Technology and Regional Development

Technology is considered as the ‘immediate’ determinant of the productivity and competitiveness of firms and regions, while institutions seem to be the deeper cause lying behind it. The strength of a region’s innovation system, and hence its economic performance, first depends on the quality and pattern of its sources of technological innovation. Such sources may include public research institutions, some large firms conducing large-scale R&D projects, a large number of co-located SMEs, and/or informal communities weaving them together. Local knowledge spillover has emerged as the principal approach in explaining the geographic mechanism of technological innovation. The key thesis is that a region’s innovative capacity comes from the formation of locally shared tacit knowledge through collective learning, and that this learning is enabled by interfirm networks facilitated by face-to-face communications. In recent years, this approach has been challenged from a variety of aspects, by reinterpreting tacit knowledge, reevaluating the role of geographic proximity, disputing the public good nature of knowledge spilled over, as well as reemphasizing the contribution of pecuniary externalities. A viable alternative theory, however, is yet to emerge. It seems that what we need is a more holistic theory of uneven regional development. Such a theory has to be based on a broadened conceptualization of institutions and resources, as well as an expanded list of the actors of innovation.