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The reasons for changes in ranking within urban systems are a matter of a wide and long debate. Some focus on a continuous and smooth ordering of cities by their size within the urban system, in the tradition of Zipf's law. Others focus on discrete, discontinuous ordering, as cities take on functions at different levels, such as specialized market places or high-level education, in the tradition of Christaller. We enter the debate by empirically evaluating whether the same determinants explain continuous or discrete changes in urban ranks in the evolution of the Italian urban hierarchy over the years 1971 to 2011. We empirically show that small, continuous changes of cities' ranks have different drivers than large, discontinuous leaps. The presence of high-level functions in a city predicts major leaps across discrete ranks. Results are robust to the use of an instrumental variable strategy based on a shift–share argument. [ABSTRACT FROM AUTHOR]

Popular theories claim that innovation activities should be located in large cities because of more favorable environmental conditions that are absent in smaller cities or peripheral areas. Germany provides a counterexample to such theories. We argue that a major reason behind the geography of innovation in Germany is the country's pronounced legacy of political fragmentation that created a decentralized settlement structure, shaped the geographic distribution of universities and public research institutions, and brought about a rather uniform and local access to finance. We show how political fragmentation influenced the emergence of historic centers of knowledge production and impacts the positioning of innovation activities today. We conclude that institutional factors should play a more prominent role in theories that aim at explaining the spatial distribution of innovation activities. [ABSTRACT FROM AUTHOR]

This article assesses the influence of spatial heterogeneity on the entry mode by multinational enterprises ( MNEs) in foreign markets. Focusing on acquisitions, we claim that the location of the target firm influences the MNE's ownership choice. MNEs normally execute partial acquisitions to reduce their liability of foreignness and to preserve their target's inherent competencies, particularly in highly innovative and internationally competitive sectors. However, this phenomenon occurs less frequently if target firms are located in areas that are characterized by relevant externalities, such as core cities and industrial districts. In particular, core cities allow foreign MNEs to access a variety of information and knowledge as well as other externalities that are associated with international interconnectedness; industrial districts provide MNEs with easier access to industry-specific agglomeration economies (a local pool of skilled labor, local input-output linkages, and local knowledge spillovers). These locations provide substitutes for different aspects of the target firm's competences, thus reducing an MNE's need to maintain a local partner. Empirical evidence from foreign acquisitions of local manufacturing firms that occurred in Italy during the 2001-10 period confirms these expectations. [ABSTRACT FROM AUTHOR]

By means of a unique longitudinal database with information on all industrial plants and employees in the Swedish economy, this article analyzes how geographic proximity influences the impact of spillovers and knowledge flows on the growth in productivity of plants. Concerning the effects of spillovers, it shows that the density of economic activities contributes mainly to the performance of plants within a short distance and that the composition of economic activities is more influential farther away. Regarding the influence of the local industrial setup, proximity increases the need to be located near different, but related, industries, whereas increased distance implies a greater effect of intraindustry spillovers. The analyses also demonstrate that knowledge flows via the mobility of skilled labor are primarily a subregional phenomenon. Only inflows of skills that are related to the existing knowledge base of plants and come from fewer than 50 kilometers away have a positive effect on the performance of plants. Concerning outflows of skills, the results indicate that it is less harmful for a dispatching plant if a former employee remains within the local economy rather than leaves it for a job in another part of the national economy. [ABSTRACT FROM AUTHOR]

This article presents estimates of the impact of regional variety and trade linkages on regional economic growth by means of export and import data by Italian province (NUTS 3) and sector (three-digit) for the period 1995-2003. Our results show strong evidence that related variety contributes to regional economic growth. Thus, Italian regions that are well endowed with sectors that are complementary in terms of competences (i.e., that show related variety) perform better. The article also assesses the effects of the breadth and relatedness of international trade linkages on regional growth, since they may bring new and related variety to a region. Our analysis demonstrates that regional growth is not affected by simply being well connected to the outside world or having a high variety of knowledge flowing into the region. Rather, we found evidence of related extraregional knowledge sparking intersectoral learning across regions. When the cognitive proximity between the extraregional knowledge and the knowledge base of a region is neither too small nor too large, real learning opportunities are present, and the external knowledge contributes to growth in regional employment. [ABSTRACT FROM AUTHOR]