Firm clustering and innovation: Determinants and effects**We would like to thank Jan Faber (University of Utrecht, Department of Innovation Studies), Bart Verspagen, Gerrit Rooks, and Peter Muhlau (Eindhoven Centre for Innovation Studies), the anonymous reviewers, and the guest†editors of this journal for their thoughtful comments. The usual disclaimer applies

In this article we ask why innovator firms engage in innovation networks, and which factors explain the spatial dispersion of these networks. Benefits of the use of internal and external knowledge resources for innovative performance of firms were partially confirmed. Especially the utilisation of external competences drawn from buyers and suppliers had stronger effects on innovative performance if complexity of innovation projects was high. Spatial concentration of innovation networks of buyers and suppliers turned out to have a reciprocal, positive relation with interaction intensity between firms. Interaction enhances spatial concentration of relations and vice versa, although the strength of effects differs for ties with buyers and suppliers. Finally we found that higher regional economic embeddedness increases spatial concentration of innovation networks, whereas R&D effort had no effect at all.