Knowledge diffusion and industry growth: the case of Japan’s early cotton spinning industry

The diffusion of technological knowledge is key to industry growth. But not all knowledge is created equal. I use a nanoeconomic approach to examine knowledge diffusion-based growth in the Meiji-era Japanese cotton spinning industry, which enjoyed remarkable success after a decade of initial failure. By tracing sources of technological knowledge to individual engineers, I find that successful technology diffusion required the right kind of human capital embodying and transmitting knowledge, and a competitive environment that rewarded talent while weeding out incompetence.