Innovating firms face the dilemma of knowing when they will be able to appropriate the rents accruing from their innovations. Only the future value of the rents creates an incentive to innovate, and all innovations that are either imitated or improved upon by competitors preempt the innovator...

The ability to generate innovations and capture the rents from innovation are important for firms’ competitive advantage. Increasingly firms seek knowledge abundant locations, or industry clusters, to access novel knowledge and generate innovations through knowledge recombinations...