Abstract

A model of economic growth characterizes a knowledge filter between new knowledge and economically useful knowledge. The formation of new ventures and the absorptive capacity of incumbent firms are the mechanisms that penetrate the knowledge filter. Analysis from expanding economies (Colorado) shows that new firms are more proficient at penetrating the knowledge filter than are incumbent firms. This study explores the role of new and incumbent firms in penetrating the knowledge filter in declining economies (Ohio) utilizing spatial panel estimation techniques providing a more robust set of findings. The results suggest that new firms are more proficient at penetrating the knowledge filter in declining and growing regions alike.

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