THE IMPACT OF KNOWLEDGE ON THE SURVIVAL OF AMERICAN MANUFACTURING PLANTS

Recently, a new economic theory of growth (Romer 1986, 1990) that emph asizes the importance of knowledge has been proposed. We extend this a rgument to manufacturing plants by developing and testing a theory of how investments in knowledge, as expressed in human capital and produc tion technology, affect plant survival. Based on an event-history anal yses of 97 manufacturing plants during the period from 1973 to 1987, w e show that internal investments in knowledge are important for surviv al and that knowledge and organization from are closely intertwined. W e also find that the level of investment in research in the industry r esults in higher survivability net of many other factors, confirming R omer's basic thesis.