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ustries. An important element in this theory is technology. This is for two reasons. First, technology at any point in time will define production possibilities and therefore will play a significant part in determining the areas in which a region can/should specialize. Second, changes in technology can be a significant factor in changing the relative advantage of a region and/or the profitability of existing activities. From this perspective, technology bees a very important factor in defining the fortunes of a region and/or changes in those fortunes over time. Now let’s consider a particular technology, putermunications technology and what this potentially means for regional development in a Krugman type world. What is the knowledge, or information economy? ? Relates to firms or parts of firms primarily concerned with the processing of information, either as an input to or an output of the production process. ? Involves use of puter and munications technology ? Makes location increasingly irrelevant to performance of task ? FOOTLOOSE FIRMS ? Free to move ? Can be located anywhere from a technical point of view ? Marginal cost of serving an additional customer is virtually zero。 hence, location independent ? Includes information/knowledge industry ? Regional Ine Levels in Europe and North America have been diverging in the last 1520 years after an earlier period of convergence ? In Europe, this is partly due to a mon set of rules for regions at very different levels of development ? It is also partly due to the growth of the service sector as part of the tradeable goods sector ? Model developed by Krugman basically argues that concentration of manufacturing is based on the interaction of economies of scale with transportation costs. ? Finds that countries/regions with a larger home market tend to export manufactures and large