Journal Article

Agglomeration and the location of innovative activity

B Audretsch

in Oxford Review of Economic Policy

Published on behalf of The Oxford Review of Economic Policy Ltd

Volume 14, issue 2, pages 18-29
Published in print June 1998 | ISSN: 0266-903X
Published online June 1998 | e-ISSN: 1460-2121 | DOI: https://dx.doi.org/10.1093/oxrep/14.2.18
Agglomeration and the location of innovative activity

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A paradox has been the emergence of the importance of local proximity and geographic clusters precisely at a time when globalization seems to dominate economic activity. The purpose of this paper is to resolve this paradox by explaining why and how geography matters for innovative activity and ultimately for the international comparative advantage. Globalization and the telecommunications revolution have triggered a shift in the comparative advantage of the leading developed countries towards an increased importance of innovative activity. This shift in comparative advantage has increased the value of knowledge-based economic activity. Since knowledge is generated and transmitted more efficiently via local proximity, economic activity based on new knowledge has a high propensity to cluster within a geographic region. This has triggered a fundamental shift in public policy towards business, away from policies constraining the freedom of firms to contract and towards a new set of enabling policies, implemented at the regional and local levels.

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Subjects: Economic Development and Growth ; Public Economics ; Political Economy ; Public Policy

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