This paper analyzes the relationship between regional growth and accessibility to knowledge resources in a cross-section of Swedish municipalities. The empirical part of the paper shows the hypothesis that knowledge accessibility has a positive effect on growth which cannot be rejected. The knowledge accessibility in a given period has a statistically significant effect on the growth in subsequent periods. The paper also demonstrates that knowledge accessibilities do not affect growth homogeneously across municipalities.

Paul Krugman has argued many times that the most fundamental aspect of economic activities is that they tend to cluster in space. However, the tendency to cluster is stronger for certain types of activities than for others. One type of economic activity with a very strong tendency to cluster is R&D. This is a general trait of all economies but, many economists still seem to neglect this fact, and many more, for example, analyze the role of R&D for economic growth using aggregated models for the whole national economy. However, the fact that R&D is spatially concentrated ought to be acknowledged, since it is well established that knowledge flows are bounded in space. The general tendency of R&D activities to cluster can be explained by the existence of increasing returns, which make these activities more productive and more profitable when they agglomerate. The existence of increasing returns signal that the market forces might be unable to generate an optimal resource allocation, since individual actors do not take into account the effect of their own actions on the operations of other actors.

Given the general assumption that R&D-generated knowledge contributes to economic growth it is of great importance to understand how R&D contributes to economic growth in an economy where R&D is strongly concentrated to a limited number of regions. Such an understanding is contingent upon an understanding of the character of knowledge and knowledge flows. There are strong evidences to show that knowledge transfers to a high extent are dependent upon face-to-face interaction. The volume of knowledge flows depends upon the interaction possibilities at different spatial scales. We assume that it is meaningful to identify a number of such spatial scales based upon the character of the generalized spatial interaction costs. In particular, we claim that there are three spatial scales that are of special importance: (i) The local scale that allows several interactions a day, (ii) The intra-regional scale—the commuting scale—that allows for daily interaction, and (iii) The inter-regional scale that allows only for a limited number of planned interactions a month or a year.

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