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In this paper we offer a way to measure the knowledge base of an economy interms of probabilistic entropy. This measure, we hypothesize, is an indicationof the extent to which a system, including the economic system, self-organizes.In a self-organizing system, interactions between dimensions or subsystems willunintentionally give rise to anticipations that are properly aligned. Thepotential reduction of uncertainty can be measured as negative entropy in themutual information among three (or more) dimensions. For a knowledge-basedeconomy, three dimensions can be considered as key: the distribution of firmsizes, the geographical locations, and the technological classifications offirms. Based on statistics of these three dimensions and drawing on a uniquedataset of all Dutch firms registered with the Chambers of Commerce, we areable to refine well-known empirical findings for the geographical dimension.Counter-intuitive, however, are our empirical findings for the dimension oftechnology. Knowledge diffusion through medium-tech industry is much moreimportant for a localized economy than knowledge creation in high-techindustry. Knowledge-intensive services tend to uncouple economic activitiesfrom the regional dimension.

"Medium-tech" industries may be of greater importance to a local economy  than "High-tech" firms: New methods for measuring the knowledge base of an  economic system