Why do social interactions linked to sharing knowledge drive the emergence of a regional technology economy? We proffer a positive theory and explanation-sketch identifying mechanisms and initial conditions in an explanation of emergence of a knowledge economy. We trace the emergence of a knowledge economy, from a small group of founding members to a regional technology economy. With the rapid influx of new people, knowledge spillover motivates technologists and entrepreneurs to reach out beyond existing contacts to explore the expanding knowledge economy and interact with new acquaintances in the search for novelty. In the course of network rewiring in knowledge clusters, individuals share knowledge and cooperate in innovation, and move to more central positions when they interact. Mirroring the trends of increased knowledge exploration and innovative activity at the individual level, new startup firms founded during this time period come to span a greater number of industry groups. Endogenous dynamics of overlapping knowledge networks lie behind the rapid morphogenesis of new regional technology economies in New York City and Los Angeles.
Keywords: Institutions; Knowledge economy; Knowledge spillover; Social exchange; Social mechanisms.
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