Cities, knowledge and innovation

This chapter provides an overview of current theories and empirical research on cities and the knowledge economy. Two recent and interrelated streams of literature are discussed: the first focusing on agglomeration economies related to increasing returns and knowledge spillovers of firms in cities and the second highlighting the role of knowledge workers and creativity in identifying new and innovative growth opportunities in cities. We argue that analyses using knowledge production functions to capture knowledge flows in cities do not, as of yet, provide true insight into the generation and transfer of different kinds of knowledge. Only recently are various conceptualizations of distance and knowledge transmission channels able to address the heterogeneity of the actors and processes involved in capturing the respective role of cities in knowledge creation. We conclude that the mechanisms that create and diffuse knowledge in cities should be better embedded into both streams of literature. The current discourse on agglomeration externalities obviously needs such conceptual and methodological views to address current impasses. In particular, evolutionary economic geographical concepts are promising in explaining the innovative behavior of growing firms and organizations in cities, carefully addressing the heterogeneity of the actors involved, spatial scale, selection and survival, as well as time and path dependency.