Abstract: Cloud computing is an important part of China’s "new infrastructure" strategy. In order to enhance the city's digital competitiveness in cloud computing, many local governments construct technology parks and innovation bases to promote the agglomeration of cloud-computing firms in the local city. The logic behind these actions is the belief that agglomeration brings innovation. Recent years have witnessed the spatial clustering of cloud-computing firms in many cities such as Shanghai, Beijing, and Shenzhen. However, whether the traditional wisdom, which is borrowed from the practical experience from the manufacturing and service industries, fits the innovation pattern in the cloud-computing industry, is still a question to be answered. The cloud computing industry is different from the traditional industry in the “localization” pattern. Instead of having to install hardware and software on site, the IT resources of cloud computing can be delivered through the Internet. From the technical logic, this new cross-space "pay-as-you-go" model largely dissolves the limitations of location and geographical distance. The seemingly contradictory relationship between the government's regional policies to enhance industrial agglomeration and the virtualized and networked technological attributes of cloud computing is the starting point for this exploratory study. At the spatial scale of intra-city micro-locations, a few understudied questions attract our interest. First, does the cloud computing industry exhibit spatial agglomeration characteristics? Or, does it follow the technological logic and exhibit spatially decentralized and suburbanized distribution characteristics? Second, for cloud computing firms, what impact do different degrees of agglomeration and agglomeration patterns have on firms’ technology innovation? Third, does the innovation effect of agglomeration vary with different technological layers along the industry chain (basic layer, platform layer, and software layer)? To answer these questions, this paper collects data on 1637 cloud computing firms in Shanghai from 2010-2016. Combining text analysis, spatial analysis, and econometric modeling, this study aims to depict the spatial characteristics of the intra-city cloud computing industry and to analyze the effect of different agglomeration patterns on enterprise innovation. The quantitative analysis offers novel findings. (1) Shanghai's cloud computing industry shows a spatial pattern of central clustering and multipoint linkage. As the industrial chain extends toward the back end, the spatial distribution of enterprises clusters more and more toward the central city. (2) The cloud computing industry is still geographically relevant. Specifically, the geospatial agglomeration still significantly affects technological innovation. (3) More interesting, specialized agglomeration and diversified agglomeration within the industry chain have different effects on different types of cloud computing enterprises. Specifically, as the technology chain extends to the market side, the impact of specialized agglomeration on enterprise innovation turns from negative to positive and increases sequentially; however, the innovation promotion effect brought by diversified agglomeration turns from positive to negative and gradually decreases. This study responds to the academic debate on whether geography is dead since the rise of the Internet. The findings not only show that the cloud computing industry with the attributes of virtualized technology still shows the spatial distribution characteristics of geographic agglomeration but also further verify the impact of spatial agglomeration on technology innovation. At the same time, this study is a strong complement to the existing agglomeration theory. The research findings also provide realistic reference implications for cloud computing industrial policies.