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A paradox has been the emergence of the importance of local proximity and geographic clusters precisely at a time when globalization seems to dominate economic activity. The purpose of this paper is to resolve this paradox by explaining why and how geography matters for innovative activity and ultimately for the international comparative advantage. Globalization and the telecommunications revolution have triggered a shift in the comparative advantage of the leading developed countries towards an increased importance of innovative activity. This shift in comparative advantage has increased the value of knowledge-based economic activity. Since knowledge is generated and transmitted more efficiently via local proximity, economic activity based on new knowledge has a high propensity to cluster within a geographic region. This has triggered a fundamental shift in public policy towards business, away from policies constraining the freedom of firms to contract and towards a new set of enabling policies, implemented at the regional and local levels. Oxford University Press « Previous | Next Article » Table of Contents This Article Oxf Rev Econ Policy (1998) 14 (2): 18-29. doi: 10.1093/oxrep/14.2.18 » Abstract Free Full Text (PDF) Free Classifications Article Services Article metrics Alert me when cited Alert me if corrected Find similar articles Similar articles in Web of Science Add to my archive Download citation Request Permissions Citing Articles Load citing article information Citing articles via CrossRef Citing articles via Scopus Citing articles via Web of Science Citing articles via Google Scholar Google Scholar Articles by Audretsch, B. 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Oxford Review of Economic Policy – Oxford University Press
Published: Jun 1, 1998
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