History Matters: Path dependence and innovation in British city ...

any patent applications. Conversely, firms in
most of the cities with newer industrial sectors
submitted above-average numbers of patent
applications.
We also found no necessary correlation
between the generation of patent applications
in a particular city and their use in the same
city. New knowledge is not necessarily used
in the city where it was created, a conclusion
derived from differences in growth rates
between high-tech manufacturing sectors. In
some cities with the highest rates of patent
applications, employment rates in such sectors
accelerated whereas in others they declined.
A key feature of innovation is not simply the
production of new economically valuable
knowledge but also its commercialisation and
sale. An important indicator of the relative
ability of city economies to commercialise new
knowledge is their proportion of knowledgeintensive
business services (KIBS). Again we
found their proportion highest in most of
the most innovative cities and lowest in most
of the least innovative. This lack of KIBS in
most of the low performing cities illustrates
a conundrum for such cities. They need KIBS
firms to provide specialised expertise in the
commercialisation of innovations but they
cannot create enough market demand for
their services without commercialising more
innovations in the first place.
Such problems illustrate the difficulty of
creating new pathways. For reasons not
properly explained by the data this may have
become more difficult during the 1990s, with
declining rates of new firm formation in most
of our sample of cities. New firm formation
was highest in those cities suffering most
from the “gales of creative destruction”
experienced in their traditional industries, while
some more innovative cities appeared to lose
some dynamism with falling rates of new firm
formation.
We tested the Jacobs proposition that local
variety is a source of new path creation. Here
we discovered a general decline in the sectoral
variety, as measured by the inverse Herfindahl-
Hirschman index of market concentration.
Conversely, most became more specialised over
the 1980s and 1990s. When we correlated the
index of variety with new firm formation we
found only a weak positive correlation between
them. As a result we argue that clustered
variety or groups of specialisations are the most
likely to create new pathways.
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