This chapter explores the complex relationships between tourism specialization, externalities, agglomeration effects and regional innovation systems. Tourism services generate substantial information flows through localized interactions, fostering knowledge spillovers and co-creation processes. However, while spatial agglomeration facilitates technology diffusion, the tourism industry remains largely an adopter rather than a creator of innovation. The chapter examines different types of externalities, relatedness (including related and unrelated) or variety and their impact on regional specialization. It also discusses the role of digitalization, smart tourism and global corporations in shaping tourism innovation. Despite tourism's potential to contribute to regional innovation systems, findings indicate that highly tourism-specialized regions often lag in technological development and labor productivity. The chapter concludes by emphasizing the need for place-based policies that integrate tourism with broader regional development strategies, fostering synergies between tourism and knowledge-intensive industries to enhance long-term competitiveness and sustainability.