A recent wave of studies suggests that who innovates and how much innovative activity is undertaken is closely linked to the phase of the industry life cycle. In Discussion Paper No. 1161, Research Fellow David Audretsch and Maryann Feldman suggest an additional key aspect to the evolution of innovative activity over the industry life cycle – where that innovative activity takes place. This question of the location of innovative activity is important because it reflects the best use of the available knowledge inputs that generate innovative activity.

The paper suggests that the geographic link between knowledge inputs and outputs is shaped by the stage of the industry life cycle. In particular, it examines how the propensity for innovative activity to cluster spatially is influenced by the industry life cycle. Based on a data base that identifies innovative activity for individual states and specific industries in the US, the empirical evidence suggests that the propensity for innovative activity to concentrate geographically is shaped by the stage of the industry life cycle. The generation of new economic knowledge tends to result in a greater propensity for innovative activity to cluster during the early stages of the industry life cycle, and to be more highly dispersed during the mature and declining stages of the life cycle, particularly after controlling for the extent to which the location of production is geographically concentrated

Innovative Clusters and the Industry Life Cycle
David B Audretsch and Maryann P Feldman

Discussion Paper No. 1161, April 1995 (IO)