Technological Diversity and Jacobs' Externality Hypothesis Revisited

Olof Ejermo

No 16, Working Paper Series in Economics and Institutions of Innovation from Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

Abstract: Recent empirical evidence strongly supports Jacobs’ (1969) externality hypothesis, that urban diversity provides a more favorable environment for economic development. In order to correctly gauge Jacobs’ hypothesis, economic development should be understood as a result of innovations. Furthermore, it is argued that a relevant diversity-measure should take into account the degree of diversity between the inherent classes (e.g. pharmaceuticals are closer to chemicals than to forestry). These ideas are tested using regionally classified Swedish patent application data as a measure of innovativeness. Patent data are also used to reflect technological diversity. Recent empirical evidence strongly supports Jacobs’ (1969) externality hypothesis, that urban diversity provides a more favorable environment for economic development. In order to correctly gauge Jacobs’ hypothesis, economic development should be understood as a result of innovations. Furthermore, it is argued that a relevant diversity-measure should take into account the degree of diversity between the inherent classes (e.g. pharmaceuticals are closer to chemicals than to forestry). These ideas are tested using regionally classified Swedish patent application data as a measure of innovativeness. Patent data are also used to reflect technological diversity. The results show that the number of patent applications in Swedish regions is highly and positively dependent on regional technological specialization, quite the opposite to Jacobs’ prediction. The paper raises general questions about earlier empirical results. It is concluded that the size of regions is important is an important factor to consider, since this in itself may affect patenting intensity and technological diversity.

Keywords: Specialization; diversity; patenting; Sweden; regions (search for similar items in EconPapers)
JEL-codes: H41 O31 O40 R12 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2004-11-29
New Economics Papers: this item is included in nep-geo, nep-ino and nep-ure
Note: Accepted for publication in Growth and Change
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Journal Article: Technological Diversity and Jacobs’ Externality Hypothesis Revisited (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:cesisp:0016

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