ABSTRACT
This chapter focuses on the factors in the development of the innovation potential of the United States machine tool industry at the metro-regional level. It begins by laying out the structure of the inquiry. The dependent variable selected for analysis is the metro-regional innovation potential of the machine tool industry, defined operationally as the number of machine tool patents produced within the metropolitan area from 1990 through 1992. Agglomeration economies are hypothesized to exert a positive influence on regional innovation potential. The effects of two different kinds of agglomeration economies - urbanization economies and localization economies - are analyzed. Do the factors influencing the development of the innovation potential of the machine tool industry have the same effect on the development of the innovation potential of other industries? Changes in the federal government's demand could be expected, therefore, to have a direct influence on the innovation potential of an industry.
