Demand-Driven Innovation and Spatial Competition over Time.

This paper explores a model of innovation and spatial co mpetition over time. A key implication of the paper is that firms' size is posit ively autocorrelated across time. The mechanism that generates this persistence works only in heterogenous product markets and is based on the idea that larger firms possess better information about the design of future products. Some corro borating evidence is cited. Copyright 1987 by The Review of Economic Studies Limited.