Long Term Costs of Macroeconomic Instability: The Destruction of Innovative Networks in Cleveland, Ohio, 1920-1940

This research project will examine the long-term costs of macroeconomic instability in a major metropolitan area and the direct impact of macroeconomic shocks on technological discovery.

At the start of 1920, Cleveland, Ohio, had a technological cutting edge that was supported by its overlapping networks of financiers and investors. However, during the Great Depression, the region’s position slipped both in absolute terms and relative to the middle Atlantic region of the United States. This project explains this decline through analysis of data on individual inventors, innovative firms, and financial institutions in the Cleveland area. Much of the previous study of innovative regions has been based on observation of one case—Silicon Valley. The study of Cleveland tests some influential hypotheses that have grown out of that literature and determines whether they can be generalized beyond northern California. Further research and the datasets can be used to investigate alternative explanations, including industry life cycle models, changes in firm organization and market structure, and shocks to the financial system.