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Introduction: economic geography in a knowledge-based economy The process of globalization is often associated with the`unbundling' of the previous relationship between sovereignty, territoriality, and state power and, as a consequence, with steadily weakening nation-states (Ruggie, 1993). Yet it is arguably the gradual shift in the basis of industrial competitiveness from static price competition towards dynamic improvement that has contributed most in making globalization the favourite business buzzword at the recent turn of the century. The shift has favoured firms that are better able to innovate and create knowledge than their competitors and has thus moved the competitive edge of an increasing number of firms from cost reduction to the generation of entrepreneurial rents (Spender, 1994).The creation of knowledge is usually seen as a process requiring dedicated investment. At the level of the individual firm, knowledge-creating investments are often associated with research and development activities and with the adoption of leadingedge technology. Equally important, however, is the investment in`low-tech' learning and innovation (Maskell, 1998), which takes place when firms, in fairly traditional industries, learn and innovate while handling and developing mundane day-to-day operations such as resource management, logistics, production organization, marketing, sales, distribution, and industrial relations (Malerba, 1992).It may well be that spatial clustering always contributed to economic growth by enhancing learning processes, but the shift towards a knowledge-based economy has certainly amplified our interest in understanding the nature of this proposition. This had led some scholars to propose that the localized cluster is the territorial configuration most likely to enhance learning processes. Today Silicon Valley and Hollywood

How to cite TSpace items Always cite the published version, so the author(s) will receive recognition through services that track citation counts, e.g. Scopus. If you need to cite the page number of the TSpace version (original manuscript or accepted manuscript) because you cannot access the published version, then cite the TSpace version in addition to the published version using the permanent URI (handle) found on the record page.

Co-located firms within related industries enhance the ability to create knowledge by variation and a deepened division of labour. The interdependent development between economic activities and local institutions make the cluster attractive to some industries and hostile to others. The very reasons why cognitive distance might be small within the cluster tend to make cognitive distance great between clusters and make interfirm cooperation across bodies of knowledge more costly. The additional value created when clustering may justify the additional cost.