Innovation in Cities: Science-Based Diversity, Specialization and Localized Competition

Abstract

Whether diversity or specialization of economic activity better promotes technological change and subsequent economic growth has been the subject of a heated debate in the economics literature. The purpose of this paper is to consider the e⁄ect of the composi-tion of economic activity on innovation. We test whether the specialization of economic activity within a narrow concentrated set of economic activities is more conducive to knowledge spillovers or if diversity, by bringing together complementary activities, better promotes innovation. The evidence provides considerable support for the diversity thesis

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