  How do regions acquire the knowledge they need to diversify their economic
activities? How does the migration of workers among firms and industries
contribute to the diffusion of that knowledge? Here we measure the industry,
occupation, and location-specific knowledge carried by workers from one
establishment to the next using a dataset summarizing the individual work
history for an entire country. We study pioneer firms--firms operating in an
industry that was not present in a region--because the success of pioneers is
the basic unit of regional economic diversification. We find that the growth
and survival of pioneers increase significantly when their first hires are
workers with experience in a related industry, and with work experience in the
same location, but not with past experience in a related occupation. We compare
these results with new firms that are not pioneers and find that
industry-specific knowledge is significantly more important for pioneer than
non-pioneer firms. To address endogeneity we use Bartik instruments, which
leverage national fluctuations in the demand for an activity as shocks for
local labor supply. The instrumental variable estimates support the finding
that industry-related knowledge is a predictor of the survival and growth of
pioneer firms. These findings expand our understanding of the micro-mechanisms
underlying regional economic diversification events.
