Knowledge, Capital Formation and Innovation Behaviour in a Spatial Context

The purpose of this study is to provide adecision-based framework for the complex and interwoven spatial processes ofproduction and innovation, labor force, and capital formation.A spatialmacroeconomic model of the nested innovation process is introduced.Thismodel considers new production factors (such as information, knowledgeproduction, and knowledge transfer) relevant for taking into accounttechnological progress. The role and efficiency of transfer institutions such as universities andtechnology transfer centers, as well as subsidies for firms located indisadvantaged regions or certain industrial sectors, are shown to be ofpotentially crucial importance for the dynamics of the whole system.Aspatial network consisting of three regions and 30 firms is used to demonstratethe complex dynamics of interlinked spatial processes.The simulationssuggest that the timing of adopting an innovation from other firms has aconsiderable impact on the development of future market share. Considering a large spatial network of firms shows that several firmsconstitute a leading regional cluster within the innovationprocess.Concentration in innovation activity is always higher than thecorresponding concentration in production. However, the evolution in time ofinnovation activity and production is correlated. (SAA)