A Relational Account of the Causes of Spatial Firm Mobility

It is accepted in the literature that exchanges within networks have an ongoing social structure that both enables and constrains the behavior of its members (Pfeffer and Nowak 1976; Uzzi 1996). However, most research in inter-organizational settings has focused on the enabling effects of networks and network structures only, even though some noteworthy exceptions exist (e.g. Romo and Schwartz 1995; Singh and Mitchell 1996). A possible constraining effect of network participation is spatial lock-in, also known as spatial inertia, of a firm. Following Resource Dependence Theory (Pfeffer and Salancik 1978), it can be argued that a firm that makes extensive use of knowledge resources possessed or controlled by external actors for its innovative processes can become dependent on these actors. By themselves, the relationships in which these dependencies exist are non-spatial. However, since geographical proximity is assumed to facilitate the successful exchange of (especially tacit) knowledge through inter-organizational relationships (IORs) (Bretschger 1999), dependency on other firms located in the same region can also lead to dependency on a certain geographical location, and thus to spatial lock-in (Stam 2003). The IORs that are enabling for the firm in terms of its innovative processes act, at the same time, as constraining factors for the spatial behavior of the firm. Similar reasonings can be found in the literature on Territorial Innovation Models (Moulaert and Sekia 2003), which indicates that economic embeddedness in a region can be beneficial for the performance of firms. However, this embeddedness can also lead to dependence on localized inputs and production factors. Due to these dependencies, a firm can become very unlikely to relocate, even if doing so is beneficial from a cost perspective. As Romo and Schwartz state: “Firms are usually too dependent on the material, political and social resources available in the local production culture to risk departure, even when production costs might be substantially reduced (Romo and Schwartz 1995:874).†There currently is, however, only weak empirical evidence for the proposed relationship between the level of (local) embeddedness and a firm’s propensity to relocate. Moreover, several authors even propose that geographical distance in IORs is becoming irrelevant since it effects can be replicated by ICT (Morgan 2004), or high levels of organizational or technological proximity (Kirat and Lung 1999). If this is indeed the case, then participation in localized innovative IORs will have no effect on the spatial behavior of firms, since a firm can operate exactly the same on a different geographical location. The main goal of this research is to provide empirical insights into the effects of a firm’s level of participation in innovative (localized) inter-organizational relationships (IORs) on its propensity to relocate. Based on the above, the following research question has been formulated is “To what extent is the level of embeddedness of a firm in (localized) innovative inter-organizational relationships of influence on its propensity to relocate?†Answering this research question adds to the insights about the constraining effects of networks by focusing on the spatially constraining effect of inter-organizational relationships. This research question will be answered based on a data from a survey among Dutch automation service firms in 2006. In line with earlier research (c.f. Van Dijk and Pellenbarg 2000; Brouwer et al. 2004) an ordinal logit model will be used to relate the relocation propensity of a firm to that firm’s participation in localized innovative IORs, the strength of these IORs, and the level of geographical, organizational and technological proximity. It also provides insight into the question whether or not high levels of technological and organizational proximity can negate the need for geographical proximity in inter-organizational collaboration (Boschma 2005). References: Boschma, R. A. (2005). "Proximity and innovation: A critical assessment." Regional Studies 39(1): 61-74 Bretschger, L. (1999). "Knowledge diffusion and the development of regions." Annals of Regional Science 33(3): 251-268 Brouwer, A. E., I. Mariotti and J. N. van Ommeren (2004). "The firm relocation decision: An empirical investigation." Annals of Regional Science 38(2): 335-347 Van Dijk, J. and P. H. Pellenbarg (2000). "Firm relocation decisions in The Netherlands: An ordered logit approach." Papers in Regional Science 79(1): 191-219 Kirat, T. and Y. Lung (1999). "Innovation and proximity - Territories as loci of collective learning processes." European Urban and Regional Studies 6(1): 27-38 Morgan, K. (2004). "The exaggerated death of geography: Learning, proximity and territorial innovation systems." Journal of Economic Geography 89(1): 3-21 Moulaert, F. and F. Sekia (2003). "Territorial innovation models: A critical review." Regional Studies 37(3): 289-302 Pfeffer, J. and P. Nowak (1976). "Joint-ventures and interorganizational interdependence." Administrative Science Quarterly 21(3): 398-418 Pfeffer, J. and G. R. Salancik (1978). The external control of organizations: A resource dependency perspective. New York, Harper and Row Romo, F. P. and M. Schwartz (1995). "The structural embeddedness of business decisions: The migration of manufacturing plants in New York state, 1960 to 1985." American Sociological Review 60(1): 874-907 Singh, K. and W. Mitchell (1996). "Precarious collaboration: Business survival after partners shut down or form new partnerships." Strategic management journal 17(2): 99-116 Stam, F. C. (2003). Why butterflies don't leave: Locational evolution of evolving enterprises. Utrecht, Utrecht University Uzzi, B. (1996). "The sources and consequences of embeddedness for the economic performance of organizations: The network effect." American Sociological Review 61(4): 674-698

The effects of firm relocation on firm performance - A literature review

Approximately 6% of all firms in the Netherlands decide to relocate every year. Furthermore, the number of firms that has relocated increased dramatically over time. Relatively much is known about the (re)location decision itself. However, much less research focuses on the effects of relocation on the performance of firms. This is remarkable since the importance of the geographical and organizational position of a firm for firm performance, and especially innovation, has become more and more profound over time. The notion that no firm may function as an island on itself is accepted by and large and the importance of a firm’s geographical and organizational position is sometimes even described as exaggerated in the literature. It therefore seems logical to study the effects of changes in a firm’s position as a result of a relocation. Given the above this paper asks the question: What is known in the literature about the effects of firm relocation on the performance of firms? In order to answer this question, first an overview of the possible effects of firm relocation is given. Subsequently, a review of the available literature dealing with the effects of firm relocation is presented in order to make an inventory of the effects that have and have not been studied. It is argued that the scarce relocation literature that is available has an extremely narrow focus and largely neglects the importance of the geographical and organizational position of a firm and thereby might ignore important factors influencing the effects of firm relocation on firm performance.

How small bars resist smoking bans in the Netherlands

'It's the community, stupid!', write Tal Simons, Patrick Vermeulen and Joris Knobe

R&D, Foreign Technology and Technical Efficiency in Developing Countries

This study investigates the relationship between firms’ innovation activities and efficiency in manufacturing firms in developing countries. We examine whether innovation activities including internal research and development (R&D) and adoption of foreign technology have differential effects on technical efficiency. We hypothesize that the relation between internal R&D and technical efficiency is positive; the relation between adoption of foreign technology and technical efficiency is negative and lastly, internal R&D in combination with the adoption of foreign technology have a positive effect on technical efficiency. We use cross-sectional firm level survey data from the 2013 World Bank Enterprise Survey and the linked 2014 Innovation Follow-up Survey for examining the effect of innovation activities on firms’ technical efficiency. We test our hypothesis using cross-sectional stochastic frontier analysis. We find that internal R&D has a negative and significant effect on technical efficiency. Adoption of foreign technology on the other hand does not have a significant effect on technical efficiency. Nevertheless, the combination of internal R&D and adoption of foreign technology has a negative and significant effect on technical efficiency. We conclude that internal R&D may have dynamic effects on technical efficiency. Furthermore, efficiency may be observed in firms conducting internal R&D but results in relative inefficiency for firms not conducting R&D giving rise to overall inefficiency in the manufacturing industry. Lastly, low rates of human capital hamper R&D activity and the adoption of foreign technology in manufacturing firms in developing countries

Made in Vietnam:The Effects of Internal, Collaborative, and Regional Knowledge Sources of Product Innovation in Vietnamese Firms

This paper analyses the impact of different knowledge sources of product innovation in Vietnam using firm-level data. We analyze the separate impacts of internal knowledge, collaborative knowledge, and regional knowledge. The analysis reveals that internal knowledge sources from internal R&D have a positive influence on product innovation. However, not all kinds of collaborative knowledge sources have significant effects on innovation. Only collaborative knowledge gained from inside the supply chain affects product innovation positively. Apparently, the capacity to benefit from working with knowledge institutes and absorbing knowledge from the environment do not materialize in new products

Clusters and firm-level innovation: A configurational analysis of agglomeration, network and institutional advantages in European aerospace

Clusters have the potential to strengthen firm innovation. However, our knowledge of how firms are affected by the external resources found in clusters, and how this relates to their level of internal resources, is limited. There are seemingly conflicting theoretical assumptions and empirical findings on both the individual and combined impact of these resources. Our paper seeks to reconcile these by adopting a configurational lens, allowing for multiple pathways to innovation. Applying fuzzy-set Qualitative Comparative Analysis (fsQCA) to a sample of firms in European aerospace clusters, we uncover that innovation outcomes can only be explained through combinations of internal assets, and external resources provided by geography, networks, and institutions. No single resource, in isolation, is sufficient. We distinguish between a total of seven pathways. These vary from weak firms benefitting from localized knowledge spillovers, to strong firms with extensive non-local networks. We find that the relationship between internal and external resources is causally complex, with even the potential for negative innovation impacts. Hence, we provide a first step towards harmonizing the literature's different approaches to understanding clusters’ impact on firms