An econometric approach for evaluating the linkages between broadband and knowledge intensive firms

• Broadband is important to knowledge intensive firm presence in a majority of metropolitan areas.
• Complimentary or substitutability of broadband for location is highly contextual in nature.
• In sprawling metro areas broadband may substitute for congestion costs of intra-day commuting.
• Broadband may compliment agglomerative benefits of well-known hubs of knowledge firm location.

In addition to highlighting improvements in the availability and speed of broadband as a national priority, the National Broadband Plan also includes several recommendations for improving access and use of broadband by small businesses. The plan also recommends economic development officials include broadband in their local development strategies. While these are certainly import goals, more research is needed to evaluate how broadband impacts the regional business environment, and regional capacity to retain and attract businesses in particular industries. In order to further our understanding about the linkages between broadband and businesses, and the ability of places to retain and attract businesses in particular industries, this study will develop and estimate econometric models to better understand the linkages between broadband and firms in the knowledge intensive sector. Specifically, 54 metropolitan area specific models will be developed to examine regional variations in the linkages between broadband and firms in the knowledge intensive sector in 2004. Model results highlight the importance of broadband to knowledge firms in all but five metropolitan areas across the U.S. They also reveal variations in the impact of broadband on knowledge firm presence related to metropolitan area size and industrial legacy.