Knowledge-intensive activities are bound by imperfections that limit the provision of incentives, particularly asymmetric information about inputs and unclear definition of outputs. Thus, performance-based incentives are not possible. We then model a contract in which the firm can use the...

A well-grounded empirical and theoretical literature shows that local production systems can benefit from external economies generated by a shared ‘industrial atmosphere’. Many scholars would agree that in contexts as industrial districts, clusters and local systems, economic actions are...

This paper examines whether location in strong industrial clusters translates into a higher probability of innovating. A firm-level analysis of the UK and Italy is performed. Innovative activities of firms (European patent data for 1988-98) are related to regional employment, other...