Organizational Attributes and the Distribution of Rewards in a Region: Managerial Firms vs. Knowledge Clusters

Abstract

This paper expands the organization theory and evidence on regional industrial agglomerations. We define regional economic activities according to the attributes of the organizations that populate a region and investigate how organizational characteristics influence macro-outcomes at a regional economic level. We focus on two dimensions emerging from two widely known organizational forms: the managerial corporation and the knowledge cluster with a marked orientation toward interfirm knowledge spillovers. We use an original data set of 146 U.S. cities to obtain variations in the extent to which they are populated by managerial firms or knowledge clusters. By utilizing city-level measures of managerial salaries, we test how the intensity of managerial corporation versus knowledge cluster characteristics affects the mean and dispersion of the “rewards” of cities. Our evidence suggests that higher managerial corporate characteristics lower the variability of rewards, while they have no effect on the mean of rewards. Higher-knowledge cluster characteristics produce both higher dispersion and higher expected rewards. We explain these results by looking at the different learning mechanisms of the two organizational types. In so doing, we highlight the role of intra- and interfirm knowledge processes as important sources of differences in the rewards of the two models. From an empirical point of view, results are confirmed using both patent-based and skill mobility-based measures of knowledge spillovers.