Technology spillovers and agglomeration are critical issues in regional economic development. The presence of geographically localized spillovers in a region attracts firms and thereby leads to a higher level of agglomeration. On the other hand, the agglomeration of firms facilitates localized spillovers through local innovation networks. The endogenous nature of the relationship between spillovers and agglomeration, however, has been rarely acknowledged in the existing literature. This article critically reviews a wide range of issues related to technology spillovers and agglomeration and proposes a comprehensive conceptual framework to understand the mechanism of regional economic development.
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