Alpha Clusters: Creative Innovation in Local Economies

Abstract

This article examines a set of industries including financial investment, fashion, and culture that tend to predominate in certain cities such as New York and London. Using data on business establishments and wages for the United States and Canada, the author shows that these industries exhibit a very high level of spatial concentration and a related high level of wage variation among metropolitan areas. The author proposes that these industries are very cluster dependent because of an inherently rapid pace of product innovation. The implications of this for economic development analysis are considered in the context of cluster and innovation policy. The author suggests that fostering innovation in these industries requires a substantially different approach from that commonly being deployed for technology industries.