Hot spots are fast-growing geographic clusters of competing firms. Drawing on several literature streams, we develop an evolutionary model that contrasts hot spot and non-hot spot competitors within the same industry. Initially, economies of agglomeration, institutional forces, and managers' mental models create an innovative environment within the hot spot. Over time, those same forces create a homogeneous macroculture that suppresses innovation, making hot spot competitors more susceptible than non-hot spot competitors to environmental jolts. Hot spots are increasingly important in the competitive landscape. They are often found in high-tech industries and are associated with job creation and technological innovation. However, evidence shows that former hot spots, such as Route 128 in Boston and the Minneapolis area, have experienced declines in growth and economic devastation. This rise-and-fall pattern suggests that some geographically clustered groups of competitors may experience evolutionary phases similar to those experienced by larger industry populations. Initially, highly innovative new entrants to a geographical cluster grow dramatically, creating an identity (hot spot) for the clustered firms. Over time, however, failures prevail among individual firms, and the performance of the hot spot deteriorates. The quote preceding this article vividly describes the demise of hot spots. Although researchers in industrial organization, organizational ecology, and economic geography have documented the tendency of groups of firms within industries to cluster in geographical space, hot spots are generally an understudied phenomenon in the organization sciences. As Scott noted, "Indeed it may be said that the question of the initiation and early consolidation of growth centers in capitalism (from 19th century Lancashire to Henry Ford's Detroit to Silicon Valley) has never really been satisfactorily addressed or resolved." In this article, we follow the lead of Baum and Mezias, who called for research that examines "the relationship between localized competition and the dynamics of organizational founding, growth, and transformation." In developing our research propositions about the behavior of clustered groups of competitors within a larger industry population and the effects on innovation, we drew from the following research streams: (a) punctuated equilibrium and innovation, (b) organizational ecology, (c) economic geography, (d) industrial organization and the resource-based view of the firm, (e) institutional theory, and (f) cognitive theories. We argue that a clustered subgroup of competitors within an industry will likely move through three evolutionary phases that pattern the punctuated equilibrium model: (a) origination of the cluster and emergence of the hot spot identity, (2) convergence of clustered firms, and (3) firm reorientation, which includes a decline in the performance of the cluster or hot spot. For each phase, we discuss the role that resource economies, cognitive frameworks, and institutional forces play in influencing competitive behavior and levels of innovation. For each phase, we also show how the hot spot evolution differs from the overall industry evolution captured by a typical industry life cycle. We propose that the economies of agglomeration that initiallyHot spots are fast-growing geographic clusters of competing firms. Drawing on several literature streams, we develop an evolutionary model that contrasts hot spot and non-hot spot competitors within the same industry. Initially, economies of agglomeration, institutional forces, and managers' mental models create an innovative environment within the hot spot. Over time, those same forces create a homogeneous macroculture that suppresses innovation, making hot spot competitors more susceptible than non-hot spot competitors to environmental jolts. Hot spots are increasingly important in the competitive landscape. They are often found in high-tech industries and are associated with job creation and technological innovation. However, evidence shows that former hot spots, such as Route 128 in Boston and the Minneapolis area, have experienced declines in growth and economic devastation. This rise-and-fall pattern suggests that some geographically clustered groups of competitors may experience evolutionary phases similar to those experienced by larger industry populations. Initially, highly innovative new entrants to a geographical cluster grow dramatically, creating an identity (hot spot) for the clustered firms. Over time, however, failures prevail among individual firms, and the performance of the hot spot deteriorates. The quote preceding this article vividly describes the demise of hot spots. Although researchers in industrial organization, organizational ecology, and economic geography have documented the tendency of groups of firms within industries to cluster in geographical space, hot spots are generally an understudied phenomenon in the organization sciences. As Scott noted, "Indeed it may be said that the question of the initiation and early consolidation of growth centers in capitalism (from 19th century Lancashire to Henry Ford's Detroit to Silicon Valley) has never really been satisfactorily addressed or resolved." In this article, we follow the lead of Baum and Mezias, who called for research that examines "the relationship between localized competition and the dynamics of organizational founding, growth, and transformation." In developing our research propositions about the behavior of clustered groups of competitors within a larger industry population and the effects on innovation, we drew from the following research streams: (a) punctuated equilibrium and innovation, (b) organizational ecology, (c) economic geography, (d) industrial organization and the resource-based view of the firm, (e) institutional theory, and (f) cognitive theories. We argue that a clustered subgroup of competitors within an industry will likely move through three evolutionary phases that pattern the punctuated equilibrium model: (a) origination of the cluster and emergence of the hot spot identity, (2) convergence of clustered firms, and (3) firm reorientation, which includes a decline in the performance of the cluster or hot spot. For each phase, we discuss the role that resource economies, cognitive frameworks, and institutional forces play in influencing competitive behavior and levels of innovation. For each phase, we also show how the hot spot evolution differs from the overall industry evolution captured by a typical industry life cycle. We propose that the economies of agglomeration that initially