More than most other economic activities, innovation and technological change depend upon new economic knowledge. Thus, researchers have focused on the role that spillovers of economic knowledge across agents and firms play in generating increasing returns and ultimately economic growth. In fact, several studies have identified the existence of spatially-mediated knowledge spillovers. An important finding of previous work is that investment in R&D by private corporations and universities “spills over” for third-party firms to exploit. If the ability to receive knowledge spillovers is influenced by distance from the knowledge source, then geographic concentration should be observed, especially in industries where knowledge spillovers are likely to play a more important role. The purpose of this paper is to examine the extent to which industrial activity clusters spatially and to link this geographic concentration to the existence of knowledge externalities.