Innovations and the Growth of Cities

Abstract

In order to explore the divergent growth rate in cities, which leads to income inequality, the impact of entrepreneurs and their goods on local economies is examined.Specifically, the focus is on how innovative entrepreneurs lead to a variety in goods and economic heterogeneity in cities, which both reduce the divergence of growth rates. Though it is clear that a city's heterogeneity leads to its growth, it is not clear whether heterogeneity results from knowledge spillover or a combination of risk pooling, shared infrastructure, and thick labor markets.A cities heterogeneity can be attributed to its entrepreneurial innovation.In exploring the origin of this innovation, endogenous economic growth theory is discussed. The manner in which entrepreneurship can increase knowledge spillover, and in turn heterogeneity, is also examined. Using the insight garnered from these analyses, a new 'spatial' theory of technology-led regional economic growth is needed to address three fundamental issues: (1) why knowledge-related economic activities concentrate in certain regions, (2) how technological advance occurs and the key processes and institutions involved, and (3) how the role of technological change in regional economic growth can be put into an analytical framework.(SRD)

Keywords: Endogenous growth, Innovation process, Local economies, Urban areas, Urban development, Knowledge spillovers, Firm growth