This paper presents a mechanism-based theory of emergence explaining how new economic institutions and innovative activity arise in regional knowledge economies. The core mechanism links knowledge spillover with purposive network rewiring, generating sustained innovation over time. In a paper co-authored with Sirui Wang, we used longitudinal data of behavioral trace of knowledge spillover and network rewiring in a comparative regional analysis to show how these mechanisms operate across different institutional contexts, focusing on the United States and Sweden. The analysis shows that innovation is not simply a function of agglomeration or human capital, but of agentic networking under uncertainty. By identifying measurable mechanisms and tracing their dynamic interaction, the paper advances a mechanism-based theory capable of both explanation and conditional prediction. The findings illustrate how emergence can be empirically studied using large-scale data while remaining grounded in institutional theory.