Innovation and Networking in Peripheral Areas—a Case Study of Emergence and Change in Rural Manufacturing

Abstract This paper examines the features of successful forms of innovation in rural areas characterized by geographical distance and sparse population. The core questions are: how firms compensate for the lack of a dense local network; how rural clusters are emerging and changing; how firms acquire knowledge for innovation processes; how firms face the challenges of globalization, notably at the level of value chains. The topics will be examined through an analysis of the development of one agricultural area in northern Finland which has industrialized since the mid-1990s in the wake of the growth of the national information and communication technology (ICT) cluster. The findings reveal that the knowledge needed for innovation in small and medium-sized enterprises (SMEs) stems from regional sources—clients of localized networks as well as regional educational and knowledge institutes—whereas the leading firms of the regional networks acquire knowledge from clients, non-local knowledge institutes and national technology programmes.