An Evolutionary Theory of Regional Economic Growth and Change

This article develops a theoretical model of regional economic growth and change. It does so by first identifying how the spatial economy creates, selects, and retains knowledge variety through an examination of patent records and relevant literatures. The article then synthesizes these findings to create a theoretical model and formalizes the theoretical model into a computer simulation. The resulting simulation model is highly predictive and adaptable, as we demonstrate by applying the model to test a core hypothesis from the economic geography literature. Since Saxenian's (1994) comparison of the circumscribed technology firms of Boston to the relatively open and porous technology firms of Silicon Valley, the innovativeness of regional economies is broadly understood to be rooted in their propensity to create knowledge spillovers. The simulation model isolates the mechanism of knowledge spillovers to explore its relationship with regional dynamism. The results show that knowledge variety and innovation are maximized in regions with firms that allow most, but not all, of their knowledge to spill over to neighboring firms. The results give scientific clarity to how localized knowledge spillovers can both enhance and diminish regional innovative growth, and underscore the practical utility of formalized evolutionary modeling.