Regional networks of small and medium sized enterprises: evidence from the Metropolitan Area of Ottawa in Canada1

Innovation is currently seen as a process which results from various interactions among different actors. Recent theories of innovation emphasize clusters and geographical proximity as loci of knowledge, development and exchange, critical to higher levels of innovation and regional growth. As a consequence, there is a territorial dimension to innovation. This article investigates the innovation activities and networking of 53 small and medium sized enterprises (SMEs) in Ottawa, Canada. Taking its point of departure from the proliferating literature on the localized nature of innovation processes, the article sets out to answer three empirical questions: How intensively are SMEs engaging in innovation activities? To what extent do they interact during innovation process activities? What is the relevance of spatial proximity in networking, and what is the relative importance of localized cooperation as compared to non‐localized cooperation. The results revealed SMEs rely as much on external networks of customers and suppliers, as they do on ones based in their own region, and that these are considerably more important, than other potential sources of ideas, to the innovation process within the firm.