This article aims to show how processes of knowledge development and their institutional underpinnings make up the core of evolutionary economic geography. We argue that micro level concepts—notably innovation, selection and retention—provide insights that can be helpful also when investigating evolutionary processes of knowledge creation at the aggregate levels of cities, regions or nations. We investigate the linkage between drivers, mechanisms and barriers to knowledge creation and acquisition at the micro-level, and the development over time and across spatial settings of higher-order phenomena of localized institutions and other capabilities. We apply this distinction on the analysis of the rise, growth, decline and possible rejuvenation of spatial clusters of similar and complementary economic activity.