Knowledge as a resource and knowledge formation as a process are seen as central to providing nations and regions as well as firms with a competitive advantage. This is captured by the view that the economic and industrial landscape is currently undergoing a transformation towards a knowledge-based economy. This dissertation engages with two views that have gained great influence in the discussions – in academia as well as in policy – on this industrial transformation. This concerns the view on which types of knowledge formation processes that are seen to actually provide a competitive advantage. There is today a prevailing tendency to connect the creation of competitive advantage to research-intensive, so-called high-tech, activities. It also concerns the view on where these knowledge formation processes take place. Much inspired by innovative and high-tech regions, competitive advantage is often closely associated with the role of geographical proximity for knowledge formation. The aim of this dissertation is to develop our understanding of the role of those knowledge formation processes that currently fall outside what is captured by these prevailing views. Three research questions are addressed. First, what is the role of non-research intensive knowledge formation processes in the creation of competitive advantage? Second, how can knowledge formation processes connected to the creation of regional competitive advantage be promoted? Third, what is the role of proximity in knowledge formation processes in the creation of competitive advantage? A qualitative case study approach is adopted for the empirical part of the research, consisting of one case study where low- and medium-tech industrial activities are studied and one case study where the regional dimension of knowledge formation is studied. Personal interviews constitute the major part of the empirical material. The research findings give evidence that reveals shortcomings in theory as well as in policy practice in regards both these prevailing views. It is shown that low- and medium-tech activities are still highly relevant, not only on their own but for the industry as a whole. Further, current forces of globalisation call for an approach to regional development that includes a dual focus of strengthening regional connections as well as facilitating and promoting extra-regional connections. This is particularly important in small, open economies such as Sweden. Further, the finings are in line with those requesting a multidimensional approach to the concept of proximity – one that regards proximity not only as a concept with geographical connotation but also with reference to proximity in context, cognition or value-systems. The dissertation suggests instead that an approach to industrial activities that assumes that those firms, regions and countries that can manage complex knowledge formation processes may develop competitive advantages. It is this ability to achieve and manage sticky processes in a slippery world that is essential for the creation of competitive advantage. And we are more likely to identify these particular competitive advantages on the firm level than on the industry level. Within every industry, there are firms that can manage more suitable ‘bundles’ of knowledge bases, network connections etc, which enable them to adapt at a lesser cost (costs can for instance be measured in terms of efforts, money or time) than other firms within the same industry. This is important to acknowledge – in policy as well as in theory – in order to not exclude important parts of what contributes to industrial competitive advantage in the knowledge-based economy. / QC 20100715