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The Economic Geography of Innovation

Karen R. Polenske (Editor)

2007, Cambridge University Press, 384 pages, ISBN 978-0-521-865289, £65.00. Also available in paperback

Reviewed by Allison Wylde, London Metropolitan University.

Cluster theory is one of the latest policy buzzwords: pick a spot on a map, drop in a few universities, hi-tech firms and policy sweeteners and success will surely follow. However, Karen Polenske’s book reveals that in the UK over-congestion in clusters may reduce employment, tacit knowledge in one workforce may not translate into another - and SMEs may not listen to experts.

With the London 2012 Olympic Games promoting regeneration of the Thames Gateway, policy makers would do well to pay attention to the suggestions that help may be needed to understand the complexities of innovation: the importance of assembling the right factors at the right time and at the right densities.

Karen Polenske says the idea for the book arose from a series of talks given by the authors entitled the Geography of Innovation held during 2003 as part of the Special Programme on Urban and Regional Geography held at the Massachusetts Institute of Technology (MIT). In the introduction, Karen Polenske aims for the book to consider and challenge the concepts of innovation and the issues regarding the transfer of skills. The primary question is how to define innovation: this, the author suggests, is traditionally taken to start from the theoretical standpoint of Schumpeter (Schumpeter 1926). The discussion then considers the gaps in the literature in terms of what is done during innovation and in particular in the context of this book “where” innovation occurs (p.5).  Ideas of innovation diffusion are also raised.

The authors present chapters on specific topics, arranged in three sections. Part I focuses on the general concepts and measurements of innovation including econometric analysis. Part II looks at the institutional and spatial aspects of information together with knowledge flows and finally Part III examines the roles of institutions and innovation systems across a range of different political environments.

Part I contextualises innovation in the perspective of geography. The first chapter by Ann Carter gives a considered introduction on the established literature and importantly recognises that there is still no metric for comparing the size of innovation or role of technological change which limits the “effective measurement of standard economic variables” (p.15). While clusters are useful as a tool to understand innovation, all innovations have the common feature of being “new” (p.27); it may be that current methods cannot measure change or innovation. Perhaps a cost-benefit analysis would be more appropriate. Future work looking at the conditions that promote innovation or change could yield “broad “generalisations” (Ip.27). This is an excellent resource suitable for a wide readership aiming to get to grips with the history as well as the complex questions in the subject.

The next two papers are more empirical, with the second containing a detailed analysis. Apiwat Ratanawaraha and Karen Polenske present a critique of the current indicators of geographic concentrations, saying overall they lack the detail needed to conduct “excellent studies” (p.54). They also suggest that current methods ignore factors such as innovation consumption, the political environment and the site of the innovation. This is an excellent resource and could be the basis of a methods paper for measuring of innovation.

Bernard Fingleton, Danilo Igliori, Barrry Moore, and Raakhi Odreda include detailed explanations in their methods that help the reader understand later chapters in the book. Their findings give an original insight into how to measure the concentration of innovation and the role that over intensity may play. In particular, “employment is destroyed” if congestion occurs (p.80). This technical paper helps readers who may be unfamiliar with econometric analysis with a well-described methods section. The question raised here is will congestion limits in clusters become necessary?

Meric Gertler introduces the five chapters of Part II and looks at tacit knowledge, using the example of US and German manufacturing workers. German workers were found to have high levels of technical training and low staff turnover. The German workers assumed their American counterparts would have similar technical skills and designed machine handbooks assuming little technical information would be required. However, the American workers had high levels of turnover and employers were reluctant to invest in training. Gertler suggests that cultural differences, along with the institutional structures and regulation, were key in influencing firm’s behaviour. Also, we “need to consider more carefully how tacit knowledge and context is produced” (p.109). The example of American and German practices also includes a note on the differences in training and expectations and investment cycles: American short term versus German longer term. Gertler concludes that history matters in determining how firms and institutions behave and interact.

Amy Glasmeier’s investigation of how firms learn uses a two dimensional methodology, a survey backed up by interviews: concrete findings backed up by empirical data are produced. The revelation that smaller SMEs appear to resist external learning comes as no surprise, along with the more subtle findings that smaller SMEs are more likely to listen to customers or suppliers. This chapter deserves a wide audience beyond economic geography. The question raised is - are policy makes aware of these findings?

Mia Gray, Al James and Bernard Fingleton present an original analysis of the role of gender in innovation. Elite workers from ten leading firms in the Cambridge ICT sector were given open-ended interviews to determine their “insider knowledge” (p.136). Their findings show that the female respondents are more likely to be part time or flexible workers spending less time at work than their male colleagues. This impacts on the female workers as they are less likely to “kick in at the crack of dawn and thus more likely to obtain more ‘non stimulating’ work” (, p.142, p.139). The reasons cited include childcare responsibilities. It is noted here that these results may shed light on possible explanations or generate policy discussions and recommendations. An interesting comparison could be made between the UK and countries with a different history or society structure.

Alice Lam presents an investigation on how MNE’s “tap into the foreign academic knowledge base and scientific labour through collaborative linkages with higher-education institutions” (p.158). The research was undertaken in the research laboratories of US and Japanese MNEs operating in the UK. Findings reveal differences in how the Japanese and US firms create and manage the links. The Japanese approach was to create a narrowly focused specialised team in UK Universities to replace a weakness in research capacity at the Japanese R&D home. The lack of a strategy to recruit local scientists and the shifting of the research towards product development resulted in failure due to a lack of embeddedness within the wider University. The US MNE’s added to pre-existing research expertise and created a “bottom up” scheme of engagement, joint schemes of teaching, training and student recruitments (p.172). The result was the development of a “strategic partnership” (p.181). Thus the Japanese MNEs are less reliant on dispersed learning and less embedded whilst the US firm’s co-ordinate dispersed learning on a global basis and embed themselves in local innovation networks. As suggested by the author, it will be interesting to discover the firms’ eventual innovation trajectories.

AnnaLee Saxenian investigated the role Taiwan is playing in supplying skilled engineers and entrepreneurs to Shanghai, as well as the networks. The findings reveal that individuals who returned first to Taiwan from Silicon Valley and other high tech areas are now establishing firms in Shanghai. Findings reveal that the networks now allow entrepreneurship and innovation to occur away from the established technology regions.

Bengt-Åke Lundvall, Björn Johnson, Esben Andersen, and Bent Dalum begin the five chapters in Part III with a theoretical discussion on the national system of innovation concept. They define the learning economy as “where an increasing share of all agents is exposed to rapid and frequent change” (p.214). They suggest developing a theory that innovation systems could help understand innovation and learning. They also suggest a theory for what makes knowledge local rather than global taking into account that “most knowledge is neither absolutely local (individual) nor absolutely generic (global) would be useful (p.221). They suggest applications for innovation system concept to help policy makers, suggesting this may enable the analysis of poor countries. They say that simply supplying the capital for production and natural capital will not necessarily lead to intellectual or social capital: essential for sustainable development. This chapter contributes to the understanding of how theories may be used in practice, and as the authors admit, policy makers may need guidance on understanding how these complex systems.

Maryann P. Feldman examines the Capitol region in the United States, and considers the role of government policy in the development of regional industrial clusters: in particular during their formation and sustainability. Feldman highlights the public initiatives providing resources for start-ups and the additional federal funding allocated to universities. She argues these initiatives added to the pool of potential employees and universities and firms need highly trained personnel. She argues this encouraged the flow of knowledge, the establishment of networks, entrepreneurship and spin offs, which generated opportunities for new ventures. Feldman concludes timing is critical for success along with the mix of entrepreneurs and new firms forming alongside government incentives and infrastructure.

Christie Baxter and Peter Tyler, compare how high-technology centres start and develop and the roles of government and public policy in the United States and Scotland. They suggest the availability of high quality workers and a network of infrastructure were key factors during the establishment phase. During the development and expansion phases, public policy is key. They suggest organisations from different sectors were able to share a collective role in business development across the academic, government, high-tech industry, and nonprofits sectors. It is noted here that comparing the US with Scotland seems unusual not least because of the relationship with England.

Steinfeld adds to the international dimension of this review of innovation by concentrating on the People's Republic of China (PRC). He argues that Chinese firms are competitive only because they produce low-value manufactured goods and reduce costs through cutting production costs and paying low wages. Findings show that although Chinese firms work with global supply chains of high-technology goods, as a result of poor integration they focus on “over the wall” products instead of developing specialist or niche products. He suggests that because learning is limited innovative capacity is limited. Reasons may be due to historical Chinese traditions, slow institutional reform process or inconsistencies in governmental policy.

Finally Michael Storper, Lena Lavinas, and Alejandro Mercado-Célis compare a success story from Jalisco, Mexico, with a failure from a low-technology economic development in Northeast Brazil. Their explanations for the success or failures focus on factors of co-ordination and family and social networks, as well as other factors including property rights and legal regulations.

The readership of this book could potentially be wide since innovation is currently enjoying a growth in interest from researchers across many disciplines and policy makers. This book adds the spatial dimension to the established literature. Several chapters deserve a wide readership for their overviews and explanations of complex ideas. Policy recommendations are made that agencies would do well to pay attention to, in particular, the suggestion that help may be required to understand the complexities of innovation as well the key finding that success depends on everything being in place at the right time. 

The £65 price of the book is in line with other specialist texts. In more practical sense improvements could be made though editing and layout changes. Some sections would benefit from close editing, to eliminate repetition. The layout of the book is very clear providing reviews of the analytical methods in the first section which, in later sections where there is less explanation, the reader can refer back. Possible improvements could include adding the author biography at the beginning of each chapter.


Polenske K. R., 2007 Eds, The Economic Geography of Innovation, Cambridge University Press, Cambridge UK 2007.

Schumpeter J. 1926, The theory of economic development Cambridge MA Harvard University Press.

(Added 22 January 2009)