Clusters, externalities and innovation: new Evidence from German firms, 1878-1913

Innovation concerns mainly three broad areas: products, production processes and organisational set-ups.2 This paper focuses on firms’ innovative activity concerning the first two areas and follows the definition of innovation as research, development, imitation and adoption of new products and new production processes.3 This approach is consistent with an important stream of historical and theoretical works that regard innovation, in the form of technological progress, as a fundamental determinant of economic growth.4 Moreover, it is consistent with Schumpeter, who focuses on the ‘introduction of new methods of production and new commodities’ in his discussion of innovation, in turn as a part of monopolistic practices.5