The exploration of technological diversity and the geographic localization of innovation

This paper examines the innovative ability of small firms in the semiconductor industry regarding their exploration of technological diversity and their integration within local knowledge networks. Through the analysis of patent data, we compare the innovative activity of start-up firms and larger firms. We find that small firms explore new technological areas by innovating in less 'crowded' areas. The analysis of patent citation data reveals that small firms are tied into regional knowledge networks to a greater extent than large firms. These findings point to the role of entrepreneurial firms in the exploration of new technological spaces and in the diffusion of their accumulated knowledge through local small firm networks.