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This paper draws on evidence from Victoria to examine why more innovation takes place in some areas than in others. In so doing, it explores the relationship between innovation and networks. / Despite a large number of recent government policy statements on innovation, there has been very little attention paid to the spatial dimensions of innovation. / The literature on innovation increasingly points to the important role played by local and regional networks in driving innovation. Innovation is the result of the production, use and diffusion of knowledge, and this demands collaboration involving networks of individuals, organisations and institutions. / To test the theory of a connection between networks and innovation across regional Victoria, patent data is used as a proxy measure for innovation. This data is then cross-referenced with various social and economic data sets. / The analysis reveals that innovation in Victoria is substantially concentrated in ‘hot spots’ such as inner Melbourne. In some parts of Victoria very little innovation takes place at all. / This research has found that all things being equal, more innovation will take place in those areas in which there is a greater density of informal networks. However, not all types of networks are positive, and they are more important in provincial areas than in big cities. Innovation clearly has a spatial aspect, and innovation policy needs to give particular attention to the requirements of provincial areas.