At the same time that a remarkable new social context appeared at the micro level to produce postmodern men and women as we have seen in Chapter Two, a similar differentiation occurred in the geography of the advanced industrialized countries, the birth of innovative regions (Florida 2004, 2014), another positive sign of disequilibrium. Not unexpectedly, the two are related. However, the starting point sometimes occurs at the meso level because high innovation rates attracts not only highly educated immigrants but also others because the areas are likely to have greater openness (Florida 2014: 251). From the standpoint of understanding how to construct an innovative region or district, the most critical component for stimulating economic growth represents how various research organizations, manufacturers, and suppliers are linked together. We need to identify what mechanisms facilitate solutions to the valley of death problem noted in Figure 1.1, especially in liberal market economies such as the United States, United Kingdom, Australia (LMEs), and so forth.

Organizations can combine creative people into research teams, but what links organizations together? This theoretical question originates in the theory about the third stage of knowledge creation, in which differentiated organizations become linked into idea- innovation networks to produce radical innovations. Geographic regions represent a simple solution for integrating diverse organizations. In the age of the Internet, one might question whether such proximity is truly necessary. However, the Internet does not have the capacity of transmitting tacit knowledge, which requires that individuals read the nonverbal face- to- face interaction/ communication discussed in Chapter Two. This capacity becomes extremely important in the transfer of tacit knowledge, which is necessary in idea- innovation networks for the rapid development of radical innovations. In Chapter One, we noted the amount of time needed to learn know- how in licensing agreements for patents (Arora et al. 2001: 188).

To stress the importance of this principle of action theory, namely, the need for interorganizational relationships to stimulate high innovation rates, I want to describe the characteristics of an innovative region in Germany rather than Silicon Valley, which we will consider later in this chapter. Germany has more innovative regions relative to population than the United States and therefore represents a better model for those who want to create innovative regions.