Changes in the international economy have gradually shifted the basis of industrial competitiveness from static price competition towards dynamic improvement, benefiting firms that are able to create knowledge faster than their competitors. The paper argues that proximity between firms plays an important role in interactive learning processes and that knowledge creation is supported by the institutional embodiment of tacit knowledge useful for particular classes of activity. Sustainable competitiveness requires the ongoing replacement of decrepit resources, the rebuilding of obsolete structures and the renewal of economically important national or regional institutions, when imitation gradually turns localised capabilities into global ubiquities.

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