High-tech firm clustering: Implications for rural areas

High-tech firms continue to receive widespread attention as potential engines of local economic development. These firms are not only expected to pay higher wages and demand greater skills of their workers, but also to grow more rapidly than other types of firms. It is also widely known that-although exceptions exist-high-tech firms tend to cluster or colocate, with Silicon Valley or Boston's Route 128 being among the better-known examples. This clustering, which is not unique to the high-tech industry, in turn raises doubts as to whether rural communities will be able to attract the critical mass of firms needed to create a local high-tech industry. Our objectives in this paper are twofold. First, we examine the geographic patterns of high-tech industry locations across all U.S. counties. Second, we use spatial econometrics to separate cross-county influences (spillovers) on the locations of existing and new high-tech firms from inter- and intra-industry agglomeration effects. Prior industry location studies, including those of high-tech firms, have ignored the statistical implications of geographic clustering (for a recent exception, see Roe, Irwin, and Sharp). The same is true even of applied industry cluster studies, which tend not to account explicity for spatial interaction (Feser et al.).