For more than a century, geographers and economists have developed theories on the spatial agglomeration of economic activity in response to three empirical observations:

• 1.
  A large portion of world output is produced in a limited number of highly concentrated core regions.
• 2.
  Firms in similar or related industries tend to colocate in particular places.
• 3.
  Both of these patterns seem sustainable over time.

While this outcome has most often been attributed to agglomeration economies, some scholars have long pointed out that the economic and institutional fabric of some areas promotes innovative behavior that further reinforces this pattern.

The most lasting contribution among the early analysts is the economist Alfred Marshall's “industrial districts.” Besides mentioning the external benefits that single-activity or closely related producers derive from sharing the fixed costs ...