The Geography of Organizational Knowledge

The evolution of the geographic distribution of producers in the television receiver and automobile industries is analyzed. Both industries experienced sharp shakeouts and evolved to be oligopolies, suggestive of increasing returns. The television receiver industry was initially concentrated regionally but evolved to be more dispersed over time. In contrast, the automobile industry was dispersed initially but evolved to be heavily concentrated around one city, Detroit, MI, that initially had no producers. Neither pattern conforms to theories that portray agglomerations as being beneficial to the firms that populate them. An alternative theory is developed and tested to explain the geographic evolution of the two industries. Firms are assumed to differ in terms of their initial competence at the time of entry, which shapes their long-term performance. They acquire their competence from firms in related industries and prior entrants into the new industry. The location and performance of entrants in both industries is analyzed, and it is shown how differential importance in the two sources of competence plays a critical role in explaining the contrasting evolution of the geographic structure of the two industries. [