This chapter reviews the agglomeration externalities literature which explains the role of urban environments in globalisation. It examines the utility of agglomeration externalities for the sample of transnational Small and Medium sized Enterprises (SME) studied. The relation between innovation and agglomeration externalities is most forcefully stressed by Edwards work on the triumph of the city, which argues that cities due to their size and circulation of ideas provide the most important source of innovation in the contemporary era. However, the long tradition of work on agglomeration externalities provides the necessary fine distinctions and specifications on the mechanisms involved. Following Neffkes literature overview of the matter, four distinct types of agglomeration externalities can be identified. The empirical data is derived from a broader study examining the knowledge dynamics of SME transnationalisation. The resulting overview of the firm's knowledge, procurement networks and its social context allows investigating the relevance of the different types of agglomeration externalities utilised for transnationalisation.