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Location Strategies and Knowledge Spillovers

Stern School of Business, New York University, 40 West Fourth Street, Tisch 7-15, New York, New York 10012
R. H. Smith School of Business, University of Maryland, 3417 Van Munching Hall, College Park, Maryland 20742
jalcacer{at}stern.nyu.edu
wchung{at}rhsmith.umd.edu

Given the importance of proximity for knowledge spillovers, we examine firms’ location choices expecting differences in firms’ strategies. Firms will locate to maximize their net spillovers as a function of locations’ knowledge activity, their own capabilities, and competitors’ anticipated actions. Using new entrants into the United States from 1985 to 1994, we find that firms favor locations with academic innovative activity. Other results highlight differences in firms’ location strategies suggesting that firms consider not only gains from inward knowledge spillovers but also the possible cost of outward spillovers. While less technologically advanced firms favor locations with high levels of industrial innovative activity, technologically advanced firms choose only locations with high levels of academic activity and avoid locations with industrial activity to distance themselves from competitors.

Key Words: agglomeration economies; knowledge spillovers; location choice
History: Received: January 2, 2004;

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