There is substantial empirical evidence that innovation is geographically concentrated. Unlike what is generally assumed, however, it is not clear that localised knowledge spillovers provide a theoretically valid explanation for this. Studying spillovers of cost-reducing technology between...

This paper presents a Cournot oligopoly model with R&D spillovers both within and across industries. The aim is to provide an appropri- ate theoretical foundation for three different hypotheses regarding the impact of the local production structure on innovation and output, as well as addressing...