Geographical clusters and innovation diffusion

There is a considerable body of evidence to demonstrate that the diffusion of new technologies is spatially variable. If firms rely on each other to learn about new technology, the diffusion process is punctuated by cognitive externalities, allowing for an easier spread of usage and improvements. The present paper argues that externalities promoting the adoption of new technology are stronger at the regional level and depend positively on the proximity of early users. The results of the empirical work presented verify the importance of geography and inter-firm networking in the process of knowledge transfer and diffusion, suggesting new approaches to technology transfer and technology policy. (C) 2001 Elsevier Science Inc.