It is widely recognised that the performance and development of firms are heavily influenced by their environment and that the conditions that prevail in the local or regional milieu seem to be particularly important. Furthermore, the fact that economic, entrepreneurial and innovative activities tend to agglomerate at certain places, leading to patterns of national and regional specialization, is increasingly seen to give important insights into the very process of firm competitiveness and industrial transformation. Drawing on a rich literature and case study material from selected industries, and elaborating on key concepts such as firms and competencies, industries and industrial systems, and competitiveness and prosperity, the authors set out to answer some broad research questions: * what is competition about in today's economy, and how is the performance of firms and industries related to space and place? * why do geographical areas (local milieus, cities, regions, countries) specialize in particular types of economic activity, and why do patterns of specialization, once in place, tend to be so tremendously durable? * how can high-cost regions in general and small industrialized countries in particular sustain competitiveness and prosperity in an increasingly globally integrated world economy? This book points the way out of a dilemma created by recent industrial theory and policy: is it possible for countries which are not destined to be leading high-tech powers to take advantage of the current conjecture of increasingly open markets?