The volume is in three parts. The first part demonstrates that the processes of innovation and technological change are spatially differentiated, both regionally within countries and internationally between countries. The second part broadens, both conceptually and empirically, our understanding of the innovation process and the process of network formation, by examining the increasing importance of knowledge creation and diffusion in the new economy and how this is changing the nature of firms in crucial ways. Particular focus is laid on identifying the growing pressures for firms to develop more inter- and intrafirm networks and on providing lucid illustrations of these different kinds of networks. The third part discusses key issues related to the systems of innovation approach as a conceptual framwork for regional innovation analysis and directs attention to enlightening conceptual and empirical work on the issue how knowledge spills over locally.