Science, technology, and regional economic development: Review and prospects

Abstract

This paper reviews the literature on the location and regional effects of science and technology (S&T) in the context of developed economies. Two processes associated with the creation of new products, agglomeration and spin-off, act to attract further innovative activity in those regions. Other regions, where R&D and related activities do not take place, are unlikely to be the locations of new-product production, and instead will tend to specialize in the production of standardized products. Both corporate and government R&D rely on pools of technical labor for technological and new-product activities; these pools of mobile workers are most attracted to large urban areas. In only some of these areas, however, does the spin-off process result in the generation of new technology-based firms. The availability of local venture capital appears to be the principal influence on this variation. Government policy regarding science and technology has impacts on regions by contributing to the agglomeration of R&D. Government policy also often fails to recognize that S&T policy and industrial policy have regional effects that may be long-term in nature and most detrimental to those regions whose economies are least competitive. Finally, some priorities for future research on innovation in a regional setting are identified.