Chapter 8. Stylized Facts in the Geography of Innovation

The geography of innovation describes the importance of proximity and location to innovative activity. As part of what has been termed the new economic geography, this area of research is less than 20 years old, and is now developed sufficiently so that the discussion can be organized around certain stylized and commonly accepted facts: • Innovation is spatially concentrated. • Geography provides a platform to organize economic activity. • All places are not equal: urbanization, localization, and diversity. • Knowledge spillovers are geographically localized. • Knowledge spillovers are nuanced, subtle, pervasive, and not easily amenable to measurement. • Local universities are necessary but not sufficient for innovation. • Innovation benefits from local buzz and global pipelines. • Places are defined over time by an evolutionary process. The purpose of this chapter is to summarize recent work on innovation and location in light of these themes, and to consider how these stylized facts shed light on the broader process of technological change and economic growth. While firms are one venue to organize economic activity, the resources required to generate innovation are typically not confined to a single firm, and geography provides another means to organize the factors of production. Geography is additionally a venue for complex multifaceted social relationships, and human community and creativity that are beyond the economic sphere. Economies are complex: highly integrated, globally interconnected, and highly agglomerated on centers of activity. There is always the temptation to analyze economic institutions and actors individually; however, the new economic geography literature considers the large context. Of course, once the analysis is open to consider geography there is a need to understand history, building a deep contextualized understanding of a place and the relationships that define it. The present review of the literature summarizes the advancements made in this stream of inquiry, but also indicates that many open avenues for research remain, thus encouraging others to contribute to the emerging field of economic geography.