NOT FOR QUOTATION WITHOUT PERMISSION OF THE AUTHOR
TECHNOLOGY AND REGIONAL DEVELOPMENT IN THE AMERICAN CONTEXT
John Rees
Howard Staf ford Ronald Briggs Raymond Oakey
August, 1983 CP-83-39
C o Z Z a b o r a t i v e P a p e r s
report work which has not been performed solely at the International Institute for Applied Systems Analysis and which has received only limited review. Views or opinions expressed herein do not necessarily represent those of the Institute, its National Member Organizations, or other organi- zations supporting the work.
INTERNATIONAL INSTITUTE FOR APPLIED SYSTEMS ANALYSIS
A-2361 Laxenburg, Austria
PREFACE
Many large cities in the developed countries have recently experienced a slow-down of growth, and in some cases, absolute contraction of their population size. These trends pertain in particular to old industrial agglomerations which often fail to adapt to the changing demands and locational requirements of modern production facilities and to differentiate their employ- ment structure.
Interrelations between industrial restructuring and urban regional change were among topics studied in the former Human Settlements and Services Area at IIASA. They are also of current research interest to the Regional and Urban Development Group.
The paper by J. Rees, H. Stafford, R. Eriggs and R. Oakey touches on several aspects of those interdependencies, especially the question of how do high-technology complexes develop over space.
Dr. Rees, who stayed at IIASA during July, 1982, is now Associate Professor of Geography, Maxwell School of Citizenship and Public Affairs, Syracuse University. Dr. Stafford is
Professor of Geography, University of Cincinnati. Dr. Briggs is Associate Professor of Geography, University of Texas at
Dallas. Dr. Oakey is Research Associate, University of Newcastle, United Kingdom.
Part I1 of the paper has been done within a framework of an international collaboration project involving similar studies in the U.K. and F.R.G. and coordinated by Professor John Goddard of Newcastle, U.K.
P. Korcelli
Research Scholar
B. Johansson
Acting Leader, RUD
August, 1983
CONTENTS
PART I:
SUMMARY
1INTRODUCTION 6
1. REGIONAL GROWTH THEORIES
&THEIR RELEVANCE TO UNDERSTANDING THE DEVELOPMENT OF HIGH TECHNOLOGY
COMPLEXES 8
2 .
INDUSTRIAL LOCATION THEORY AND THE LOCATION DECISION
PROCESS FOR HIGH TECHNOLOGY COMPANIES 3 5 3. TOWARDS AN EVALUATION OF HIGH TECHNOLOGY DEVELOP-
MENT PROGRAMS FOR CITIES AND STATES
5 24 .
REFERENCES
6 05 .
APPENDIX A: Further Background on the New Plant
Location Decision
6 4PART
11:SUMMARY
INTRODUCTION RESEARCH DESIGN RESULTS
FURTHER ANALYSIS OF REGIONAL AND METROPOLITAN ADOPTION PATTERNS
RESULTS OF INTERVIEW SURVEY CONCLUSIONS
REFERENCES
PART I:
A REVIEW OF REGIONAL GROWTH AND INDUSTRIAL LOCATION THEORY: Towards Understanding t h e Development o f High-Technology Complexes in t h e United States
John Rees and Eoward Stafford
Summary
I n o r d e r t o u n d e r s t a n d t h e development of high-technology complexes around t h e United S t a t e s , u s e f u l i n s i g h t s can be gained from r e v i e w i n g two major b o d i e s o f t h e o r y : t h a t d e a l i n g with r e g i o n a l economic growth i n a macro c o n t e x t , and i n d u s t r i a l l o c a - t i o n t h e o r y i n a m i c r o c o n t e x t . The r e l a t i v e importance of l o c a - t i o n f a c t o r s t h a t impact high-technology i n d u s t r i e s can be
a s s e s s e d from t h e s e t h e o r i e s , and s u g g e s t i o n s made f o r both s t a t e and f e d e r a l p o l i c y t o complement r a t h e r than c o n t r a d i c t each o t h e r i n t h e common p u r s u i t of n u r t u r i n g i n n o v a t i o n , enhancing
p r o d u c t i v i t y and i n c r e a s i n g economic growth a t t h e n a t i o n a l l e v e l . T h e o r i e s t h a t e x p l a i n r e g i o n a l economic growth d e a l w i t h t e c h n o l o g i c a l change i n a v a r i e t y of ways.
o Export b a s e t h e o r y a s s e r t s t h a t economic performance i s a f u n c t i o n of a r e g i o n ' s e x p o r t b a s e , e i t h e r n a t u r a l o r human, and s u g g e s t s t h a t t h e more
s u c c e s s f u l e x p o r t i n d u s t r i e s a r e t e c h n o l o g y - i n t e n s i v e , t h e r e f o r e r e s u l t i n g i n h i g h e r l e v e 1 s of r e g i o n a l p r o d u c t i v i t y . High technology i n d u s t r i e s can have h i g h e r i n t e r - and i n t r a - r e g i o n a l m u l t i p l i e r e f f e c t s t h a t h a s t e n t h e p r o c e s s of r e g i o n a l economic growth.
o F a c t o r p r i c e e q u a l i z a t i o n t h e o r i e s e x p l a i n how c a p i t a l and l a b o r can flow i n t e r - r e g i o n a l l y t o seek t h e i r h i g h e s t r e t u r n , and s t u d i e s of economic d e c e n t r a l i - z a t i o n from North t o South i n t h e l a s t twenty y e a r s have r e l a t e d p e r c a p i t a income convergence i n t h e
United S t a t e s t o t h e growth of key high-technology s e c t o r s i n p a r t i c u l a r r e g i o n s .
o Growth P o l e t h e o r y e x p l i c i t l y r e c o g n i z e s t h e
importance of p r o p u l s i v e , high-technology s e c t o r s i n t h e urban growth p r o c e s s , and how such c e n t e r s can perform a s i n c u b a t o r s o r seedbeds f o r t h e b i r t h o f new i n d u s t r y .
o The p r o d u c t and r e g i o n a l l i f e c y c l e t h e o r i e s of r e g i o n a l development r e c o g n i z e t h a t i n d u s t r i e s and p r o d u c t s have d i f f e r e n t l o c a t i o n a l r e q u i r e m e n t s a t v a r i o u s s t a g e s of t h e i r development. T h e r e f o r e , w h i l e new p r o d u c t development t e n d s t o t a k e p l a c e i n RbD- i n t e n s i v e l o c a t i o n s l i k e Boston, New York o r t h e San F r a n c i s c o a r e a ; mass p r o d u c t i o n t e c h n i q u e s a l l o w pro- d u c t i o n t o t a k e p l a c e i n more p e r i p h e r a l a r e a s l i k e t h e C a r o l i n a s , Georgia and TExas where l a b o r c o s t s have t r a d i t i o n a l l y been cheaper.
o D i f f u s i o n t h e o r y i s more concerned w i t h t h e s p r e a d of i n n o v a t i o n than i t s g e n e r a t i o n . Yet t h e speed w i t h which p r o d u c t i v i t y enhancing innovat i o n s s p r e a d be-
tween r e g i o n s of t h i s c o u n t r y c a n p l a y a c r i t i c a l r o l e i n a c c e l e r a t i n g t h e economic growth p r o c e s s .
Though t h e above a r e p a r t i a l t h e o r i e s t h a t e x p l a i n d i f f e r e n t a s p e c t s of t h e r e g i o n a l development p r o c e s s , t h e r e does n o t a p p e a r t o be any need f o r a new t h e o r y t o e x p l a i n t h e development of h i g h technology complexes i n t h e United S t a t e s . Growth p o l e and
p r o d u c t c y c l e t h e o r y t o g e t h e r a r e p a r t i c u l a r l y a p p r o p r i a t e
e x p l a n a t o r y frameworks i n t h i s r e g a r d . I n d e e d , when t h e s e a r e i n t e g r a t e d i n t o a r e g i o n a l l i f e c y c l e framework, much i n s i g h t c a n b e g a i n e d a b o u t c o n t e m p o r a r y growth and change i n t h e v a r i o u s r e g i o n s o f t h e c o u n t r y . Growth c e n t e r s o r " S u n s p o t s " i n t h e S o u t h and West c a n b e s e e n a s new economic s t r u c t u r e s i n new r e g i o n s
t h a t h a v e by-passed t h e o b s o l e s c e n t p l a n t s o f t h e o l d i n d u s t r i a l h e a r t l a n d . On t h e o t h e r h a n d , t h e economic t r a n s f o r m a t i o n o f New E n g l a n d c o u p l e d w i t h i n c r e a s i n g i n f l a t i o n i n t h e g r o w t h a r e a s o f
t h e S o u t h and West may r e s u l t i n a new r e g i o n a l e q u i l i b r i u m i n t h e U n i t e d S t a t e s where b o t h t h e momentum o f t h e new g r o w t h c e n t e r s and t h e i n d i g e n e o u s t e c h n o l o g i c a l p o t e n t i a l o f t h e o l d e r h e a r t l a n d may r e s u l t i n b o t h a r e a s growing i n t h e f u t u r e , even i f a t
r e l a t i v e l y s l o w r a t e s .
I n d u s t r i a l l o c a t i o n t h e o r y t e l l s u s t h a t t h e e x e c u t i v e s o f h i g h - t e c h n o l o g y companies u n d e r t a k e t h e i r l o c a t i o n a l s e a r c h i n much t h e same way a s e x e c u t i v e s o f o t h e r c o m p a n i e s . Yet t h e
f a c t o r s t h a t a t t r a c t them i n t o a community o r a t l e a s t t h e p r i o r i t y g i v e n t o v a r i o u s f a c t o r s c a n b e d i f f e r e n t from o t h e r companies.
o A p p r o p r i a t e l a b o r i s by f a r t h e most i m p o r t a n t s i n g l e v a r i a b l e t h a t i n f l u e n c e s t h e l o c a t i o n a l s e a r c h o f a h i g h - t e c h n o l o g y company e x e c u t i v e .
o S e v e r a l o t h e r key l o c a t i o n f a c t o r s a l s o r e l a t e t o t h i s human f a c t o r . I m p o r t a n t a r e t h e q u a l i t i e s o f l i f e i n a n a r e a : t h e e x i s t e n c e o f good s c h o o l s and u n i v e r s i - t i e s f o r t h e a t t r a c t i o n , t r a i n i n g and r e t e n t i o n and
s k i l l e d workers and managers; and t h e r e c r e a t i o n a l a m e n i t i e s o f an a r e a .
High-technology i n d u s t r i e s a r e n o t a s c l o s e l y t i e d t o t h e l o c a t i o n of m a t e r i a l s o r m a r k e t s a s a r e o t h e r i n d u s t r i e s . On t h e o t h e r hand, t h e y a r e n o t f o o t l o o s e e i t h e r , g i v e n t h a t t h e l a b o r - o r i e n t a t i o n i t s e l f c a n b e l o c a t i o n a l l y c o n s t r a i n i n g .
There i s no r e a s o n t o b e l i e v e t h a t high-technology companies w i l l be o v e r l y i n f l u e n c e d by f i s c a l i n c e n t i v e s a t t h e S t a t e o r
l o c a l l e v e l , any more t h a n o t h e r companies would. I n d e e d , t h e b e s t inducement s t r a t e g y f o r a s t a t e o r c i t y t o l u r e h i g h - t e c h companies i s t o s u p p o r t a human c a p i t a l s t r a t e g y t h a t emphasizes t h e t r a i n i n g and r e t r a i n i n g o f l a b o r and q u a l i t y e d u c a t i o n i n g e n e r a 1.
Because of t h e i n c r e a s i n g involvement o f s t a t e s and c i t i e s i n i n t e n s e c o m p e t i t i o n f o r high-technology j o b s , i t h a s become even more i m p o r t a n t r e c e n t l y f o r communities t o be aware o f t h e l o c a t i o n f a c t o r s p e r c e i v e d t o be i m p o r t a n t by c o r p o r a t e
e x e c u t i v e s .
Hence, t h e r e e x i s t s a need f o r community d e v e l o p e r s t o moni- t o r t h e i r l o c a t i o n a l a t t r i b u t e s i n a r e a l i s t i c manner, and t o match t h e s e a t t r i b u t e s w i t h t h e needs o f p a r t i c u l a r i n d u s t r i e s .
I n t h e i r development s t r a t e g i e s , communities need t o e v a l u a t e : o t h e i r e x i s t i n g economic b a s e , and i d e n t i f y p o t e n t i a l
l i n k a g e s t o a p p r o p r i a t e h i g h - t e c h s e c t o r s .
o t h e i r l a b o r market and l i n k s t o s o u r c e s o f q u a l i t y e d u c a t i o n l o c a l l y , p a r t i c u l a r l y a c c e s s t o major u n i - v e r s i t i e s and r e s e a r c h i n s t i t u t i o n s .
o the amenities they offer, especially access to recreational and cultural opportunities.
o
their financial infrastructure, especially access to local development capital for medium size and small f irms .
o access to local and national markets via different forms of transportation.
Communities which see themselves as lacking in some of these
attributes would need to concentrate their development strategies
on deficiencies where appropriate. Most communities would wish to
foster one or more of the following: manpower assistance, techni-
cal and financial assistance and improve their access to cultural
and physical amenities. Though many communities may expend many
resources on such ventures, their success rate in attracting in
high-technology companies will in all probability be small.
Introduction
To gain an understanding of how high-techno log^ industrial complexes develop around the country, insig~s h can be gained from
two major bodies of theory: theories of regional economic growth and industrial location theory. Part I contains a review of the various partial theories of regional economic growth, each dealing with technological change in either an explicit or implicit
fashion. From this review, the most appropriate elements of regional growth theory that helps us explain the development of high-technology complexes are identified.
Because these growth theories deal with regional develoment in a macro sense, their applicability in understanding the loca- tion patter-s
nof industry depends on the cumulative effect of in-
dividual decision makers. Therefore, in order to appreciate the geographical orientation of high-technology industry, it is necessary to examine industrial location theory and how locat ion factors implicit in that theory relate to high-technology
industry. This is the focus of the second part of this paper.
The increasing involvement of states and cities in the com- petition for high-technology jobs has made it imperative that com- munities be aware of the location factors perceived to be
important by decision makers before they develop strategies to lure high-technology companies.
Part 3 deals with ways in which communities can monitor and mobilize their local potential for attracting high-tech industries
in a realistic manner. A target industry methodology is suggested
a s a n o b j e c t i v e way o f m a t c h i n g community a t t r i b u t e s w i t h t h e n e e d s o f h i g h - t e c h i n d u s t r y . F i n a l l y , t h e c h a n c e s o f s u c c e s s i n s u c h e n d e a v o r s a r e examined i n t h e l i g h t o f many communities c h a s i n g a s m a l l number o f p o t e n t i a l c l i e n t s , when p a s t development i n c e n t i v e s h a v e shown l i t t l e e v i d e n c e o f s u c c e s s . I f s t a t e p o l i c i e s c a n c e l e a c h o t h e r o u t i n t r y i n g t o a t t r a c t h i g h - t e c h companies i n t o t h e i r
l o c a l i t i e s , many r e s o u r c e s c o u l d b e w a s t e d .
1. Regional Growth T h e o r i e s and T h e i r Relevance t o Understanding t h e Development of High Technology Complexes.
I n t h e same way t h a t t h e r e l a t i o n s h i p between t e c h n o l o g i c a l change and economic growth remained among t h e " t e r r a i n c o g n i t a " of modern economics u n t i l r e c e n t l y , r e g i o n a l economists and economic geographers have been slow t o examine r e g i o n a l v a r i a t i o n s i n t h e
l i n k between i n n o v a t i o n , d i f f u s i o n , and r e g i o n a l economic growth e i t h e r c o n c e p t u a l l y o r e m p i r i c a l l y . There i s growing e v i d e n c e , however, t h a t f a c t o r s i n f l u e n c i n g t e c h n o l o g i c a l change may v a r y between r e g i o n s i n a s y s t e m a t i c manner (Thomas and Le Heron 1975, Rees 1979, Oakey, Thwaites and Nash 1980, J . E . C . 1982).
Because of t h e r e c e n t advent of what Business Week c a l l e d t h e high-technology "War between the S t a t e s " , i t seems a p p r o p r i a t e t o review r e g i o n a l growth t h e o r y t o t r y and f u r t h e r o u r under- s t a n d i n g of t h e development o f high-technology complexes. Though most t h e o r i e s t h a t p u r p o r t t o e x p l a i n r e g i o n a l economic growth do n o t e x p l i c i t l y a d d r e s s t h e r o l e of t e c h n o l o g i c a l change, t h i s
f a c t o r i s i m p l i c i t i n most o f t h e t h e o r i e s developed t o d a t e . These t h e o r i e s w i l l be reviewed h e r e a s t o how they d e a l w i t h t e c h n o l o g i c a l change and how they r e l a t e t o t h e development of high-technology complexes around t h e United S t a t e s .
A t t h e o u t s e t i t should be recognized t h a t t h e r e i s no s i n g l e , a c c e p t a b l e , comprehensive r e g i o n a l growth t h e o r y , b u t a s e t of p a r t i a l t h e o r i e s t h a t e x p l a i n o r emphasize d i f f e r e n t a s - p e c t s o f t h e r e g i o n a l development p r o c e s s . Though t h e r e have been a t t e m p t s a t s y n t h e s i z i n g t h e s e p a r t i a l t h e o r i e s i n t o a r e g i o n a l
growth t h e o r y ( n o t a b l y by Richardson 1973) t h e s e a t b e s t a r e d i f - f i c u l t t o o p e r a t i o n a l i z e i n a p o l i c y c o n t e x t . The t h e o r i e s r e - viewed h e r e a r e t h e r e f o r e p a r t i a l t h e o r i e s , e a c h d e a l i n g w i t h
t e c h n o l o g i c a l change i n d i f f e r e n t and o f t e n l i m i t e d ways.* These t h e o r i e s i n v o l v e :
( i ) t h e r o l e of a r e g i o n ' s e x p o r t b a s e
( i i ) r e g i o n a l income convergence o r d i v e r g e n c e o v e r time ( i i i ) growth p o l e t h e o r y
( i v ) r e g i o n a l d i f f u s i o n p r o c e s s e s ( v ) p r o d u c t and r e g i o n a l l i f e c y c l e s
1.1 Export Base Theory
S e v e r a l r e s e a r c h e r s have s t r e s s e d - t h e r o l e of e x p o r t s a s t h e i n i t i a l t r i g g e r f o r r e g i o n a l growth ( N o r t h , 1955, P e r l o f f and Wingo, 1961). A t i t s s i m p l e s t , e x p o r t b a s e t h e o r y s t a t e s t h a t a
r e g i o n ' s growth r a t e i s a f u n c t i o n of i n t e r - r e g i o n a l and i n t e r - n a t i o n a l e x p o r t performance.
"This a b i l i t y t o e x p o r t i n d u c e s a f l o w of income i n t o t h e r e g i o n which, through t h e f a m i l i a r m u l t i p l i e r e f f e c t , t e n d s t o expand t h e i n t e r n a l m a r k e t s of t h e r e g i o n f o r b o t h n a t i o n a l and r e g i o n - s e r v i n g goods and s e r v i c e s . . . . A s t h e r e g i o n a l market ex- pands and r e g i o n s e r v i n g a c t i v i t i e s p r o l i f e r a t e , c o n d i t i o n s may d e v e l o p f o r s e l f r e i n f o r c i n g and s e l f s u s t a i n i n g r e g i o n a l growth,
*Useful r e v i e w s of t h e s e t h e o r i e s a r e t o b e found i n Lloyd and Dicken (19771, and W e i n s t e i n and F i r e s t i n e ( 1 9 7 8 ) .
and new i n t e r n a l f a c t o r s may become important i n d e t e r m i n i n g t h e r a t e s of r e g i o n a l growth, such a s e x t e r n a l economies a s s o c i a t e d w i t h s o c i a l overhead c a p i t a l and t h e agglomeration of i n d u s t r i e s , and i n t e r n a l economies of s c a l e " ( P e r l o f f and Wingo, 1961, p. 200).
The r e s o u r c e endowments of a r e g i o n a r e t h e r e f o r e s e e n a s d e t e r m i n i n g i t s c o m p e t i t i v e advantage over o t h e r r e g i o n s , and such endowments can c l e a r l y be modified through t e c h n o l o g i c a l change, changes i n t h e l a b o r f o r c e , t h e i m p o r t a t i o n of c a p i t a l and t h e l i k e . For example, t h r e e i n d i v i d u a l s r e l o c a t e d from t h e N o r t h e a s t i n t h e 1930s i n s e a r c h f o r Gulf o i l , i n i t i a l l y founding Geophysical S e r v i c e s I n c o r p o r a t e d . Due t o t h e l a c k of indigenous technology, they d e v i s e d t h e i r own i n s t r u m e n t a t i o n i n t h e s e a r c h f o r o i l and t h i s l e d t o t h e b i r t h of one o f America's most s u c c e s s f u l e l e c - t r o n i c s companies, Texas I n s t r u m e n t s .
Not o n l y can such export-producing i n d u s t r i e s r e s u l t i n a r e g i o n a l b a l a n c e of payments s u r p l u s , b u t e x p o r t i n d u s t r i e s tend t o have s t r o n g forward and backward l i n k a g e s w i t h o t h e r i n d u s t r i e s i n o t h e r r e g i o n s , hence a i d i n g t h e i n t e g r a t i o n of t h e developing r e g i o n i n t o t h e n a t i o n a l economy. Furthermore, "export i n d u s t r i e s tend t o be t e c h n o l o g i c a l l y advanced and L O o p e r a t e a t h i g h e r l e v e l s of p r o d u c t i v i t y . Income g e n e r a t i o n from h i g h - p r o d u c t i v i t y i n - d u s t r i e s f i l t e r s through t h e r e g i o n and h e l p s t o s p u r development of r e s i d e n t i a r y (non e x p o r t ) i n d u s t r i e s " (Weinstein and F i r e s t i n e , 1978, p. 6 2 ) . Hence, e x p o r t base t h e o r y r e c o g n i z e s t h e h i g h e r m u l t i p l i e r p o t e n t i a l of high-technology s e c t o r s , though t h e e x a c t n a t u r e of such m u l t i p l i e r s has n o t been t h e focus of much e m p i r i c a l work.
1.2 Regional Income I n e q u a l i t y T h e o r i e s
A number of t h e o r i e s have been concerned w i t h e x p l a i n i n g r e g i o n a l income i n e q u a l i t y , mostly i n t h e c o n t e x t of d e v e l o p i n g c o u n t r i e s o r growth r e g i o n s i n more advanced economies. These
t h e o r i e s s u g g e s t t h a t t h e economic growth p r o c e s s , once t r i g g e r e d by some i n i t i a l m o t i v a t i n g f o r c e , t e n d s t o b e c u m u l a t i v e i n n a t u r e . Under t h i s r u b r i c , t h e r e a r e two major t y p e s of t h e o r i e s :
1.2.1 F a c t o r P r i c e E q u a l i z a t i o n T h e o r i e s
The n o t i o n of convergence i n r e g i o n a l incomes emerged from t h e o r i e s of i n t e r n a t i o n a l and i n t e r - r e g i o n a l t r a d e . The key a s - sumption of t h e s e models i s t h a t f a c t o r s of p r o d u c t i o n - - c a p i t a l and l a b o r i n p a r t i c u l a r - - a r e " f r e e " t o move i n economic s p a c e t o seek t h e i r p o i n t of h i g h e s t r e t u r n . Hence, i n t e r - r e g i o n a l m o b i l i t y of c a p i t a l from n o r t h e r n t o s o u t h e r n s t a t e s i n t h e 1970s i s s e e n a s movement from a r e a s of low r e t u r n , t o a r e a s o f h i g h r e t u r n
(Wheaton, 1979). E v e n t u a l l y , an e q u i l i b r i u m i s reached where p e r c a p i t a income i s e q u a l i z e d between r e g i o n s .
Evidence shows t h a t a h i g h d e g r e e of r e g i o n a l income con- v e r g e n c e took p l a c e i n t h e United S t a t e s over t h e l a s t f i f t y y e a r s
(Survey of C u r r e n t B u s i n e s s , A p r i l 1977, W e i n s t e i n and F i r e s t i n e , 1978). I n 1929, p e r c a p i t a income i n t h e Southwest was only 53 p e r c e n t of t h e U.S. a v e r a g e , b u t by 1976 t h i s had reached 84 p e r c e n t of t h e U.S. a v e r a g e . During t h e same time p e r i o d a l l b u t two of t h e i n d u s t r i a l s t a t e s of t h e N o r t h e a s t and Midwest showed r e l a t i v e d e c l i n e s i n per c a p i t a income, w i t h d r a s t i c de-
c l i n e s i n some s t a t e s , n o t a b l y New York, C o n n e c t i c u t and Delaware.
S i n c e t h e S o u t h e a s t e r n and S o u t h w e s t e r n s t a t e s have been t h e l a r g e s t r e c i p i e n t s of b o t h p h y s i c a l and human c a p i t a l o v e r t h a t p e r i o d , t h i s s u g g e s t s t h a t b o t h i n d u s t r i a l companies and in- d i v i d u a l s were s e e k i n g t o maximize income, hence c a u s i n g income convergence among r e g i o n s .
The i n t r a - r e g i o n a l p a t t e r n o f c a p i t a l m o b i l i t y i n t h e United S t a t e s i n r e c e n t t i m e s i s however a complex one. "Income a n a l y s i s o f economic and p o p u l a t i o n t r e n d s d u r i n g t h e s e v e n t i e s i n d i c a t e s
t h a t a powerful d e c e n t r a l i z a t i o n o f a c t i v i t y was o c c u r r i n g
....
Buti m p o r t a n t q u a l i f i c a t i o n s need t o b e made a b o u t t h e p e r i p h e r y , f o r i t was n o t a n economic monolith" ( K e i n a t h , 1982, p. 3 5 6 ) . Growth r a t e s among t h e s t a t e s o f t h e S u n b e l t South have by no means been e q u a l , r e f l e c t i n g l a r g e d i f f e r e n c e s i n i n d u s t r i a l s t r u c t u r e . "The dominant i n d u s t r i e s i n t h e C a r o l i n a s , Tennessee and Texas have i n c l u d e d t e x t i l e s , a p p a r e l and food p r o c e s s i n g - - a l l c o m p a r a t i v e l y l a b o r i n t e n s i v e and low wage i n d u s t r i e s a t t h e mature end o f t h e i r technology c y c l e s . N e a r l y 42 p e r c e n t o f t h e S o u t h ' s m a n u f a c t u r i n g employment a r e i n low-wage i n d u s t r i e s a s compared t o o n l y 20 p e r - c e n t f o r t h e U.S. a s a whole. The South employs o n l y a b o u t 25 p e r - c e n t o f i t s m a n u f a c t u r i n g workers i n h i g h wage i n d u s t r i e s a s com- pared t o 37 p e r c e n t f o r t h e United S t a t e s " ( W e i n s t e i n and
F i r e s t i n e , 1978, p. 5 1 ) . The f a c t t h a t r e g i o n a l income con-
v e r g e n c e between North and South a p p e a r s t o have been l e d h i s t o r i - c a l l y by t h e d e c e n t r a l i z a t i o n o f r e l a t i v e l y low-technology i n - d u s t r i e s and low-technology s e c t o r s o f high-technology i n d u s t r i e s
can a l s o b e e x p l a i n e d by t h e r e g i o n a l m a n i f e s t a t i o n of t h e p r o d u c t c y c l e model d i s c u s s e d l a t e r .
1.2.2 Unbalanced Growth T h e o r i e s
While r e g i o n a l convergence o r e q u i l i b r i u m t h e o r i s t s s e e t h e s p r e a d e f f e c t s of development a s t h e mechanism by which growth i s t r a n s m i t t e d t h r o u g h o u t a n economic system, a d v o c a t e s of unbalanced growth, p a r t i c u l a r l y Myrdal (1957) and Hirschmann (19581, s t r o n g l y d i s p u t e t h e e f f e c t i v e n e s s of t h e s e s p r e a d e f f e c t s . M y r d a l ' s t h e o r y of unbalanced growth c e n t e r e d around t h e n o t i o n of " c u m u l a t i v e c a u s a t i o n " mechanisms where market f o r c e s tend t o a t t r a c t economic a c t i v i t y i n c e r t a i n a r e a s t h a t a c q u i r e d an i n i t i a l a d v a n t a g e
through l o c a t i o n , t e c h n o l o g y o r some o t h e r f a c t o r s . The b u i l d u p becomes s e l f - s u s t a i n i n g , and r e s u l t s i n v e r y l i t t l e growth i n p e r i p h e r a l r e g i o n s . Myrdal does n o t deny t h e e x i s t e n c e of s p r e a d e f f e c t s , p a r t i c u a r l y i n t h e c a s e of an advanced, i n t e g r a t e d , economic system l i k e t h e United S t a t e s . He o n l y a r g u e s t h a t
market mechanisms do n o t i n e v i t a b l y produce such s p r e a d e f f e c t s t o promote an e q u a l i z a t i o n of growth imbalances.
Lagging a r e a s a r e d e b i l i t a t e d by what Myrdal c a l l s "backwash e f f e c t s " , a n a l o g o u s t o Hirschmann's " p o l a r i z a t i o n " p r o c e s s e s . From h e r e l a b o r and c a p i t a l m i g r a t e t o t h e growth a r e a s of t h e
I I
c e n t e r " , w h i l e i n v e s t m e n t l e v e l s i n p u b l i c s e r v i c e a l s o i n h i b i t t h e development of p e r i p h e r a l a r e a s . Thus, a c c o r d i n g t o
M r r d a l , t h e backwash e f f e c t s r e i n f o r c e t h e tendency f o r r e g i o n a l income d i v e r g e n c e .
For both Myrdal and Hirschmann, economic developnent is a function of interaction between leading (core) and lagging (peri- pheral) regions. Thus, if spread (trickle down) effects are stronger than the backwash (polarization) processes, cumulative causation mechanisms will lead to the development of new economic centers and lay the foundation for future innovation growth. While recognizing the complexities implicit in the delicate balance be- tween equilibrating and disequilibrating forces, Williamson's (1965, p. 199) definitive study of the experience of 24 countries concludes that "rising regional income disparities and increasing North-South dualism is typical of early development stages, while regional convergence and a disappearance of severe North-South problems is typical of the more mature stages of national growth and development". The recent history of America's regions tends to bear witness to this conclusion.
"Although Myrdal and Hirschmann did not have the United States in mind when referring to northern (growing) and southern (lagging) regions, their descriptions of the economic growth process sound remarkably like the American experience over the past century" (Weinstein and Firestine, 1978, p. 58). It was not until the period between 1880 and 1910 that the Northeast and Mid- west developed into the dominant industrial region of the country,
accounting for 72 percent of all U.S. manufacturing by 1937.
Shortly thereafter, spread effects started to emanate from the industrial core, with Northern capital investing in Southern and Western agriculture and transportation, and generating the material
r e q u i r e m e n t s of t h e Manufacturing B e l t . The predominance of m i l i - t a r y b a s e s s e t up i n t h e South and West, f i r s t a s s o c i a t e d with World War I1 i f n o t t h e C i v i l War, had an a p p r e c i a b l e i n f l u e n c e on n e t m i g r a t i o n flows. Between 1965 and 1970, m i l i t a r y p e r s o n n e l accounted f o r 14 p e r c e n t of i n t e r - r e g i o n a l m i g r a n t s and i s t e s t i - mony t o t h e r o l e t h a t government p o l i c y can p l a y i n s p r e a d e f f e c t s . More r e c e n t l y , p l a n t o b s o l e s c e n s e , and e x t e r n a l i t i e s such a s in-
c r e a s e d c o n g e s t i o n and p o l l u t i o n served as push f a c t o r s f o r an i n c r e a s e d d e c e n t r a l i z a t i o n of economic a c t i v i t y from t h e North.
T h i s coupled w i t h t h e p u l l of cheaper l a b o r , l e s s u n i o n i z a t i o n , growing markets and a p e r c e i v e d i n c r e a s e i n a m e n i t i e s i n Southern and Western s t a t e s caused t h e p r o c e s s t o g a i n momentum t o such an e x t e n t t h a t i t has been i n t e r p r e t e d a s
a
r e a l i g n m e n t of t r a d i t i o n a l c o r e - p e r i p h e r y r e l a t i o n s h i p s i n t h e United S t a t e s . The c o r er e g i o n ' s r e l a t i v e d e c l i n e d u r i n g t h e 1970s can t h e r e f o r e be r e l a t e d t o t h e cumulative e f f e c t s of a g r a d u a l d i s p e r s a l of i n n o v a t i v e a c t i v i t y t o t h e South and West.
Growth P o l e Theory
Economic development t h e o r i s t s have recognized f o r some time t h a t growth o c c u r s i n i t i a l l y around one o r more r e g i o n a l c e n t e r s of economic s t r e n g t h . Hirschmann (1958, p.
183)
argues: "This need f o r t h e emergence of 'growing p o i n t s ' o r 'growth p o l e s ' i n t h e c o u r s e of t h e development p r o c e s s means t h a t i n t e r n a t i o n a l and i n t e r r e g i o n a l i n e q u a l i t y of growth i s an i n e v i t a b l e concomitant and c o n d i t i o n of growth i t s e l f . Thus, i n t h e geographic s e n s e , growth i s n e c e s s a r i l y unbalanced".The o r i g i n s of growth p o l e t h o e r y i s u s u a l l y t r a c e d t o t h e French e c o n o m i s t , F r a n c o i s P e r r o u x , whose o r i g i n a l c o n c e p t i o n of growth p o l e s r e f e r r e d t o i n d u s t r i a l s e c t o r s and n o t t h e i r s p a t i a l m a n i f e s t a t i o n . I n t h i s s e n s e r e s e a r c h on growth p o l e s h a s been c o n f u s i n g . While non-geographic o r i g i n a l l y , i t became t r a n s f o r m e d i n t o a s p a t i a l c o n c e p t m o s t l y by r e g i o n a l p l a n n e r s under t h e term g r o w t h c e n t e r . (See r e v i e w s by Darwent, 1969, and Hansen, 1972.)
I n P e r r o u x ' s c o n c e p t u a l i z a t i o n , p o l a r i z a t i o n depended on t h e growth of one o r more p r o p u l s i v e i n d u s t r i e s o r companies w i t h p a r t i c u l a r c h a r a c t e r i s t i c s : t h e y had t o b e r e l a t i v e l y l a r g e , f a s t - g r o w i n g , have w e l l developed s u p p l i e r and market l i n k s w i t h o t h e r
i n d u s t r i e s , and be i n n o v a t i v e . Such p r o p u l s i v e i n s t i t u t i o n s would a l s o i n c l u d e u n i v e r s i t i e s , a s w i t n e s s e d by t h e r o l e of MIT i n t h e c r e a t i o n of t h e Route 128 i n d u s t r i a l complexes. Such i n s t i t u t i o n s were s e e n t o b e l e a d e r s , though s e c t o r a l p o l a r i z a t i o n i n t h i s con- t e x t d i d n o t n e c e s s a r i l y imply g e o g r a p h i c a l c l u s t e r i n g . However, i t i s g e n e r a l l y r e c o g n i z e d t h a t " t h e r e do a p p e a r t o b e s i g n i f i c a n t s p a t i a l p o l a r i z i n g i n f l u e n c e s p r e s e n t i n t h e working of t h e m u l t i - p l i e r " (Lloyd and Dicken, 1977, p. 406). These i n c l u d e i n p a r t i - c u l a r , t h e o p e r a t i o n of s c a l e f a c t o r s ( s p e c i f i c a l l y a g g l o m e r a t i o n economies), t h e s p a t i a l c l u s t e r i n g of i n n o v a t i o n s and t h e n a t u r e of i n d u s t r i a l d e c i s i o n making d i s c u s s e d i n p a r t 2 of t h i s p a p e r .
Growth p o l e t h e o r y t h e r e f o r e h a s a more e x p l i c i t r e c o g n i t i o n of t h e i m p ~ r t a n c e of t h e l i n k between t e c h n o l o g i c a l change, i n - n o v a t i o n and r e g i o n a l economic growth t h a n t h e o t h e r t h e o r i e s r e - viewed s o f a r .
"Thus one may e n v i s a g e t h e s i t u a t i o n o f a growing, s u c c e s s - f u l economic s y s t e m , s a y a n i n d u s t r i a l c i t y , drawing t o i t t h e i d e a s of s p a t i a l l y d i s p e r s e d i n v e n t o r s s e a r c h i n g f o r s p o n s o r s h i p , p u l l i n g i n t h e s k i l l s o f m i g r a n t s , i n v e s t i n g i t s own f u n d s i n t h e s e a r c h f o r i n v e n t i o n and u s i n g i t s a c c u m u l a t i n g c a p i t a l and l a b o r t o c o n v e r t t h i s f l o o d o f new technology i n t o e f f e c t i v e u s e (Lloyd and Dicken, 1977, p. 409). Pred shows t h i s i n t h e c o n t e x t o f t h e American u r b a n s y s t e m a t t h e end of t h e n i n e t e e n t h c e n t u r y . "New o r e n l a r g e d u r b a n i n d u s t r i e s and t h e i r ' m u l t i p l i e r ' e f f e c t s c r e a t e d t h e employment o p p o r t u n i t i e s t h a t s u c e s s i v e l y a t t r a c t e d ' a c t i v e ' and ' p a s s i v e ' m i g r a n t s t o t h e i n f a n t m e t r o p o l i s e s , and e v e n t u a l l y l e d t o a d d i t i o n a l m a n u f a c t u r i n g growth by d i r e c t l y o r i n d i r e c t l y enhancing t h e p o s s i b i l i t y o f i n v e n t i o n and i n n o v a t i o n " ( P r e d , 1966, p. 3 9 ) . Wilbur Thompson (1968) t a k e s t h i s argument f u r t h e r by s u g g e s t i n g t h a t t h e major a d v a n t a g e s o f l a r g e u r b a n a r e a s do n o t l i e s o much i n t h e i r economic b a s e i n t h e t r a d i t i o n a l s e n s e b u t r a t h e r i n t h e i r c a p a c i t y t o i n n o v a t e , a s r e f l e c t e d i n u n i v e r s i t i e s and r e s e a r c h i n s t i t u t i o n s w i t h a n e x p l i c i t concern f o r c r e a t i v i t y , a g a i n e x p l a i n i n g t h e r o l e of
MIT
and S t a n f o r d i n t h e c r e a t i o n o f Route 128 and S i l i c o n V a l l e y , r e s p e c t i v e l y .The tendency f o r e n t r e p r e n e u r i a l s k i l l and i n n o v a t i o n po- t e n t i a l g e n e r a l l y t o b e c o n c e n t r a t e d i n l a r g e u r b a n a r e a s i s r e i n - f o r c e d by t h e o r g a n i z a t i o n a l s t r u c t u r e o f modern b u s i n e s s e n t e r - p r i s e s . The c o n t r o l f u n c t i o n s o f l a r g e i n d u s t r i a l e n t e r p r i s e s have become c o n c e n t r a t e d i n l a r g e m e t r o p o l i t a n a r e a s t o t h e e x t e n t
t h a t Stanback (1982) c o u l d r e c e n t l y i d e n t i f y a group o f command and c o n t r o l c e n t e r s w i t h i n t h e American u r b a n system.
S i n c e most new b u s i n e s s e s t e n d t o s t a y i n a r e a s where t h e i r f o u n d e r s were i n i t i a l l y l o c a t e d , i t i s a l s o l i k e l y t h a t l a r g e u r b a n a r e a s w i l l spawn more new companies t h a n s m a l l u r b a n a r e a s . Thus l a r g e r a g g l o m e r a t i o n s s e r v e a s seedbeds o r i n c u b a t o r s f o r t h e growth o f new companies ( ~ t r u y k and James, 1975, Cooper, 1971, D a n i l o v , 1972). To d a t e v e r y l i t t l e e m p i r i c a l e v i d e n c e e x i s t s on
t h e way urban a r e a s f u n c t i o n a s i n d u s t r i a l s e e d b e d s and how t h i s r e l a t e s t o t h e i r i n n o v a t i o n p o t e n t i a l . I n t u i t i v e l y , however, one c a n i d e n t i f y a network o f primary and secondary seedbeds f o r i n - n o v a t i v e i n d u s t r i e s t h a t may f o l l o w t h e u r b a n - s i z e h i e r a r c h y .
There does e x i s t e v i d e n c e t h a t t h e d i f f u s i o n o f i n d u s t r i a l i n n o v a t i o n may be h i g h l y r e l a t e d t o p e r s o n n e l movements between f i r m s i n t h e same and r e l a t e d s e c t o r s . But v e r i f i c a t i o n of t h i s p r o c e s s i s l i m i t e d and based on d a t e d e m p i r i c a l s t u d i e s . Many r e c e n t g e n e r a l i z a t i o n s a b o u t t h e p r o c e s s r e f e r t o t h e work o f Cooper (1971) on t h e s p i n - o f f p r o c e s s i n t h e San F r a n c i s c o a r e a . Out o f Cooper's work came t h e c o n c l u s i o n t h a t s m a l l f i r m s have h i g h e r s p i n - o f f r a t e s t h a n l a r g e f i r m s . But such s t a t e m e n t s may n o t h o l d t r u e o v e r time ( g i v e n t h e v i c i s s i t u d e s o f t h e b u s i n e s s c y c l e ) n o r o v e r s p a c e . Indeed one key v a r i a b l e s o f a r i n r e c e i p t o f l i t t l e a t t e n t i o n i s t h e r o l e o f o r g a n i z a t i o n a l s t r u c t u r e and c o r p o r a t e p o l i c y on s p i n - o f f mechanisms. I n t h i s r e s p e c t we can c l a s s i f y s p i n - o f f f i r m s a c c o r d i n g t o how t h e y came a b o u t :
a . C o m p e t i t i v e spin-offs--where employees l e a v e a company and e s t a b l i s h t h e i r own companies where t h e p r o d u c t s compete d i r e c t l y w i t h t h o s e of t h e i n i t i a l p a r e n t . Because most
b u y e r s r e q u i r e a "second s o u r c e , " t h e need f o r d u p l i c a t i o n and s t a n d a r d i z a t i o n of p r o d u c t s can b e a major s t i m u l u s f o r s p i n - o f f h e r e .
b. Backward l i n k e d spin-off--where employees s e t up t h e i r own company t o s u p p l y t h e p a r e n t w i t h needed m a t e r i a l s .
T h i s may b e t h e r e s u l t of a c o n s c i o u s parent-company p o l i c y d e c i s i o n t o buy r a t h e r than make a p r o d u c t i t n e e d s , i . e . , where t h e s p i n - o f f i s d i r e c t l y encouraged by t h e p a r e n t . c . Forward l i n k e d spin-off--where employees s e t up a com- pany t o market p r o d u c t s on which t h e y worked f o r t h e p a r e n t . T h i s may o c c u r where a n employee i d e n t i f i e s a p o t e n t i a l u s e f o r a p r o d u c t , and d e c i d e s t o market t h e i d e a h i m s e l f . T h i s c o u l d have a major e f f e c t on t h e d i f f u s i o n and a d o p t i o n o f a p a r t i c u l a r p r o d u c t .
I t s h o u l d a l s o b e r e c o g n i z e d t h a t l a r g e f i r m s c a n l i m i t t h e number o f e x t e r n a l s p i n - o f f s by e n c o u r a g i n g f l e x i b i l i t y and reward f o r p r o d u c t and p r o c e s s i n n o v a t i o n w i t h i n t h e f i r m , i . e . , by
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de f a c t o e n c o u r a g i n g i n t e r n a l s p i n - o f f s f o r r i s k y R&D v e n t u r e s w i t h a t h r e e t o f i v e y e a r make o r b r e a k h o r i z o n . Texas I n s t r u m e n t s h a s been s e e n a s a company t h a t f i n d s and k e e p s t e c h n i c a l e n t r e p r e n e u r sthrough i t s s m a l l b u s i n e s s development schemes w i t h i n t h e company.
T h i s may be one r e a s o n why t h e number of s p i n - o f f s i n t h e D a l l a s a r e a (where Texas I n s t r u m e n t s i s t h e l e a d i n g e l e c t r o n i c s company) i s i n comparison w i t h t h e number of s p i n - o f f s from F a i r c h i l d i n t h e San F r a n c i s c o Bay a r e a . To d a t e , however, we have v e r y l i t t l e e v i d e n c e on how t h e s p i n - o f f p r o c e s s works i n d i f f e r e n t t y p e s o f h i g h - t e c h n o l o g y companies o r i n d u s t r i e s .
I n t h e c o n t e x t of growth p o l e t h e o r y , i t i s a l s o i m p o r t a n t t o emphasize t h a t f o r most i n d u s t r i e s : " i n v e s t m e n t d e c i s i o n s t e n d t o f a v o r t h o s e systems i n which p r e v i o u s i n v e s t m e n t h a s a p p a r e n t l y met w i t h f a v o r a b l e r e t u r n s " (Lloyd and Dicken, 1977, p. 4 1 2 ) . Large growing u r b a n a r e a s a r e powerful s o u r c e s o f demand f o r i n - vestment funds a s a r e s u l t of t h e i r p r o p e n s i t y t o c r e a t e expanding o p p o r t u n i t i e s f o r i n n o v a t i o n . Hence, one would e x p e c t t h e l a r g e r u r b a n a r e a s t o be t h e most f e r t i l e spawning grounds f o r h i g h - t e c h - nology i n d u s t r i e s . N e v e r t h e l e s s , t h e f a s t e r growth r a t e s o f s m a l l and medium-sized growth c e n t e r s i n r e c e n t y e a r s coupled w i t h t h e r e v i t a l i z a t i o n o f n o n ? n e t r o p o l i t a n a r e a s s u g g e s t t h a t p o w e r f u l a g g l o m e r a t i n g t e n d e n c i e s a r e a l s o a t work i n t h e s e s m a l l e r growth c e n t e r s w i t h p o p u l a t i o n s between 200,000 and 1 m i l l i o n . Because of t h i s s h i f t towards what I r v i n g K r i s t o l c a l l e d a n u r b a n c i v i l i - z a t i o n w i t h o u t c i t i e s , i t i s indeed p o s s i b l e t h a t h i g h - t e c h com- p l e x e s w i l l d e v e l o p i n a wide v a r i e t y o f d i f f e r e n t l o c a t i o n s . For t h i s r e a s o n , t h e n e x t round o f h i g h - t e c h growth p o l e s may w e l l b e away from t h e l a r g e a g g l o m e r a t i o n s of Boston, San F r a n c i s c o , New York, D a l l a s and Phoenix, and towards medium-sized growth c e n t e r s of t h e c o u n t r y
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p l a c e s l i k e A u s t i n , Texas; Albuquerque, New Mexico; Colorado S p r i n g s , Colorado; P o r t l a n d , Oregon; Lowell, M a s s a c h u s e t t s ; and t h e l i k e . These a r e g e n e r a l l y u r b a n p l a c e s s m a l l enough t o o f f e r a s u p e r i o r q u a l i t y o f l i f e w h i l e s t i l l b e i n g l a r g e enough t o p r o v i d e n e c e s s a r y s e r v i c e s and a c c e s s i b i l i t y .1.4 D i f f u s i o n Theory
Though e c o n o m i s t s ( M a n s f i e l d , 1977, Gold, 1977) have u n d e r - t a k e n numerous s t u d i e s of t e c h n o l o g y t r a n s f e r and t h e d i f f u s i o n o f i n d u s t r i a l i n n o v a t i o n s , t h e y have l a r g e l y i g n o r e d t h e r e g i o n a l c o n t e x t of i n n o v a t i o n s . L i k e w i s e , g e o g r a p h e r s have a l o n g t r a - d i t i o n of c o n c e r n f o r t h e i n n o v a t i o n d i f f u s i o n p r o c e s s
( ~ a ~ e r s t r a n d , 1967, Brown, 1 9 8 0 ) , b u t most o f t h e i r r e s e a r c h h a s f o c u s e d on consumer r a t h e r t h a n i n d u s t r i a l i n n o v a t i o n s . Thus, t h e r e e x i s t s a need t o i n t e g r a t e a p p r o p r i a t e e l e m e n t s o f b o t h eco- nomic and s p a t i a l models of i n n o v a t i o n d i f f u s i o n .
I n t h i s c o n t e x t , Brown ( 1 9 8 0 ) h a s i d e n t i f i e d a t l e a s t f o u r a p p r o a c h e s t o t h e s t u d y o f i n n o v a t i o n d i f f u s i o n :
o t h e a d o p t i o n a p p r o a c h which f o c u s e s on t h e p r o c e s s by which a d o p t i o n o c c u r s , m o s t l y a s a f u n c t i o n o f t h e
l e a r n i n g o r communications p r o c e s s .
o t h e m a r k e t and i n f r a s t r u c t u r e a p p r o a c h , f o c u s i n g on t h e ways i n which a d o p t i o n c o n d i t i o n s a r e made a v a i l a - b l e v i a d i f f u s i o n a g e n c i e s and a d o p t i o n s t r a t e g i e s . o t h e economic h i s t o r y p e r s p e c t i v e which emphasizes t h e
dynamic, e v o l v i n g n a t u r e o f i n n o v a t i o n s .
o t h e development p e r s p e c t i v e w i t h f o c u s on t h e impact o f d i f f u s i o n on employment and r e g i o n a l d i s p a r i t i e s . From t h e s e v a r i o u s a p p r o a c h e s t o t h e s t u d y o f i n n o v a t i o n d i f f u s i o n , a t l e a s t f o u r t y p e s o f d i f f u s i o n models c a n be i d e n t i - f i e d :
a . t h e e p i d e m i c d i f f u s i o n model which emphasizes d i s t a n c e decay f a c t o r s and t h e l o g i s t i c s c u r v e , where d i f f u s i o n i s
s e e n a s a f u n c t i o n of t h e c o n t a c t system o f a d o p t e r s . The
" t y r a n n y of d i s t a n c e " i m p l i e s t h a t t h e d i f f u s i o n o r s p r e a d o f i n n o v a t i o n s i s most e f f e c t i v e i n a r e a s c l o s e t o t h e p o i n t o f o r i g i n ( s e e p a r t 2 f o r more d e t a i l ) .
b. t h e h i e r a r c h i c a l d i f f u s i o n model, emphasizing t h e u r b a n - s i z e h i e r a r c h y a s t h e prime d e t e n n i n a n t o f t h e d i f - f u s i o n p r o c e s s
err^,
1972). While most i n i t i a l a p p r o a c h e s saw t h e format o f flow f i l t e r i n g down t h e u r b a n s i z e h i e r - a r c h y t h i s does n o t n e c e s s a r i l y imply a r i g i d p r o g r e s s i o n from l a r g e r t o s m a l l e r u r b a n c e n t e r s f o r a l l t y p e s of inno- v a t i o n s . Pred h a s r e l a t e d t h i s t o t h e o r g a n i z a t i o n a l s t r u c -t u r e of m u l t i - l o c a t i o n a l companies:
" I f d i f f u s i o n i n f l u e n c e flows i n t e r - o r g a n i z a t i o n a l l y , o r from one h e a d q u a r t e r s c i t y t o a n o t h e r , such d i f f u s i o n need n o t b e merely comprised o f l a r g e r - c i t y t o s m a l l e r - c i t y sequences. It may
a l s o i n c l u d e s p r e a d from l a r g e c i t i e s t o even l a r g e r c i t i e s , from s m a l l e r c i t i e s t o l a r g e r c i t i e s , o r from one c i t y o f a g i v e n s i z e t o a n o t h e r c i t y o f a p p r o x i m a t e l y t h e same s i z e . " ( P r e d , 1975, p. 256).
F u r t h e r , i n one o f t h e few e x i s t i n g s t u d i e s on t h e i n t e r - r e g i o n a l d i f f u s i o n o f i n d u s t r i a l i n n o v a t i o n s , M a r t i n and Swan (1979, p. 22) conclude: " I f a n i n n o v a t i o n o r i g i n a t e s i n a n i n - d u s t r y where t h e p r o c e s s o f d i f f u s i o n i s governed by market s t r u c - t u r e , r e g i o n a l c h a r a c t e r i s t i c s c a n l a r g e l y b e i g n o r e d . On t h e o t h e r hand, i f an i n n o v a t i o n i s d i f f u s e d a c c o r d i n g t o t h e u r b a n h i e r a r c h y , t h e r e g i o n a l f a c t o r becomes preponderant." I n n o v a t i o n s
i n m a n u f a c t u r i n g a r e i n c l u d e d i n t h e f o r m e r , w h i l e consumer i n - n o v a t i o n s i n v o l v e t h e l a t t e r .
c . The i n t e r - i n d u s t r y d i f f u s i o n model e m p h a s i z e s t h e s e c - t o r a l e n v i r o n m e n t o f a f i r m and t h e i m p o r t a n c e o f c o n t e x t u a l v a r i a b l e s s u c h a s m a r k e t s t r u c t u r e , p r o f i t a b i l i t y , a c c e s s t o c a p i t a l m a r k e t s and age o f c a p i t a l s t o c k i n e x p l a i n i n g t h e d i f f u s i o n p r o c e s s ( M a n s f i e l d , 1977).
d. The i n t e r - o r g a n i z a t i o n a l d i f f u s i o n model f o c u s e s on t h e i n t e r n a l c h a r a c t e r i s t i c s o f f i r m s a s d e t e r m i n a n t s o f d i f f u s i o n , t o g e t h e r w i t h a t t i t u d i n a l and i n f o r m a t i o n v a r i a - b l e s .
One r e a s o n why t h e s e models have n o t b e e n i n t e g r a t e d i n t o a comprehensive d i f f u s i o n t h e o r y t o d a t e r e l a t e s t o t h e f a c t t h a t t h e y o p e r a t e a t d i f f e r e n t l e v e l s o f a n a l y s i s . "The e p i d e m i c and h i e r a r c h i c a l d i f f u s i o n models s t r i c t l y viewed, d e a l w i t h t h e q u e s t i o n o f
-
how a phenomenon d e v e l o p s i n t i m e and s p a c e , w h i l e o n l y t h e i n d u s t r y - s p e c i f i c and f i r m - s p e c i f i c models a t t e m p t t o answer t h e q u e s t i o n o f why a p a r t i c u l a r d i f f u s i o n p a t t e r nemerges.
. . .
I f one t h u s q u e s t i o n s t h e i n f l u e n c e o f s p a c e on t h e d i f f u s i o n o f i n n o v a t i o n s one must p r o c e e d from b o t h o f t h e last-named models and i n v e s t i g a t e how t h e v a l i d i t y o f t h e s e models i s m o d i f i e d by t h e f a c t t h a t t h e economic s u b j e c t s a r e exposed t o v a r y i n g l o c a t i o n a l environment^^^ (Ewers and Wettman, 1980, p. 169).Because o f o p e r a t i o n a l problems i m p l i c i t i n t h i s t y p e o f r e s e a r c h , v e r y l i t t l e e m p i r i c a l s t u d i e s e x i s t on t h e i n t e r - r e - g i o n a l d i f f u s i o n o f p r o d u c t i o n i n n o v a t i o n s , p a r t i c u l a r l y i n t h e
United S t a t e s . One of t h e few s t u d i e s t o show t h a t g e o g r a p h i c a l v a r i a t i o n s may produce v a r i a t i o n s i n r a t e s o f t e c h n o l o g i c a l change comes from B r i t a i n and i n c l u d e s a n a n a l y s i s of d a t a on t h e f i r s t a d o p t i o n of s i g n i f i c a n t m a n u f a c t u r i n g i n n o v a t i o n s (Oakey, Thwaites and Nash, 1980). A f t e r they allowed f o r r e g i o n a l v a r i a t i o n s i n p l a n t s i z e s t r u c t u r e , a n a n a l y s i s o f t h e l o c a t i o n o f p l a n t s r e - s p o n s i b l e f o r t h e f i r s t commercial p r o d u c t i o n o r a p p l i c a t i o n o f n e a r l y 300 major p r o d u c t and p r o c e s s i n n o v a t i o n s between 1965 and 1978 showed t h a t t h e S o u t h e a s t r e g i o n ( t h e "core" of t h e U.K.) i s by f a r t h e most i n n o v a t i v e . T h i s r e g i o n was s e e n t o have a l a r g e c o n c e n t r a t i o n o f h e a d q u a r t e r s f u n c t i o n s ( p a r t i c u l a r l y i n R&D and m a r k e t i n g ) , i n d e p e n d e n t b u s i n e s s s e r v i c e s and t h e a v a i l a b i l i t y of
s p e c i a l i s t s k i l l s on t h e l o c a l l a b o r market. S i m i l a r l y , M a l e c k i ' s (1980) work i n t h e United S t a t e s i d e n t i f i e d t h e l o c a t i o n a l concen- t r a t i o n of R&D work i n t h e "core" s t a t e s o f t h e N o r t h e a s t and Mid- w e s t . I n c o n t r a s t , t h e i n d u s t r i a l m i l i e u o f p e r i p h e r a l a r e a s i n B r i t a i n would a p p e a r t o b e l e s s conducive t o i n d u s t r i a l innova- t i o n , a r e f l e c t i o n o f an i n d u s t r i a l s t r u c t u r e dominated by b r a n c h p l a n t s t h a t o n l y s u p p o r t a l i m i t e d range of management c o n t r o l f u n c t i o n s .
The e x a c t n a t u r e of d i f f e r e n c e s under t h e more complex r e - g i o n a l s t r u c t u r e of t h e United S t a t e s i s n o t known t o d a t e . A s a s t e p i n u n d e r s t a n d i n g more a b o u t r e g i o n a l d i f f e r e n c e s i n innova- t i o n p o t e n t i a l i n t h i s c o u n t r y a r e c e n t s t u d y of t h e i n t e r - r e - g i o n a l d i f f u s i o n o f new, computerized p r o d u c t i o n p r o c e s s e s i n t h e United S t a t e s (Rees and B r i g g s , 1983) r e l a t e s t h e a d o p t i o n o f t h e s e
i n n o v a t i o n s t o a number o f c o n t e x t u a l v a r i a b l e s : s e c t o r a l , o r g a n i - z a t i o n a l and g e o g r a p h i c a l . A random sample o f 600 m a n u f a c t u r i n g p l a n t s i n t h e m a c h i n e r y and e l e c t r o n i c i n d u s t r i e s (SIC 35 and 3 6 ) a c r o s s t h e U n i t e d S t a t e s shows t h a t a d o p t i o n r a t e s f o r t h e s e new t e c h n o l o g i e s ( c o m p u t e r i z e d n u m e r i c a l c o n t r o l s y s t e m s , t h e u s e o f computers i n c o m m e r c i a l , d e s i g n and m a n u f a c t u r i n g a c t i v i t i e s , p r o - grammable h a n d l i n g s y s t e m s and t h e u s e o f m i c r o p r o c e s s o r s i n f i n a l p r o d u c t s ) v a r i e d s i g n i f i c a n t l y a c c o r d i n g t o :
o t h e o r g a n i z a t i o n a l s t a t u s o f p l a n t s , where p l a n t s be- l o n g i n g t o m u l t i - p l a n t f i r m s were much more l i k e l y t o a d o p t t h a n s i n g l e - p l a n t f i r m s ,
o s i z e o f p l a n t , where l a r g e r p l a n t s had much h i g h e r a d o p t i o n r a t e s t h a n s m a l l e r o n e s ,
o a g e o f p l a n t , where t h e o l d e r m a n u f a c t u r i n g p l a n t s showed a h i g h e r p r o p e n s i t y t o a d o p t t h a n newer p l a n t s , o R&D ( r e s e a r c h and development) i n t e n s i t y , where p l a n t s w i t h some R&D o n - s i t e o r a t some o t h e r l o c a t i o n w i t h i n
t h e company had h i g h e r a d o p t i o n r a t e s .
o and by l o c a t i o n , where p l a n t s i n t h e o l d e r e s t a b l i s h e d m a n u f a c t u r i n g b e l t ( t h e N o r t h e a s t and North C e n t r a l
c e n s u s r e g i o n s ) showed h i g h e r a d o p t i o n r a t e s t h a n p l a n t s i n t h e S o u t h and West. I n t h i s s t u d y , t h e age o f p l a n t v a r i a b l e shows s t r o n g e v i d e n c e t h a t t h e o l d e r m a n u f a c t u r i n g p l a n t s a c r o s s t h e c o u n t r y have b e e n r e -
j u v e n a t i n g t h e m s e l v e s t o remain c o m p e t i t i v e . T h i s s u g g e s t s t h a t t h e i n n o v a t i v e c a p a c i t y o f t h e o l d e r
industrial heartland of the country should not be written off in any attempt at reindustrialization or economic recovery that may be initiated at the federal level.
Product and Regional Life Cycles
Building on growth pole theory, and recognizing the pro- pulsive nature of technology in changing regional economic struc- ture, regional researchers in the 1970s turned to the product cycle model and the technology life-cycle concept for more appropriate explanations of the changing locational requirements of firms that are developing products at different stages of maturity (Thomas, 1980, Rees, 1979, Norton and Rees, 1979). Drawing on Vernon's work in an international context and Thompson's (1968) filtering down theory of industrial location the product cycle model has been used to explain recent regional industrial shifts in the United States.
Briefly, the product cycle model is based on the premise that products evolve through three distinct stages in their life cyc les
:o an innovation stage where a new product is manufac- tured in the home region and introduced in a new market area by exports,
o a growth stage where external demand (inter-regional
or international) expands to a point where direct in-
vestment in production facilities becomes feasible and
when process technology can be transferred,
o and a standardization stage when production may shift to low-cost locations.
This model has an explicit locational dimension since each stage of the product cycle has different locational requirements.
The innovation stage which needs a high input of RCD is usually carried out in high-cost areas, as in the case of mini- and micro- computers in California and Massachusetts. The standardization phase on the other hand favors low-cost locations, typically peri- pheral areas where labor costs are cheap, and the level of unioni- zation is low. This part of the argument explains the early loss of nearly one million production jobs from the Manufacturing Belt between 1947 and 1963. This application of the product cycle model also implies that as decentralization of production accu- mulates in peripheral growth centers, external economies of scale will increase in those locations, particularly agglomeration eco- nomies, service infrastructure development and local linkages.
Furthermore, regional demand in the receiving regions can grow to a critical threshold where industrial growth takes off on its own though a seedbed or indigenous generation effect, e.g., large com- panies spawning small companies, particularly in high-technology sectors. Aiding this growth process in the new areas is the im- migration of entrepreneurs. Evidence of such developments can be
seen in the once-peripheral new growth centers (the Sunspots) o f the South and West, as in the Dallas-Forth Worth area (Rees, 1979). This spatial manifestation of the product cycle therefore implies that over time regions can change their roles from being
r e c i p i e n t s of i n n o v a t i o n ( v i a b r a n c h p l a n t s ) t o become g e n e r a t o r s of i n n o v a t i o n through i n d i g e n o u s growth.
T r a d i t i o n a l l y t h e M a n u f a c t u r i n g B e l t h a s s e r v e d a s t h e seed- bed of i n n o v a t i o n f o r t h e American i n d u s t r i a l system ( P e r l o f f and Wingo, 1961, Rosenberg, 1972). Using t h e p r o d u c t c y c l e framework, Norton and Rees (1979) argued t h a t t h e d i f f u s i o n of technology-
i n t e n s i v e growth s e c t o r s t o t h e more p e r i p h e r a l growth c e n t e r s o f t h e U n i t e d S t a t e s ( l i k e D a l l a s and Phoenix) means t h a t t h e i n - n o v a t i o n p o t e n t i a l o f t h e Manufacturing B e l t h a s been e r o d e d and
t h a t o f t h e p e r i p h e r y enhanced. S h i f t s h a r e a n a l y s i s showed t h a t t h e M a n u f a c t u r i n g B e l t was s e e n t o s p e c i a l i z e i n n a t i o n a l l y de- c l i n i n g i n d u s t r i e s , whereas t h e p o s i t i v e i n d u s t r i a l mix o f p e r i - p h e r a l a r e a s showed a g r e a t e r s h a r e of more t e c h n o l o g y - i n t e n s i v e growth i n d u s t r i e s ( e l e c t r o n i c s SIC 3 6 , a v i a t i o n equipment SIC 372, s c i e n t i f i c i n s t r u m e n t s SIC 38, c h e m i c a l s and p l a s t i c s SIC 28 and 30). While t h i s a n a l y s i s was c a r r i e d o u t on an a g g r e g a t e d r e - g i o n a l l e v e l ( u s i n g Census d i v i s i o n s ) i t t e n d s t o i g n o r e t h e i n t r a - r e g i o n a l v a r i a t i o n s t h a t make t h e F r o s t b e l t - S u n b e l t d i s t i n c t i o n a q u e s t i o n a b l e o n e , i . e . , i t i s more a p p r o p r i a t e t o t h i n k i n terms of growth c e n t e r s w i t h i n t h e p e r i p h e r y ( o r S u n s p o t s ) a s opposed t o a l a r g e homogenous r e g i o n l i k e t h e S u n b e l t .
Given t h e c o m p l e x i t i e s of r e g i o n a l i n d u s t r i a l change i t i s d i f f i c u l t t o s e p a r a t e c y c l i c a l from s t r u c t u r a l changes d u r i n g t h e stop-go i n f l a t i o n - r e c e s s i o n a r y e r a of t h e 1970s and e a r l y 1980s.
S i n c e t h e c a p i t a l goods s e c t o r of t h e M a n u f a c t u r i n g B e l t was
s e r i o u s l y h i t by t h e G r e a t R e c e s s i o n s o f 1975 and 1982, i t i s q u i t e
