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This study is concerned with spatial innovative behavior of firms in European cities in three countries: Italy, the Netherlands, and the United Kingdom. Three elements play essentially a central role in the analysis: (1) the company and its innovative behavior, (2) the local production environment, and (3) knowledge networks. Uncertainty and uncertainty reduction appear to have a strong influence on the interplay between these elements, in such a way that different innovative strategies may arise, for example, product and process innovation. In the article a comprehensive score that represents the significance of the local production environment for both product and process innovation will be proposed and explored for various cities in the countries concerned. In a comparison between the manufacturing and the service sector in the Netherlands, the local production environment appeared to have more influence on product innovation than on process innovation. Besides, the manufacturing sector appeared to perceive its environment as being relatively less important, whereas the service sector clearly has a different view. Because of the need for uncertainty reduction, local (knowledge) networks—in particular, links with local universities and colleges—turn out to be increasingly important. From our empirical results, we conclude that companies that maintain strong knowledge relationships tend to value their local environment higher than companies without such links. © 1997 John Wiley & Sons, Inc.
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