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Second Interim Report
Clair Brown, Editor

10. How does Knowledge Flow? Inter-Firm Patterns in the Semiconductor Industry
Melissa M. Appleyard

10.6 Summary and Conclusions

Knowledge propels growth—the growth of a country, industry, or company. In the semiconductor industry, the augmentation of knowledge occurs at such a rapid pace that its management becomes a key competitive variable. In fact, the vitality of regions where semiconductor firms are clustered, such as California's Silicon Valley, rely on the inter-firm connections built on private channels of communication (Saxenian, 1994). Successful knowledge management hinges on optimal cross-company sharing dictated by net benefit calculations.

The survey data presented in this paper show that public sources of technical information play a larger role in knowledge diffusion in Japan relative to the U.S. and in the semiconductor industry relative to the steel industry. Important knowledge-sharing vehicles in the semiconductor industry differ in terms of the intensity of human interaction. For example, the use of trade journals can be characterized by a low intensity of interaction relative to face-to-face meetings. These findings suggest that an effective system of knowledge management would endow employees with the appropriate tools to seek and absorb knowledge from outside of the company's boundaries.

Not only is it important for firms to understand knowledge flows for optimal knowledge management strategies, but policy makers should also consider knowledge-sharing patterns before introducing new institutions that may disrupt them. For example, the creation of a national consortium may strengthen some lines of communication but weaken others. Engineers who work for consortium members may talk face-to-face more frequently than they did prior to the consortium's formation, thus strengthening their private channels of communication. However, members of the consortium may choose to publish research findings in reports circulated only among consortium members, instead of trade journals that circulate more widely, thus restricting knowledge diffusion. Policy makers must calculate the implications for economic growth when considering policies that enhance and/or inhibit existing knowledge-sharing patterns.

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