Economic Growth and Linkage with Silicon Valley: The Cases of Austin and Boston

What creates growth in a local economy? Answers to this question have varied markedly over the last forty years. In the 1980s, the revolutionary concept that knowledge, rather than labor and physical capital, was the prime engine of economic growth. This idea prompted policy makers and analysts to associate local economic development with the exchange of ideas among educated workers living in a city. A study was conducted that supported the suggestion that local firms operating in cities with a large pool of scientists and engineers can innovate more readily, secure more patents, and therefore enjoy more rapid rates of technical progress and productivity growth. Nowhere is this more evident than in the Silicon Valley in California and Route 128 in Massachusetts. Part of Austin's success as an innovation center is due to its ability to capture a large share of the flow of ideas and knowledge emerging from Silicon Valley.


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December 1, 2004