Penetrating the "Knowledge Filter" in Regional Economies

A spatial econometric method is used to determinewhether new ventures matter more than incumbent firms in allowing knowledgespillovers to contribute to economic growth. The model introduces a"knowledge filter" between new knowledge and economic knowledge thatconstitutes a commercial opportunity. Data are collected from63 counties in the state of Colorado betweenthe years of 1990 to 2000. The interaction between knowledge spillovers and newventure creation appears to be a localized, regional phenomenon. Findings showthat the relationship between knowledge and economic growth is regulated by newventures moreso than the absorptive capacity of incumbent firms. Support isfound for the effect of knowledge spillovers on economic growth in terms of therate of new firm births.Conversely, it is found that incumbent firmsnegatively moderate the relationship between knowledge and growth.Consequently, as the value of incumbents rises, the positive relationshipbetween knowledge and growth declines. The findings suggest that incumbentoperations may serve as a medium for knowledge to flow from one region to thenext, which allows for the success and growth of new ventures. (NEE)