Innovation and the Growth of Cities.

AuthorRogers, William H.
PositionBook Review

by Zoltan J. Acs. Northampton, Mass.: Edward Elgar Publishing. 2002. Cloth, ISBN 8406493964, $85.00. 247 pages.

In my experience, someone who claims to be eclectic in approach is often trying to mask confusion. How could one combine the works of P. Krugman, P. Romer, F. A. Hayek, and K. Polanyi? However, in the case of Innovation and the Growth of Cities, Zoltan J. Acs does a remarkable job and shows how a diverse approach can be fruitful.

The goal of the book is to identify the major engine of growth. To do this the author explores the familiar neoclassical models of the new economic geography, pioneered by Krugman, and the new growth theory, often associated with Romer. As with the Solow Model, both models place an emphasis on innovation as the primary engine of growth. Acs finds the common critique of each model; generally, they are too restrictive in their assumptions and they do not appropriately model the engine of innovation. To improve on these models the author includes the entrepreneur and local networks. The systems approach adds a distinctive institutional flavor, which provides a more flexible framework to the study of innovation and the networks that support innovation. However, the use of the new economic geography provides a spatial element to the institutions. To complete the model, the role of the entrepreneur is treated as a person who finds and exploits newly crated knowledge. In this respect Acs sees the entrepreneur from an Austrian perspective, which does round out the author's eclectic approach.

With this framework, Acs investigates (1) the connection between firm- and university-funded research and development, (2) research externalities within industries, across industries, and across space, (3) the impact of firm size on innovation, and (4) role-specific institutions in promoting innovation. The mode of investigation is primarily empirical evidence from one data source of innovations; however, many other case and empirical studies are cited. The main data source is the U.S. Small Business Administration, which counts an innovation as an invention that has led to the production of a product in the market place. By using this database the author is able to avoid patent data, which will not cover unpatented innovations (apparently there are many) and inventions that found no usefulness in the market place.

It is not surprising that the author finds a link between both private and public funding of research and...

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