This book provides a balanced, empirically-based view of the "Digital Economy," and explores its regional and geographical import in areas where the Digital Economy meets more traditional patterns. More than just an interpretive analysis, this book utilizes empirical evidence in its assessment of the dynamics of specific regions in different parts of the world. The book also examines the policy implications of the rising Digital Economy.

Thisbookisbasedonpaperspresentedataninternationalworkshoporganisedin Jonkoping,Sweden,inJune2005tocelebratethe60thbirthdayofProfessorBorje .. Johansson-adearfriendandadmiredcolleagueofours. Thebookprovidesa limited sample of Borje Johansson's broad ranging research interests. In this volume, some of his friends and colleagues have contributed chapters on the themeof"Innovation,DynamicRegions,andRegionalDynamics". Thisisa?eld ofresearchinwhichBorjeJohanssonhasbeenagreatinspirationtousall,andto whichhehim-selfhascontributedwithcharacteristicenthusiasmandinsightaspart ofhisprodigiousoutput. TheworkshopandthecreationofthisbookweresponsoredbytheAlfaSavings BankFoundationinJonkoping,JonkopingInternationalBusinessSchool,andthe SchoolofPublicPolicy,GeorgeMasonUniversity,Fairfax,VA. Wethankthemfor theirgeneroussupport. TheauthorsandtheeditorsthankKerstinFerroukhiforall her efforts to organise the workshop and Ulla Forslund-Johansson and Uma Kelekarforworkingtirelesslytogetthepapersrefereedandrevised,toputtogether multipleeditsofthisbookandforpreparingitforthepublisher. Itwouldhavebeen impossibletoproducethisbookwithouttheirdedicatedwork. Sweden CharlieKarlsson Sweden AkeE. Andersson UK PaulCheshire USA RogerRStough v Contents 1 Innovation,DynamicRegionsandRegionalDynamics...1 ? CharlieKarlsson,AkeE. Andersson,PaulCheshire,andR. R. Stough 2 ThePureTheoryofSpatialMarkets...35 MartinBeckmann 3 Smith-RicardoSpecializationinthePresenceofTiringEffects...47 TonuPuu 4 DynamicsofInnovationFieldswithEndogenousHeterogeneity ofPeople ...59 MasahisaFujita 5 EconomicsofCreativity ...79 ? AkeE. Andersson 6 SimpleMemesandComplexCulturalDynamics ...97 DavidBattenandRogerBradbury 7 TheFashioningofDynamicCompetitiveAdvantageof EntrepreneurialCities:RoleofSocialandPolitical Entrepreneurship ...107 LataChatterjeeandT. R. Lakshmanan 8 TheSocialCapitalofRegionalDynamics:APolicyPerspective...121 HansWestlund 9 HiddenOrderinTraf?cFlowsUsingApproximateEntropy: AnIllustration...143 KingsleyHaynes,RajendraKulkarni,andRogerStough vii viii Contents 10 RegionalInput-OutputwithEndogenousInternalandExternal NetworkFlows...161 JohnR. RoyandGeoffreyJ. D. Hewings 11 RegionalUnemploymentandWelfareEffectsoftheEU TransportPolicies:RecentResultsfromanAppliedGeneral EquilibriumModel ...177 ArtemKorzhenevychandJohannesBrocker 12 InfrastructureProductivitywithaLongPersistentEffect...1 97 TsukaiMakotoandKobayashiKiyoshi 13 ScienceParksandLocalKnowledgeCreation:AConceptual ApproachandanEmpiricalAnalysisinTwoItalianRealities ...221 RobertaCapelloandAndreaMorrison 14 TheLowParticipationofUrbanMigrantEntrepreneurs: ReasonsandPerceptionsofWeakInstitutionalEmbeddedness...247 EnnoMasurelandPeterNijkamp 15 TheLocationofIndustryR&DandtheLocationofUniversity R&D:HowAreTheyRelated?...267 CharlieKarlssonandMartinAndersson 16 GrowingUrbanGDPorAttractingPeople?DifferentCauses, DifferentConsequences ...291 PaulCheshireandStefanoMagrini 17 Urban-RuralDevelopmentinSweden...317 JohanKlaessonandLarsPettersson 18 Patents,PatentCitationsandtheGeographyofKnowledge SpilloversinEurope...331 ManfredMFischer,ThomasScherngell,andEvaJansenberger 19 Co-authorshipNetworksinDevelopmentofSolarCellTechnology: InternationalandRegionalKnowledgeInteraction ...347 KatarinaLarsen 20 Off-shoringofWorkandLondon'sSustainabilityasan InternationalFinancialCentre ...373 IanGordon,ColinHaslam,PhilipMcCannandBrianScott-Quinn 21 TheGenesisandEvolutionoftheStockholmMusicCluster ...385 PontusBraunerhjelm Index ...409 Contributors ? AkeE. Andersson ? JonkopingInternationalBusinessSchool,JonkopingUniversity,Hogskoleomradet, Gjuterigatan5,55318Jonkoping,Sweden,Ake. Andersson@ihh. hj. se MartinAndersson ? JonkopingInternationalBusinessSchool,JonkopingUniversity,Hogskoleomradet, ...Gjuterigatan5,55318Jonkoping,Sweden,Martin. Andersson@ihh. hj. se DavidBatten The Temaplan Group and CSIRO, CSIRO Marine and Atmospheric Research, PrivateBag1,Aspendale,Victoria3195,Melbourne,Australia David. Batten@csiro. au MartinBeckmann EconomicsDepartment,BrownUniversity,64Waterman StreetProvidence,RI 02912,USA,Lauren_Gallo@brown. edu RogerBradbury TjurungaandtheAustralianNationalUniversity,9ScottStreet,Narrabundah,ACT 2604,Canberra,Australia PontusBraunerhjelm DepartmentofEconomics,TheRoyalInstituteofTechnology,DrottningKristinas Vag30,10044Stockholm,Sweden,pontusb@infra. kth. se JohannesBrocker Institute for Regional Research, University of Kiel, Olshausenstrasse 40, 24098 Kiel,Germany RobertaCapello DepartmentofManagement,EconomicsandIndustrialEngineering,Politecnico diMilano,ViaGiuseppeColombo40,20133Milano,Italy Roberta. Capello@polimi.

In recent years, policy makers have given much credence to the role of entrepreneurship in the transformation of regions. As a result, a new set of policy responses have emerged that focus on the support of new venture creation, small business growth and idea generation and commercialization. While there is a wealth of research about entrepreneurship in general, less attention has been given to the development of new tools and programs in support of entrepreneurial activities, and to the ways in which the emergence, the character and the types of entrepreneurship policies might differ between countries. In particular, the transatlantic perspective is of special interest because of the pioneering role of the United States in this area, and also due to the European Union's focus on economic competitiveness. The contributions included in this book explore the emergence of entrepreneurship policies from a transatlantic comparative perspective and address different aspects of entrepreneurship policies including local entrepreneurship policies and the relationship between knowledge-based industries and entrepreneurship policies.

In the last four decades the developed economies have developed into veritable knowledge economies at the same time as more and more economies have entered the road to economic development. Typical for the developments during this time has been substantially increased investments in research and development (R&D) to generate new knowledge and new technologies and increased investments in diffusing existing knowledge by means of education and thereby raising the volume of human capital.

However, many member states and regions within the EU are struggling with their economic development. This book explores the uneven patterns of development within the EU, discusses the relative effect of investments on innovation and productivity growth and looks at the mechanisms involved in economic development and policy.

In recent years, policy makers have given much credence to the role of entrepreneurship in the transformation of regions. As a result, a new set of policy responses have emerged that focus on the support of new venture creation, small business growth and idea generation and commercialization. While there is a wealth of research about entrepreneurship in general, less attention has been given to the development of new tools and programs in support of entrepreneurial activities, and to the ways in which the emergence, the character and the types of entrepreneurship policies might differ between countries. In particular, the transatlantic perspective is of special interest because of the pioneering role of the United States in this area, and also due to the European Union's focus on economic competitiveness. The contributions included in this book explore the emergence of entrepreneurship policies from a transatlantic comparative perspective and address different aspects of entrepreneurship policies including local entrepreneurship policies and the relationship between knowledge-based industries and entrepreneurship policies.

In the last four decades the developed economies have developed into veritable knowledge economies at the same time as more and more economies have entered the road to economic development. Typical for the developments during this time has been substantially increased investments in research and development (R&D) to generate new knowledge and new technologies and increased investments in diffusing existing knowledge by means of education and thereby raising the volume of human capital.

However, many member states and regions within the EU are struggling with their economic development. This book explores the uneven patterns of development within the EU, discusses the relative effect of investments on innovation and productivity growth and looks at the mechanisms involved in economic development and policy.

The phenomenon of entrepreneurship has attracted researchers from a variety of disciplines and a diverse number of analytical approaches. Currently, there is a considerable amount of confusion and a variety of conflicting theories which are being used interchangeably and ambiguously. In this important new book, the authors argue that there are analytically distinct forms of entrepreneurship, each of them having an individual logic of their own. They highlight the role of individual economic agents with endowments of new knowledge or new combinations of old knowledge as entrepreneurs, and thus identify them as dynamic factors in the knowledge economy. Overall, this book not only provides a contemporary overview of current research in the field, but also summarizes the policy conclusions that can be drawn from current research.

The phenomenon of entrepreneurship has attracted researchers from a variety of disciplines and a diverse number of analytical approaches. Currently, there is a considerable amount of confusion and a variety of conflicting theories which are being used interchangeably and ambiguously.

In this important new book, the authors argue that there are analytically distinct forms of entrepreneurship, each of them having an individual logic of their own. They highlight the role of individual economic agents with endowments of new knowledge or new combinations of old knowledge as entrepreneurs, and thus identify them as dynamic factors in the knowledge economy.

Overall, this book not only provides a contemporary overview of current research in the field, but also summarizes the policy conclusions that can be drawn from current research.

Metropolitan growth has been dramatic in the past several decades, and today metropolitan regions are recognized as the main driving forces in national growth and development as well as in national and global innovation processes. The purpose of this book is to contribute to a better understanding of how metropolitan regions and their subsystems interact and compete, why they differ in their capacity to nurture innovation and growth, and how metropolitan policies must be designed to secure the region's long-term vitality. To that end, it presents new contributions on theories of urban growth, institutions and policies of urban change, and case studies of urban growth prepared by international experts.

Metropolitan growth has been dramatic in the past several decades, and today metropolitan regions are recognized as the main driving forces in national growth and development as well as in national and global innovation processes. The purpose of this book is to contribute to a better understanding of how metropolitan regions and their subsystems interact and compete, why they differ in their capacity to nurture innovation and growth, and how metropolitan policies must be designed to secure the region's long-term vitality. To that end, it presents new contributions on theories of urban growth, institutions and policies of urban change, and case studies of urban growth prepared by international experts.

Thisbookisbasedonpaperspresentedataninternationalworkshoporganisedin Jonkoping,Sweden,inJune2005tocelebratethe60thbirthdayofProfessorBorje .. Johansson-adearfriendandadmiredcolleagueofours. Thebookprovidesa limited sample of Borje Johansson's broad ranging research interests. In this volume, some of his friends and colleagues have contributed chapters on the themeof"Innovation,DynamicRegions,andRegionalDynamics". Thisisa?eld ofresearchinwhichBorjeJohanssonhasbeenagreatinspirationtousall,andto whichhehim-selfhascontributedwithcharacteristicenthusiasmandinsightaspart ofhisprodigiousoutput. TheworkshopandthecreationofthisbookweresponsoredbytheAlfaSavings BankFoundationinJonkoping,JonkopingInternationalBusinessSchool,andthe SchoolofPublicPolicy,GeorgeMasonUniversity,Fairfax,VA. Wethankthemfor theirgeneroussupport. TheauthorsandtheeditorsthankKerstinFerroukhiforall her efforts to organise the workshop and Ulla Forslund-Johansson and Uma Kelekarforworkingtirelesslytogetthepapersrefereedandrevised,toputtogether multipleeditsofthisbookandforpreparingitforthepublisher. Itwouldhavebeen impossibletoproducethisbookwithouttheirdedicatedwork. Sweden CharlieKarlsson Sweden AkeE. Andersson UK PaulCheshire USA RogerRStough v Contents 1 Innovation,DynamicRegionsandRegionalDynamics...1 ? CharlieKarlsson,AkeE. Andersson,PaulCheshire,andR. R. Stough 2 ThePureTheoryofSpatialMarkets...35 MartinBeckmann 3 Smith-RicardoSpecializationinthePresenceofTiringEffects...47 TonuPuu 4 DynamicsofInnovationFieldswithEndogenousHeterogeneity ofPeople ...59 MasahisaFujita 5 EconomicsofCreativity ...79 ? AkeE. Andersson 6 SimpleMemesandComplexCulturalDynamics ...97 DavidBattenandRogerBradbury 7 TheFashioningofDynamicCompetitiveAdvantageof EntrepreneurialCities:RoleofSocialandPolitical Entrepreneurship ...107 LataChatterjeeandT. R. Lakshmanan 8 TheSocialCapitalofRegionalDynamics:APolicyPerspective...121 HansWestlund 9 HiddenOrderinTraf?cFlowsUsingApproximateEntropy: AnIllustration...143 KingsleyHaynes,RajendraKulkarni,andRogerStough vii viii Contents 10 RegionalInput-OutputwithEndogenousInternalandExternal NetworkFlows...161 JohnR. RoyandGeoffreyJ. D. Hewings 11 RegionalUnemploymentandWelfareEffectsoftheEU TransportPolicies:RecentResultsfromanAppliedGeneral EquilibriumModel ...177 ArtemKorzhenevychandJohannesBrocker 12 InfrastructureProductivitywithaLongPersistentEffect...1 97 TsukaiMakotoandKobayashiKiyoshi 13 ScienceParksandLocalKnowledgeCreation:AConceptual ApproachandanEmpiricalAnalysisinTwoItalianRealities ...221 RobertaCapelloandAndreaMorrison 14 TheLowParticipationofUrbanMigrantEntrepreneurs: ReasonsandPerceptionsofWeakInstitutionalEmbeddedness...247 EnnoMasurelandPeterNijkamp 15 TheLocationofIndustryR&DandtheLocationofUniversity R&D:HowAreTheyRelated?...267 CharlieKarlssonandMartinAndersson 16 GrowingUrbanGDPorAttractingPeople?DifferentCauses, DifferentConsequences ...291 PaulCheshireandStefanoMagrini 17 Urban-RuralDevelopmentinSweden...317 JohanKlaessonandLarsPettersson 18 Patents,PatentCitationsandtheGeographyofKnowledge SpilloversinEurope...331 ManfredMFischer,ThomasScherngell,andEvaJansenberger 19 Co-authorshipNetworksinDevelopmentofSolarCellTechnology: InternationalandRegionalKnowledgeInteraction ...347 KatarinaLarsen 20 Off-shoringofWorkandLondon'sSustainabilityasan InternationalFinancialCentre ...373 IanGordon,ColinHaslam,PhilipMcCannandBrianScott-Quinn 21 TheGenesisandEvolutionoftheStockholmMusicCluster ...385 PontusBraunerhjelm Index ...409 Contributors ? AkeE. Andersson ? JonkopingInternationalBusinessSchool,JonkopingUniversity,Hogskoleomradet, Gjuterigatan5,55318Jonkoping,Sweden,Ake. Andersson@ihh. hj. se MartinAndersson ? JonkopingInternationalBusinessSchool,JonkopingUniversity,Hogskoleomradet, ...Gjuterigatan5,55318Jonkoping,Sweden,Martin. Andersson@ihh. hj. se DavidBatten The Temaplan Group and CSIRO, CSIRO Marine and Atmospheric Research, PrivateBag1,Aspendale,Victoria3195,Melbourne,Australia David. Batten@csiro. au MartinBeckmann EconomicsDepartment,BrownUniversity,64Waterman StreetProvidence,RI 02912,USA,Lauren_Gallo@brown. edu RogerBradbury TjurungaandtheAustralianNationalUniversity,9ScottStreet,Narrabundah,ACT 2604,Canberra,Australia PontusBraunerhjelm DepartmentofEconomics,TheRoyalInstituteofTechnology,DrottningKristinas Vag30,10044Stockholm,Sweden,pontusb@infra. kth. se JohannesBrocker Institute for Regional Research, University of Kiel, Olshausenstrasse 40, 24098 Kiel,Germany RobertaCapello DepartmentofManagement,EconomicsandIndustrialEngineering,Politecnico diMilano,ViaGiuseppeColombo40,20133Milano,Italy Roberta. Capello@polimi.

Network economics is a new, rapidly developing field. In this volume theoretical and empirical contributions are collected, each deals with different aspects of the network economy. The book assesses networks as a complement to pure market relations and studies innovation networks and strategic alliances among innovative corporations. Product differentiation and specialization in reciprocal networks are emphasised as a strategy of sustainable development. The book presents econometric methods of barrier and network analysis, including communication and trade patterns.

During the last two decades a new growth theory has emerged - often labelled "endogenous economic growth." The contributions in the book develop these advances into a theoretical framework for endogenous regional economic growth and explain the implications for regional economic policies in the perspective of the new century. Endogenous growth models can reflect increasing returns and hence refer more adequately to empirical observations than earlier models, and the models become policy relevant, because in endogenous growth models policy matters. Such policies comprise efforts to stimulate the growth of knowledge intensity of the labour supply and knowledge production in the form of R&D.

This volume contains a selection of papers presented at an international symposium on research and development, industrial change and economic policy organized and hosted by the University of Karlstad, Viinnland, Sweden. Situated about halfway between Stockholm and Oslo, Karlstad stands on the River Klara, which reaches north into the mountains of Norway. Founded by King Charles IX of Sweden, whose statue stands in the city centre beside the river, the city celebrated its 400th anniversary in 1984. For many decades the wealth of Karlstad has been based on traditional industries such as iron, timber and paper, and throughout the province of Viinnland there are a considerable number of industrial communities which grew up around mines, ironworks, sawmills and papermills. Even the cultural structure of these communities is heavily marked by the industrial environment in which they developed. However, for over a decade now a major structural reorientation has been taking place and the old industrial structures have been disappearing. For various reasons the importance of large scale, manufacturing companies has declined and as a result of intense development work with new ideas, new entrepreneurs and new technology, we have seen the rapid rise of small companies. In this context, recent research has shown that universities playing an increasingly central role in regional development. Thus the continued development of the University of Karlstad is of significant regional and national interest. Although fairly small in an international perspective (approximately 4000 students) the university is expanding rapidly.

Few otherfacetsofsocial andeconomic life are sopoorly understood and yet so indisput- ablyvital for prosperous development as irifrastructure. Sincetheearly 1980sresearchers and policy makers in various OECD nations have started to readdress the issue ofinfra- structure investments. This renewed interest has been promptedby a varietyofconcerns. One observation was that such investments were declining from levels which mighthave been inadequate in the first place. A second observation was that the timing of these cutbacks in infrastructure spending seemed to roughly coincide with lower rates of growth in outputorproductivity. This raised the intriguing question ofwhetherthe latter might be attributable to the former. Coulditbe thatinfrastructureinvestmentscontrolan economy's rate of productivity growth? The response in many countries has been to initiate theirownresearch in an attempttoverify orrejectthis hypothesis. But the more welearn abouttheroleofinfrastructure anditsrelationships with therest of the economy, the more complicated it seems to be. Time itself is quite difficult to accommodate given the wide variety ofspeeds atwhich differentpartsofaneconomycan adjust. Because of this inherent complexity, we tend to break the problem down into "bite-sizedchunks", thereby enabling us toisolate the parts ofinterest to us - such as the impact of infrastructure on productivity. In this way we can ignore the complex inter- actions betweenour areaofinterest and the restofour world. By saying ceteris paribus, we overlook many otherkey infrastructuralimpacts like those on theenvironmentandon ouroverall qualityoflife. This distorts the true picture.

This book provides a balanced, empirically-based view of the "Digital Economy," and explores its regional and geographical import in areas where the Digital Economy meets more traditional patterns. More than just an interpretive analysis, this book utilizes empirical evidence in its assessment of the dynamics of specific regions in different parts of the world. The book also examines the policy implications of the rising Digital Economy.

This volume provides an understanding of firms' R&D and innovation strategies and their economy-wide consequences. It is based on the premise that differences in firm-level returns, as well as economy-wide outcomes, may be linked to the heterogeneous ways in which firms organize and undertake R&D and innovation activities. It emphasizes innovation strategies of innovating firms, and reflects that innovation efforts do not represent a uniform type of expenditure. Organized into three parts the volume moves from the micro to the macro-level. This structure highlights the notion that R&D and innovation and growth are two interdependent perspectives. The first of these is micro-oriented and focuses on innovation processes of firms, where R&D activities and other innovation efforts give rise to consequences such as a strengthening of resource bases, growth of sales and employment, patents, new products, increasing productivity and profits, and improved chances of survival. The second perspective comprises economy-wide effects in the form of overall technological change, growth in total factor productivity, and structural change processes, where certain sectors may benefit from new inputs from other sectors while others experience declining markets and reduced output. The book brings together contributions and perspectives from both economics and business scholars, and will appeal to academics, researchers, and students interested in R&D and innovation strategies, international business, business strategy, and the economics of technological change.

Why has the United States economy successfully moved beyond its chief competitors? This collection suggests that at least some of the answers to the pattern of divergent development can be found in the role of the entrepreneur. By examining the process that new firms and entrepreneurs play in the economy, the essays in this volume make a fundamental contribution to our understanding of the macroeconomy. The public policy implications of this process are clear. Countries that encourage entrepreneurship and free entry will have better macroeconomic performance than those that retard it.

This book was originally published in 1999. At this time, the US economy had recently restructured itself, moving away from an industrial economy towards one based on information, while the European Union and Japan were left to worry about rising government deficits, inflexible businesses, persistent unemployment, and workers inadequately trained for the information age. Why did the US economy move beyond its chief competitors? This collection suggests that at least some of the answers to the pattern of divergent development can be found in the role of the entrepreneur. By examining the process that entrepreneurs play in the economy, the essays in this volume make a fundamental contribution to our understanding of the macroeconomy. Each chapter clarifies the role of entrepreneur in economic theory, the function of small and medium-size enterprises that they found and build and the impact of the innovations introduced on employment, productivity, and economic growth.