In this paper we offer a way to measure the knowledge base of an economy in
terms of probabilistic entropy. This measure, we hypothesize, is an indication
of the extent to which a system, including the economic system, self-organizes.
In a self-organizing system, interactions between dimensions or subsystems will
unintentionally give rise to anticipations that are properly aligned. The
potential reduction of uncertainty can be measured as negative entropy in the
mutual information among three (or more) dimensions. For a knowledge-based
economy, three dimensions can be considered as key: the distribution of firm
sizes, the geographical locations, and the technological classifications of
firms. Based on statistics of these three dimensions and drawing on a unique
dataset of all Dutch firms registered with the Chambers of Commerce, we are
able to refine well-known empirical findings for the geographical dimension.
Counter-intuitive, however, are our empirical findings for the dimension of
technology. Knowledge diffusion through medium-tech industry is much more
important for a localized economy than knowledge creation in high-tech
industry. Knowledge-intensive services tend to uncouple economic activities
from the regional dimension.