Spatial Agglomeration, Knowledge Competition And Economic Performance Of Capital Cities

When the development of knowledge economy deepen into internet age, a senior form of knowledge economy, the human is experiencing unprecedented economic and social change, on the one hand, the key production factor is knowledge, positive knowledge intensive industry will be the main orientation of structure upgrading, knowledge competition will determine the cities’ future, urban transformation will to be a knowledge city; Technological progress, on the other hand, greatly reduces transport costs and improves accessing of factors, thus making the importance of space having been questioned.However, spatial agglomeration of economic activity seem remarkable, the city itself is the result of agglomeration, big cities are often plays an important role in national economy.The capital cities of our country is a representative and space of competition between regions, and is the projection of uneven regional development. At the same time, the tacit dimensions of knowledge can make us insight into the space effect in the knowledge economy with exciting perspective, the transformation from tacit knowledge to the innovation depends on face-to-face communication.This paper states the nature of provincial capital economy, analyzes the relationship between the tacit knowledge, innovation and growth, based on the background of knowledge economy and urban sustainable development, take the NEG(new economic geography) as the basic framework, this paper expounds the correlation between spatial agglomeration of economic activity, the knowledge competition and economic performance of capital city: there is a positive correlation between economic performance and the degree of spatial agglomeration; Under the knowledge economy, the importance of agglomeration to capital economic performance is greater, spatial agglomeration is the only way for knowledge competition effecting economic performance. We use 26 capital cities of China in 1993-2012 to build a panel data and to establish a econometric model, through the analysis of the OLS and 2SLS method,We estimate variable coefficient.This paper get the following conclusions:urban sustainable competitive advantage lies in innovation, and innovation is depended on tacit knowledge face-to-face communication, which needs spatial agglomeration of economic activities. The more significant spatial agglomeration level is, the better economic performance to be, knowledge competition trends to strengthen the effect of spatial agglomeration to economic performance. Finally, the paper suggested that the government should promote spatial agglomeration, fostering its continuable core competitiveness; revive urban centre,building a knowledge- agglomeration area; and soften industrial structure, improving the ability of knowledge competition.