The economic geography of capital cities is unique in the sense that the public sector drives economic development dynamics through public procurement. If we want to analyze public procurement as a driver of knowledge dynamics in capital cities, we need to understand how national government agencies on the demand side influence the innovative activities of supplier firms. Building on the insight stated previously that the capital city is the center of public procurement activities, this section adopts a microperspective. We explain how public procurement manifests itself in the physical infrastructure of the four cities, why firms co-locate with national government agencies, and to what extent firms in capital cities engage in interactions with other actors.