Knowledge accessibility and New Firm Formation

It is obvious that knowledge plays a fundamental role for successful entrepreneurial activities. To have a chance to succeed new entries of firms into the market place must be based upon a new combination of knowledge that is at least marginally superior to existing combination in terms of product characteristics or price.Thus knowledge flows play an important role in fostering innovative and entrepreneurial activities.However the generation of the new knowledge by the means of both university and company R & D is strongly concentrated to a limited set of region.
Hence there are very substantial spatial variations in the accessibility to existing as well as new knowledge since flows of knowledge often are spatially bounded.The fact that knowledge can diffuse between locations does not imply that it transmits costless across geographic space.Accessing and absorbing knowledge is costly and geographical proximity reduces these costs.
There are major role of knowledge for successful entrepreneurship.Here are discussion of the role of accessibility to university and company R & D for new firm formation.Company R & D is assumed to contain a higher share of R & D directed towards generating technical knowledge.Since knowledge can also be assumed to be spatially bounded and diffuses in geographical space, it is argued that local interaction, measured by intra-municipality accessibility to knowledge, have a stronger influence on new firm formation than inter regional interaction.

Here is presented a micro-model of knowledge creation and transfer in a small group of people. It is intended to contribute eventually to the development of micro foundations for aggregate models of knowledge externalities used in various literature's, such as those pertaining to endogenous growth theory, urban secularisation and growth,organizational R & D and knowledge creation and human capital accumulation. Our model incorporates two keys aspects of the cooperative process of knowledge creation. They are-1.heterogeneity of people in their state of knowledge is essential for successful cooperation in the joint creation of new ideas, while, 2.the very process of cooperative knowledge creation affects the heterogeneity of people through the accumulation of knowledge in common.In the two person case we can show that the equilibrium process tends to result in the accumulation of too much knowledge in common compared to the most productive state.Unlike the two person case, in the four person case we can show that under certain conditions the equilibrium process of knowledge creation by four persons may converge to the most productive state.