The dynamics of knowledge flows: Human capital mobility, knowledge retention and change

This empirical paper investigates the relationships between the amount of human capital that flows into a firm and two activities underlying a firm's knowledge production, variation or change and knowledge retention. We track the flow of human capital within and across organizational and geographic space for all multi-unit banks operating in the world foreign exchange trade industry from 1973 to 1993. The findings indicate that an increased reliance on past experience reduces how much human capital a firm imports in the future. This effect is moderated by a self-reinforcing cycle of human capital inflow. Inflows of human capital also decline when a firm has recently adopted novel changes in its operations. The paper uses evolutionary thinking to define a model for intrafirm knowledge production.