PART III

DEVELOPMENT THEORIES:
INNOVATION, KNOWLEDGE
AND SPACE
11 Knowledge spillovers, entrepreneurship and
regional development
David B. Audretsch and T. Taylor Aldridge

11.1 Introduction
The emergence of knowledge as perhaps the most decisive factor for comparative advan-
tage also has had an impact on at least two key dimensions involving the organization of
economic activity. The rst involves the spatial organization of economic activity. In par-
ticular, globalization has rendered the organization of economic activity for the spatial
unit of the region more important. Just as globalization has reduced the marginal cost of
transmitting information and physical capital across geographic space to virtually zero, it
has also shifted the comparative advantage of a high-cost Standort, or location, in the
developed countries from being based on physical capital to being based on knowledge.
This shift in the relative cost of (tacit) knowledge vis--vis information has been identied
as increasing the value of geographic proximity. To access knowledge, locational proxim-
ity is important. Thus, a paradox of globalization is that geography has actually become
more important because close spatial proximity to a knowledge can bestow competitive
advantage
The second impact of globalization on the organization of economic activity involves
the enterprise. While early analyses had predicted that large corporations were endowed
with a competitive advantage in accessing, producing and commercializing knowledge,
more recently studies have suggested that a very dierent organizational form the entre-
preneurial rm has the competitive knowledge in the knowledge-based global economy.
The purpose of this chapter is to explain why the emergence of knowledge as the source
of comparative advantage has rendered a shift in the organization of economic activity
for both the spatial and enterprise levels. This chapter uses the lens provided by the knowl-
edge spillover theory of entrepreneurship (Audretsch et al., 2006) to integrate both the
organization of economic activity in geographic space and small rm enterprises. The
knowledge spillover theory of entrepreneurship provides a focus on the generation of
entrepreneurial opportunities emanating from knowledge investments by incumbent
rms and public research organizations which are not fully appropriated by those incum-
bent enterprises. The creation of a new organization is important because it is an endoge-
nous response to knowledge not completely and exhaustively appropriated in existing
organizations. Not only does endogenous entrepreneurship serve as a conduit for knowl-
edge spillovers, but because such knowledge spillovers tend to be spatially localized, it
results in the emergence of localized entrepreneurial clusters. In the following section, the
role of spatial access to access knowledge spillovers is explained. Why such knowledge
spillovers do not occur automatically and may, in fact, be impeded by the knowledge lter,
is explained in the third section. The role of entrepreneurship as a conduit of knowledge
spillovers is explained in the fourth section. Finally, in the fth section a summary and
conclusion are provided. In particular, entrepreneurship is identied as the missing link

201
202 Handbook of regional growth and development theories

to regional economic growth because it provides a key mechanism facilitating the spillover
and commercialization of knowledge

11.2 Knowledge spillovers and spatial proximity

An important theoretical development in the new economic geography literature is that
geography may provide a relevant unit of observation within which knowledge spillovers
occur. The theory of localization suggests that because geographic proximity is needed to
transmit knowledge, and especially tacit knowledge, knowledge spillovers tend to be local-
ized within a geographic region. The importance of geographic proximity for knowledge
spillovers has been supported in a wave of recent empirical studies by Jae (1989), Jae
et al. (1993), Acs et al. (1992, 1994), Audretsch and Feldman (1996) and Audretsch and
Stephan (1996).
As it became apparent that the rm was not completely adequate as a unit of analysis
for estimating the model of the knowledge production function, scholars began to look
for externalities. In refocusing the model of the knowledge production to a spatial unit of
observation, scholars confronted two challenges. The rst one was theoretical. What was
the theoretical basis for knowledge to spill over, yet at the same time be spatially within
some geographic unit of observation? The second challenge involved measurement. How
could knowledge spillovers be measured and identied? More than a few scholars heeded
Krugmans warning (1991, p. 53) that empirical measurement of knowledge spillovers
would prove to be impossible because knowledge ows are invisible, they leave no paper
trail by which they may be measured and tracked.
In confronting the rst challenge, which involved developing a theoretical basis for geo-
graphically bounded knowledge spillovers, scholars turned to the emerging literature of
the new growth theory. In explaining the increased divergence in the distribution of eco-
nomic activity between countries and regions, Krugman (1991) and Romer (1986) relied
on models based on increasing returns to scale in production. By increasing returns,
however, Krugman and Romer did not necessarily mean at the level of observation most
familiar in the industrial organization literature the plant, or at least the rm but rather
at the level of a spatially distinguishable unit. In fact, it was assumed that the externali-
ties across rms and even industries yield convexities in production. In particular,
Krugman (1991), invoking Marshall (1920), focused on convexities arising from spillovers
from: (1) a pooled labor market; (2) pecuniary externalities enabling the provision of non-
traded inputs to an industry in a greater variety and at lower cost; and (3) information or
technological spillovers.
Economic knowledge has long been associated with externalities. Arrow (1962)
identied externalities associated with knowledge as a result of its non-exclusive and
non-rival use. However, Arrow and subsequent scholars provided little insight concern-
ing the geographic dimension of such knowledge spillovers. In particular, many authors
have implicitly or explicitly assumed that knowledge externalities are so compelling that
there is no reason that knowledge should stop spilling over just because of borders, such
as a city limit, state line or national boundary. For example Krugman (1991), and
others, did not question the existence or importance of such knowledge spillovers. In
fact, they argue that such knowledge externalities are so important and forceful that
there is no reason for a political boundary to limit the spatial extent of the spillover. In
applying the model of the knowledge production function to spatial units of observa-
 Knowledge spillovers, entrepreneurship and regional development 203

tion, theories of why knowledge externalities are spatially bounded were needed. Thus,
a new theory of the development of localization was needed to explain not only that
knowledge spills over but also why those spillovers decay as they move across geographic
space.
Studies identifying the extent of knowledge spillovers are based on the model of the
knowledge production function applied to spatial units of observation. In what is gen-
erally to be considered to be the rst important study refocusing the knowledge produc-
tion function, Jae (1989) modied the traditional approach to estimate a model
specied for both spatial and product dimensions. Implicitly contained within the
knowledge production function model is the assumption that innovative activity, should
take place in those regions where the direct knowledge-generating inputs are the great-
est, and where knowledge spillovers are the most prevalent. Jae (1989) dealt with the
measurement problem raised by Krugman (1991) by linking the patent activity within
technologies located within states to knowledge inputs located within the same spatial
jurisdiction.
Empirical testing for the localization of knowledge spillovers essentially shifted the
model of the knowledge production function from the unit of observation of a rm to
that of a geographic unit. Jae (1989) found empirical evidence supporting the notion that
knowledge spills over for third-party use from university research laboratories as well as
from industry research and development (R&D) laboratories. Acs et al. (1992) conrmed
that the knowledge production function held at a spatial unit of observation using a direct
measure of innovative activity, new product introductions in the market. Feldman (1994)
extended the model to consider other knowledge inputs to the commercialization of new
products. The results conrmed that the knowledge production function was robust at the
geographic level of analysis: the output of innovation is a function of the innovative
inputs in that location.
While this literature has identied the important role that knowledge spillovers play, it
provides little insight into the questions of why knowledge spills over and how it spills
over. The exact links between knowledge sources and the resulting innovative output
remain invisible and unknown.
One explanation was provided by the knowledge spillover theory of entrepreneurship,
which suggests that the start-up of a new rm is a response to investments in knowledge
and ideas by incumbent organizations that are not fully commercialized by those organi-
zations. Thus, those contexts that are richer in knowledge will oer more entrepreneurial
opportunities and therefore should also endogenously induce more entrepreneurial activ-
ity, ceteris paribus. By contrast, those contexts that are impoverished in knowledge will
oer only meager entrepreneurial opportunities generated by knowledge spillovers, and
therefore would endogenously induce less entrepreneurial activity.
Access to knowledge spillovers requires spatial proximity. While Jae (1989) and
Audretsch and Feldman (1996) made it clear that spatial proximity is a prerequisite to
accessing knowledge spillovers, they provided no insight about the actual mechanism
transmitting such knowledge spillovers. As for the Romer and Lucas models (Romer
1986; Lucas, 1988, 1993), investment in new knowledge automatically generates knowl-
edge spillovers. Their only additional insight involves the spatial dimension knowledge
spills over but the spillovers are spatially bounded.
204 Handbook of regional growth and development theories

11.3 The knowledge filter

In the Romer (1986) model of endogenous growth new technological knowledge is
assumed to spill over automatically. Investment in new technological knowledge is auto-
matically accessed by third-party rms and economic agents, resulting in the automatic
spillover of knowledge. The assumption that knowledge automatically spills over is, of
course, consistent with the important insight by Arrow (1962) that knowledge diers from
the traditional factors of production physical capital and (unskilled) labor in that it is
non-excludable and non-exhaustive. When the rm or economic agent uses the knowl-
edge, it is neither exhausted nor can it be, in the absence of legal protection, precluded
from use by third-party rms or other economic agents. Thus, in the spirit of the Romer
model, drawing on the earlier insights about knowledge from Arrow, a large and vigorous
literature has emerged obsessed with the links between intellectual property protection
and the incentives for rms to invest in the creation of new knowledge through R&D and
investments in human capital.
However, the preoccupation with the non-excludability and non-exhaustability of
knowledge, rst identied by Arrow and later carried forward and assumed in the Romer
model, neglects another key insight in the original Arrow (1962) article. Arrow also
identied another dimension by which knowledge diers from the traditional factors of
production. This other dimension involves the greater degree of uncertainty, higher extent
of asymmetries, and greater cost of transacting new ideas. The expected value of any new
idea is highly uncertain, and as Arrow pointed out, has a much greater variance than
would be associated with the deployment of traditional factors of production. After all,
there is relative certainty about what a standard piece of capital equipment can do, or
what an (unskilled) worker can contribute to a mass-production assembly line. By con-
trast, Arrow emphasized that when it comes to innovation, there is uncertainty about
whether the new product can be produced, how it can be produced, and whether sucient
demand for that visualized new product might actually materialize.
In addition, new ideas are typically associated with considerable asymmetries. In order
to evaluate a proposal concerning a new idea in, say, nanotechnology, the decision-maker
might need to have not only a PhD in nanotechnology, but also a specialization in the
exact scientic area. Such divergences in education, background and experience can result
in a divergence in the expected value of a new project or the variance in outcomes antic-
ipated from pursuing that new idea, both of which can lead to divergences in the recog-
nition and evaluation of opportunities across economic agents and decision-making
hierarchies. Such divergences in the valuation of new ideas will become greater if the new
idea is not consistent with the core competence and technological trajectory of the incum-
bent rm.
Thus, because of the conditions inherent in knowledge high uncertainty, asymmetries
and transaction costs decision-making hierarchies can reach the decision not to pursue
and try to commercialize new ideas that individual economic agents, or groups or teams
of economic agents think are potentially valuable and should be pursued. The basic con-
ditions characterizing new knowledge, combined with a broad spectrum of institutions,
rules and regulations, impose what Audretsch et al. (2006) term the knowledge lter. The
knowledge lter is the gap between new knowledge and what Arrow (1962) referred to as
economic knowledge or commercialized knowledge. The greater is the knowledge
lter, the more pronounced is this gap between new knowledge and new economic, or
 Knowledge spillovers, entrepreneurship and regional development 205

commercialized, knowledge. The knowledge lter is a consequence of the basic conditions

inherent in new knowledge.

11.4 Entrepreneurship as a conduit of knowledge spillovers

The knowledge lter is a consequence of the basic conditions inherent in new knowledge.
Similarly, it is the knowledge lter that creates the opportunity for entrepreneurship in the
knowledge spillover theory of entrepreneurship. According to this theory, opportunities
for entrepreneurship are the duality of the knowledge lter. The higher is the knowledge
lter, the greater are the divergences in the valuation of new ideas across economic agents
and the decision-making hierarchies of incumbent rms. Entrepreneurial opportunities
are generated not just by investments in new knowledge and ideas, but in the propensity
for only a distinct subset of those opportunities to be fully pursued by incumbent rms.
The discrepancy in organizational context between the organizations creating oppor-
tunities and those exploiting the opportunities that seemingly contradicted Griliches
model (1979) of the rm knowledge production function was resolved by Audretsch
(1995), who introduced the knowledge spillover theory of entrepreneurship:

the ndings challenge an assumption implicit to the knowledge production function: that rms
exist exogenously and then endogenously seek out and apply knowledge inputs to generate inno-
vative output. It is the knowledge in the possession of economic agents that is exogenous, and
in an eort to appropriate the returns from that knowledge, the spillover of knowledge from its
producing entity involves endogenously creating a new rm. (pp. 17980)

What is the source of this entrepreneurial opportunity that endogenously generates the
start-up of new rms? The answer seemed to be through the spillover of knowledge that
creates the opportunities for the start-up of a new rm:

How are these small and frequently new rms able to generate innovative output when under-
taken a generally negligible amount of investment into knowledge-generating inputs, such as
R&D? One answer is apparently through exploiting knowledge created by expenditures on
research in universities and on R&D in large corporations. (p. 179)

The empirical evidence supporting the knowledge spillover theory of entrepreneurship

was provided from analyzing variations in start-up rates across dierent industries
reecting dierent underlying knowledge contexts. In particular, those industries with a
greater investment in new knowledge also exhibited higher start-up rates, while those
industries with less investment in new knowledge exhibited lower start-up rates, which was
interpreted as a conduit transmitting knowledge spillovers.
Thus, compelling evidence was provided suggesting that entrepreneurship is an endoge-
nous response to opportunities created but not exploited by the incumbent rms. This
involved an organizational dimension involving the mechanism transmitting knowledge
spillovers the start-up of new rms. In addition, Jae (1989), Audretsch and Feldman
(1996) and Audretsch and Stephan (1996) provided evidence concerning the spatial
dimension of knowledge spillovers. In particular their ndings suggested that knowledge
spillovers are geographically bounded and localized within spatial proximity to the
knowledge source. None of these studies, however, identied the actual mechanisms
which actually transmit the knowledge spillover; rather, the spillovers were implicitly
206 Handbook of regional growth and development theories

assumed to exist automatically (or fall like manna from heaven), but only within a geo-
graphically bounded spatial area.
While much has been made of the key role played by the recognition of opportunities
in the cognitive process underlying the decision to become an entrepreneur, relatively little
has been written about the actual source of such entrepreneurial opportunities. The
knowledge spillover theory of entrepreneurship identies one source of entrepreneurial
opportunities new knowledge and ideas. In particular, the knowledge spillover theory
of entrepreneurship posits that it is new knowledge and ideas created in one context, but
left uncommercialized or not vigorously pursued by the source actually creating those
ideas, such as a research laboratory in a large corporation or research undertaken by a
university, that serves as the source of knowledge generating entrepreneurial opportuni-
ties. Thus, in this view, one mechanism for recognizing new opportunities and actually
implementing them by starting a new rm involves the spillover of knowledge. The orga-
nization creating the opportunities is not the same organization that exploits the oppor-
tunities. If the exploitation of those opportunities by the entrepreneur does not involve
full payment to the rm for producing those opportunities, such as a license or royalty,
then the entrepreneurial act of starting a new rm serves as a mechanism for knowledge
spillovers.
Thus, the knowledge spillover theory of entrepreneurship shifts the fundamental deci-
sion-making unit of observation in the model of the knowledge production function away
from exogenously assumed rms to individuals, such as scientists, engineers or other
knowledge workers agents with endowments of new economic knowledge. As Audretsch
(1995) pointed out, when the lens is shifted away from the rm to the individual as the rel-
evant unit of observation, the appropriability issue remains, but the question becomes:
How can economic agents with a given endowment of new knowledge best appropriate
the returns from that knowledge? If the scientist or engineer can pursue the new idea
within the organizational structure of the rm developing the knowledge, and appropri-
ate roughly the expected value of that knowledge, the worker has no reason to leave the
rm. On the other hand, if the scientist places a greater value on his ideas than do the
decision-making bureaucracy of the incumbent rm, they may choose to start a new rm
to appropriate the value of his knowledge.
In the knowledge spillover theory of entrepreneurship the knowledge production func-
tion is actually reversed. The knowledge is exogenous and embodied in a worker. The rm
is created endogenously in the workers eort to appropriate the value of their knowledge
through innovative activity. Typically an employee from an established large corporation,
often a scientist or engineer working in a research laboratory, will have an idea for an
invention and ultimately for an innovation. Accompanying this potential innovation is an
expected net return from the new product. The inventor would expect to be compensated
for their potential innovation accordingly. If the company has a dierent, presumably
lower, valuation of the potential innovation, it may decide either not to pursue its devel-
opment, or that it merits a lower level of compensation than that expected by the
employee.
In either case, the employee will weigh the alternative of starting their own rm. If the
gap in the expected return accruing from the potential innovation between the inventor
and the corporate decision-maker is suciently large, and if the cost of starting a new
rm is suciently low, the employee may decide to leave the large corporation and
 Knowledge spillovers, entrepreneurship and regional development 207

establish a new enterprise. Since the knowledge was generated in the established corpora-
tion, the new start-up is considered to be a spin-o from the existing rm. Such start-ups
typically do not have direct access to a large R&D laboratory. Rather, the entrepreneur-
ial opportunity emanates from the knowledge and experience accrued from the R&D
laboratories with the entrepreneurs previous employers. Thus the knowledge spillover
view of entrepreneurship is actually a theory of endogenous entrepreneurship, where
entrepreneurship is an endogenous response to opportunities created by investments in
new knowledge that are not commercialized because of the knowledge lter.
As already discussed, a vigorous literature has identied that knowledge spillovers are
greater in the presence of knowledge investments. Just as Jae (1989) and Audretsch and
Feldman (1996) show, those regions with high knowledge investments experience a high
level of knowledge spillovers, and those regions with a low amount of knowledge invest-
ments experience a low level of knowledge spillovers, since there is less knowledge to be
spilled over.
Thus, as a result of the knowledge lter, entrepreneurship becomes central to generat-
ing economic growth by serving as a conduit for knowledge spillovers. The process
involved in recognizing new opportunities emanating from investments in knowledge and
new ideas, and attempting to commercialize those new ideas through the process of start-
ing a new rm, is the mechanism by which at least some knowledge spillovers occur. In
the counterfactual situation, that is, in the absence of such entrepreneurship, the new
ideas would not be pursued, and the knowledge would not be commercialized. Thus,
entrepreneurs serve as an important mechanism in the process of economic growth. An
entrepreneur is an agent of change, who recognizes an opportunity, in this case generated
by the creation of knowledge not adequately pursued (in the view of the entrepreneur) by
incumbent organizations, and ultimately chooses to act on that opportunity by starting a
new rm.
As investments in new knowledge increase, entrepreneurial opportunities will also
increase. Contexts where new knowledge plays an important role are associated with a
greater degree of uncertainty and asymmetries across economic agents evaluating the
potential value of new ideas. Thus, a context involving more new knowledge will also
impose a greater divergence in the evaluation of that knowledge across economic agents,
resulting in a greater variance in the outcome expected from commercializing those ideas.
It is this gap in the valuation of new ideas across economic agents, or between economic
agents and decision-making hierarchies of incumbent enterprises, that creates the entre-
preneurial opportunity.
By serving as a conduit for the spillover of knowledge that otherwise might not have
been commercialized, entrepreneurship provides a missing link to economic growth.
Because the spillover of knowledge tends to be localized within the spatial context of
geographically bounded regions, entrepreneurship becomes an important vehicle in
regional clusters by which (regional) knowledge spills over and becomes transmitted into
(regional) growth.
The knowledge spillover theory of entrepreneurship analogously suggests that, ceteris
paribus, entrepreneurial activity will tend to be greater in contexts where investments in
new knowledge are relatively high, since the new rm will be started from knowledge that
has spilled over from the source actually producing that new knowledge. A paucity of new
ideas in an impoverished knowledge context will generate only limited entrepreneurial
208 Handbook of regional growth and development theories

opportunities. By contrast, in a high knowledge context, new ideas will generate entre-
preneurial opportunities by exploiting (potential) spillovers of that knowledge. Thus, the
knowledge spillover view of entrepreneurship provides a clear link that entrepreneurial
activity will result from investments in new knowledge and that entrepreneurial activity
will be spatially localized within close geographic proximity to the knowledge source.
The endogeneous entrepreneurship hypothesis involves the organizational interde-
pendency between entrepreneurial start-ups and incumbent organizations investing in the
creation of new knowledge (Audretsch et al., 2006; Audretsch, 2007). A second hypothe-
sis emerging from the knowledge spillover theory of entrepreneurship, the localizational
hypothesis, has to do with the location of the entrepreneurial activity and the key role
that regional clusters play. Since we have just identied one such mechanism by which
knowledge spillovers are transmitted the start-up of a new rm it follows that knowl-
edge spillover entrepreneurship is also spatially bounded in that local access is required to
access the knowledge facilitating the entrepreneurial start-up. According to the localiza-
tion hypothesis, knowledge spillover entrepreneurship will tend to be spatially located
within close geographic proximity to the source of knowledge actually producing that
knowledge. Thus, in order to access spillovers, new rm start-ups will tend to locate close
to knowledge sources, such as universities.
Systematic empirical evidence consistent with the knowledge spillover theory of entre-
preneurship has been provided by Audretsch et al. (2006) and Acs et al. (2004). Both
studies nd that entrepreneurship rates tend to be greater in the context of greater invest-
ments in new knowledge.

11.5 Conclusions
Along with globalization has come a shift in the comparative advantage of developed
countries towards knowledge-based economic activity. This shift towards a knowledge-
based economy has not left the organization of economic activity unchanged. Rather, this
chapter has identied two key dimensions involving the organization of economic activ-
ity that have changed in virtually every developed country. The rst involves the spatial
dimension of economic activity. As knowledge becomes more important, so too has the
spatial concentration of knowledge activities, which facilitates the spillover of knowledge.
However, this chapter has explained why the spillover of investments in new knowledge
is by no means automatic. Rather, the knowledge lter can impede the spillover and
commercialization of knowledge. By serving as a conduit for knowledge spillovers, entre-
preneurship is the missing link between investments in new knowledge and economic
growth. Thus, the spillover theory of entrepreneurship provides not just an explanation
of why entrepreneurship has become more prevalent as the factor of knowledge has
emerged as a crucial source for comparative advantage, but also why entrepreneurship
plays a vital role in generating economic growth. Entrepreneurship is an important
mechanism permeating the knowledge lter to facilitate the spillover of knowledge and
ultimately to generate economic growth.
Using the lens provided by the knowledge spillover theory of entrepreneurship, this
chapter has explained why location is the underlying organizational context for entrepre-
neurship. Just as knowledge spillovers have been found to be spatially bounded, entrepre-
neurship has been shown to be an important conduit by which that knowledge spills over.
Taken together, these two organizational units form the basis for entrepreneurial clusters.
 Knowledge spillovers, entrepreneurship and regional development 209

A generation ago, the entrepreneurial rm within the context of regional clusters did
not seem to be prominent in the public policy approach to enhancing growth and creat-
ing employment. For example, in advocating a new public policy approach to promote
growth and international competitiveness at the European level, Servan-Schreiber warned
of the American Challenge in the form of the dynamism, organization, innovation, and
boldness that characterize the giant American corporations (1968, p. 153). Because giant
corporations were considered to be the engine of growth and innovation, Servan-
Schreiber advocated the creation of large industrial units which are able both in size and
management to compete with the American giants (1968, p. 159). According to Servan-
Schreiber (1968, p. 159):

The rst problem of an industrial policy for Europe consists in choosing 50 to 100 rms which,
once they are large enough, would be the most likely to become world leaders of modern tech-
nology in their elds. At the moment we are simply letting industry be gradually destroyed by
the superior power of American corporations.

Ironically, the 1988 Cecchini Report identied the gains from European integration as
largely accruing from increases in scale economies. However, the more recent insights con-
cerning the role of entrepreneurship and regional clusters have become a focal point in
the debate to foster growth and employment. For example, in the Lisbon Accord of 2000,
the European Commission made a formal commitment to becoming the entrepreneurship
and knowledge leader in the world in order to foster economic growth and prosperity
throughout the European Union. Similarly, as Bresnahan and Gambardella (2004, p. 1)
point out:

Clusters of high-tech industry, such as Silicon Valley, have received a great deal of attention from
scholars and in the public policy arena. National economic growth can be fueled by development
of such clusters. In the United States the long boom of the 1980s and 1990s was largely driven
by growth in the information technology industries in a few regional clusters. Innovation and
entrepreneurship can be supported by a number of mechanisms operating within a cluster, such
as easy access to capital, knowledge about technology and markets, and collaborators.

Similarly, Wallsten (2004, p. 229) suggests that: Policy makers around the world are
anxious to nd tools that will help their regions emulate the success of Silicon Valley and
create new centers of innovation and high technology. Little is actually known about
which specic instruments will best serve public policy in creating knowledge-based entre-
preneurial clusters. What has become clearer is that these two fundamental changes in
the organization of economic activity, one at the spatial level and the other at the enter-
prise level, hold the key to generating economic growth, jobs and competitiveness in a
globalized economy.

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