Regional Innovation Potential: The Case of the U.S. Machine Tool Industry (Bruton Center for Development Studies)

This study analyzes a process vital to economic development - technological change. It is an attempt to further understand the processes driving innovation, so that we may gain a deeper insight into the development of economies. Specifically, the study explores the concept of innovation potential and the factors that result in variations in innovation potential across metropolitan areas, using the US machine tool industry as a case study. To provide a comparison, the same models are also estimated for the semiconductor industry. The findings indicate that urbanization economies, localization economies, human capital, universities and invention-derived knowledge are significant factors. The study asesses the contributions of three different skill levels of human capital: college-educated, graduate degree and locally produced PhDs in mechanical and electrical engineering. Only the graduate and PhD degree measures are found to be significant, indicating the importance of having a highly skilled pool of labour within the region. The influences of the factors appear to be similar across industries, with some slight differences. The transfer of knowledge through patents is also studied. It is found that the transmission of knowledge is slower between different industries, relative to the transmission in the same industry.