It has become increasingly clear the last decades that innovation is a key feature of competitive firms and industries. Despite an academic and political focus on technology-intensive industries as being the driving force of the economy, certain traditional low and medium-technology (LMT) industries have also managed to stay competitive for hundreds of years, without engaging in technology production or investing substantial capital in R&D. This study provides empirical evidence on the importance of distributed knowledge bases for understanding innovation and competitiveness in LMT industries. The thesis takes form of an embedded case study of the high-end red wine industry of Bordeaux – a traditional LMT industry that has been the world leader in fine wine production for generations. On the background of 17 qualitative interviews, the distributed knowledge bases of the industry have been outlined. It is argued that the industry is in possession of considerable innovative capabilities due to its access to these knowledge bases, which lie spread across other industrial sectors. Thanks to a developed and structured cluster formation, the region's accumulated knowledge is made available to the industry, and the tacit knowledge-flows between the actors are stimulated. The industry's synthetic knowledge base along with the key role played by consultants, are seemingly the most important factors affecting the industry's absorptive capacity. On the background of this case it is argued that LMT industries can be regarded as a knowledge intensive and dynamic part of a country's economy. The economy should be viewed as an interconnected system between industries in order to grasp what drives innovation and economic growth on a regional and national level. Furthermore, it is suggested that a combined view on the innovation process may enhance our understanding of some industries, as it is found in this case that new innovations are largely dependent on the distributed knowledge bases connecting, and being complementary, with the industry's synthetic knowledge base.