Innovation-specific agglomeration economies and the spatial clustering of innovative firms

The relationship between clustering and innovation is a topic which has received widespread interest over recent years. A flourishing empirical literature has developed with the purpose of exploring to what extent innovative activities are spatially clustered and what are the major factors that may explain why firms in clusters should be more innovative than firms located elsewhere. The aim of this chapter is twofold. On the one hand, it aims at providing the reader with a short reference guide to the relevant empirical literature that in recent times has explored the relation between clusters and innovation. In particular, the chapter outlines the main approaches, discussing their assumptions, methodology, as well as the critical issues and the challenges that empirical researchers still face. Among them, it is argued that the most important ones are those related to the need of discriminating between different sources of agglomeration economies (that is, rent vs. real externalities) and to the still neglected fact that some key drivers of agglomeration may be industry-specific. On the other hand, starting from a stylized model of patenting and R&D, the chapter intends to provide a roadmap to the statistical testing of the relationship between clusters and innovative activities and to the related issue of data collection.