Urban economists have long recognized that space is economically important. Evidence of the importance of urban agglomeration and the offsetting effects of congestion are provided in a number of studies of productivity and wages. Little attention has been paid to this evidence in the economic growth literature. The new growth research focuses on technological change. The production function is extended for new ideas common to this research in a way that allows for congestion and agglomeration in innovation and the hypothesis that these forces are important in explaining innovation is tested. Strong evidence is found that agglomeration and congestion are important in explaining the vast differences in per capita patent rates across US states. This suggests an important new agenda in linking studies of urban economics with the rapidly advancing of endogenous growth.