mall firms "has a strong local character: they are more sensitive to, and contribute more to, the innovations of spatially-contiguous firms" (p.24.). This greater diversity among small, start-up firms is related to their 'embeddedness' (Grabher 1993) in localities. Proximity facilitates contacts between individuals that evolve into social and professional networks; these networks develop the common stock of knowledge in the locality that becomes the foundation for further innovation by starts; this is more beneficial to SMEs because the people in these firms are more likely to have had recent experience in other firms and therefore better links to other firms than personnel in large firms, which tend to be more vertically integrated and self-sufficient (Almeida and Kogut 1997). This seems to be reflected in the findings of Saxenian's (1994) ethnographic study in which she notes that there is more inter-firm knowledge exchange in Silicon Valley than in the Route 128 region around Boston; the former has a higher share of starts while the latter is dominated by larger firms that inter-relate much less either with surrounding institutions or other firms in the region. This difference is believed to be part of the reason why Silicon Valley remains vibrant while the Route 128 region has experienced a recent decline.There is counter-argument and counter-evidence, to the effect that MNEs continue to dominate the global economy (e.g. Strange 1991, Amin 1993, Harrison 1994). Much of the research showing the advantages of SMEs is location and/or sector specific. Rothwell and Dodgson (1994, p.310), editors of the Handbook of Industrial Innovation, argue that "the role played in innovation by... SMEs is strongly sectorally influenced; ...the relative innovatory roles of large and small firms can vary over the industry lifecycle; and... dynamic complementarities frequently exist between the technological change activities of large and small firms." T...
