DP1980 Innovation in Cities: Science-Based Diversity, Specialization and Localized Competition

Author(s): David B Audretsch, Maryann P Feldman
Publication Date: September 1998
Keyword(s): Agglomeration, Economic Development, Geography, Growth, Innovation, Spillovers
JEL(s): O1, O3
Programme Areas: Industrial Organization, International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1980

Whether diversity or specialization of economic activity better promotes technological change and subsequent economic growth has been the subject of a heated debate in the economics literature. The purpose of this paper is to consider the effect of the composition of economic activity on innovation. We test whether the specialization of economic activity within a narrow concentrated set of economic activities is more conducive to knowledge spillovers or if diversity, by bringing together complementary activities, better promotes innovation. The evidence provides considerable support for the diversity thesis but little support for the specialization thesis.