Book excerpt: This title was first published in 2000: Steven Nivin analyzes a process vital to economic development - technological change. He furthers understanding of the processes driving innovation, so that we may gain a deeper insight into the development of economies. Specifically, the study explores the concept of innovation potential and the factors that result in variations in innovation potential across metropolitan areas, using the US machine tool industry as a case study. To provide a comparison, the same models are also estimated for the semiconductor industry. The findings indicate that urbanisation economies, localization economies, human capital, universities, and invention-derived knowledge are significant factors. The study assesses the contributions of three different skill levels of human capital; college-educated, graduate degree, and locally produced PhD’s in mechanical and electrical engineering. Only the graduate and PhD degree measures are found to be significant, indicating the importance of having a highly skilled pool of labour within the region. The influences of the factors appear to be similar across industries, with some slight differences. The transfer of knowledge through patents is also studied. It is found that the transmission of this knowledge is slower between different industries, relative to the transmission within the same industry.