy initiatives that might increase these knowledge flows are then discussed. Our main proposal is to create an association of retired individuals with a proven track record in terms of industrial innovation that would visit plants in industries they are not familiar with to see if they could suggest improved ways of doing things based on their past expertise.Citations of sources, conclusions, or opinions expressed in this publication are the responsibility of the author and do not reflect the policies or views of staff or others affiliated with the Institute for Policy Studies or Johns Hopkins University