Dynamic externalities, associated with knowledge spillover, is regarded as the "engine of growth". Recent theories of economic growth have stressed the role of knowledge spillover in generating growth. Such knowledge spillover are particularly effective in cities, where communication among people is most intensive as well as extensive. In relation to dynamic externalities, the specialization of an industry in a city helps knowledge spillover between firms and stimulates growth of a particular industry and of a particular city. These are called as MAR externalities. On the other hand, variety and diversity of geographically proximate industries promote innovation and growth rather than geographical specialization. Those are called as Jacobs externalities. In addition, there is an argument on the effectiveness of competitions within an industry. To examine the impact of dynamic externalities in Korea, the analysis is conducted using a data set on the growth of several industries in 79 Korea Cities between the period of 1995 and 2000. The results show that Jacobs externalities tends to work on only high-tech manufacturing industries. In Seoul Metropolitan Area(SMA), the impact of dynamic externalities on several industries such as the paper manufacturing industries, the high-tech manufacturing industries and the high-order services industries are larger than those of non-SMA cities.