Abstract and Keywords
This article first makes some clarifications regarding the terminology we use and assumptions we make, simply for expositional purposes. It then outlines the basic tenets of the concept of agglomeration and industrial districts, highlighting the mechanisms by which the spatial grouping of activities and the generation of localized economies of scale may be related. It reviews the various hypotheses which are evident in the literature concerning the relationship between the spatial organization of industrial activity and the spatial patterns of innovation. It explains the current trends in thought about these relationships, pointing out the recent popularity of the concept of a cluster. It then investigates the various notions of clusters and industrial districts from a transactions costs perspective, and provides an assessment of the insights generated from these cluster arguments.
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