Local diversity, human creativity, and technological innovation

The purpose of this paper is to point out some shortcomings of traditional approaches to the study of knowledge spillovers and to suggest an alternative based on how knowledge is actually created and exchanged by individuals. Which regional setting is the best incubator of technological change and economic growth? Is this promoted by regional diversity or specialization of economic activity? This study will include economic analyses of geographically localized dynamic knowledge externalities, Jacob's externalities, or adding new work to old, industrial classification and technology combination, human Creativity, and technology combination through human action and imaginative use of resources. Employees add to, or switch their product line; individuals move from one type of production to another; individuals observe a product/process in another setting and incorporate it, individuals possessing different skills and working for different firms collaborate; and urban diversity and resource collaboration are utilized. It is concluded that problems are solved through the combination of previously unrelated things and that promoting regional specialization at the expense of spontaneously evolved local diversity might be a counter-productive policy.