Abstract

<jats:title>Abstract</jats:title>
<jats:p>The issues involving the links between the geography of economic activity and the emergence of the knowledge‐based economy addressed in the first chapter are examined in more detail in seven main sections. These address the following: the loss of the former comparative advantage of mature, technically moderate industries in Europe and North America; the breakdown at the level of the firm of the knowledge production function (this shows that the empirical link between knowledge inputs and innovative outputs becomes stronger as the unit of production becomes increasingly aggregated); knowledge spillovers to small firms from larger firms or universities; the importance of location and geographic space in knowledge spillovers; and the use of foreign direct investment as a strategy to access localized knowledge spillovers for transfer back to the home country.</jats:p>