We show that regional differences in returns to information technology (IT) investments by US firms are attributable in part to IT spillovers generated by the flow of IT workers among firms. We use a newly developed source of employee micro-data with employer identifiers and location information to model IT workers' mobility patterns. Access to an external IT pool that is one standard deviation larger than the mean is associated with a substantial increase in the output elasticity of own IT

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... stment. The effects of spatial proximity disappear after controlling directly for employee mobility. Our estimates suggest, for instance, that the output elasticity of IT investment for non-durable goods manufacturing firms (SIC 20-29) located in some parts of Northern California is about 5% higher than that of firms in these industries located in other parts of the country. 7 Correlations between our employment data set and other well known data sets, such as the CITDB, ComputerWorld, and InformationWeek data sets are generally above .5 (Tambe & Hitt, 2008). 8 Although we use a 5% threshold for most of our regressions, our primary results are not significantly affected when using 1%, 2%, 5%, 10%, or 15% thresholds. Robustness results using these thresholds are reported.