Do Only Big Cities Innovate? Technological Maturity and the Location of Innovation

Innovation enhances economic performance. High rates of innova-tion are associated with high rates of productivity growth, and fasterproductivity growth leads to higher real wages and improvements in standards of living. Consequently, many local policymakers are eager to encourage higher rates of innovation in their areas. Theoretical and empirical studies of the geography of innovation find that relatively populous regions are the most conducive to innova-tive activity. Large and densely populated places offer more developed markets for the specialized inputs used in innovation. Populous places also offer innovators greater opportunities to learn from one another. On the surface, these findings seem to offer little hope to smaller, more sparsely populated regions—places that would like to compete for inno-vative activity and the benefits of a knowledge economy. Are large populations a prerequisite for innovation? This article explores this common perception and finds it is not always true. More populous regions dominate in relatively new technological fields, where innovations are more original. But less populous regions can compete i