Alliances,Networks and Competitive Strategy: Rethinking Clusters of Innovation

Networks of interaction have assumed particular significance in recent years because of their presumed importance for learning and innovation. Alliances between related firms are thought to encourage interactive learning between participating organizations through the sharing of knowledge and information, which is itself facilitated through trust, shared values and ways of working. The vast body of literature that has emerged is, however, incredibly fragmented, encompassing an array of theoretical positions and perspectives. This paper focuses upon two issues which are believed to be of particular significance and which need clarification in order to move to a clearer understanding of the ways in which networks of interaction evolve, and of their capabilities and limitations in relation to economic performance and competitiveness: (1) the importance of network structure, arguing that innovative activity requires flexibility with regard to network formation. (2) The role of geography in relation to the construction and functioning of alliances. It is the contention here that networks are likely to be increasingly international in scope.     

Freight Integration in Liner Shipping: A Strategy Serving Global Production Networks

ABSTRACT Container shipping lines are well aware of the growing importance of global production networks. While continuing to focus on improving the fundamentals, many shipping lines have developed a keen interest in other segments of the logistics and transportation market to offer integrated and worldwide services to global production networks. This paper aims to assess the overall level of freight integration in thirty‐four shipping lines, and provides an insight into the extent to which freight integration serves as a business model in liner shipping. The results point to a great variety and range of freight integration in the shipping business. Each carrier leverages its service portfolio to develop specific capabilities. There is clearly no single best strategy for the whole liner shipping industry to serve global production networks.     

Knowledge,Market Structure,and Economic Coordination: Dynamics of Industrial Districts

The industrial rise of the Third Italy has been characterized by the growth of dynamic networks of flexible small and medium–sized enterprises (SMEs) that are spatially concentrated in specialized industrial districts. This network type of coordination has been associated with horizontal, trust–based relations rather than vertical relations of power and dependency between local organizations. This would lower transaction costs (essential for local systems with an extreme division of labor), facilitate the transmission and exchange of (tacit) knowledge (and thus, learning and innovation), encourage cooperation mechanisms (such as the establishment of research centers), and stimulate political–institutional performance (e.g. through regulation of potential social conflicts). From an evolutionary perspective, the focus is on the dynamics of industrial districts drawing from current experiences in Italy. In this respect, this paper concentrates on two main features of industrial districts that have largely contributed to their economic success in the past, that is, their network organization and the collective learning process. The evolution of industrial districts is described in terms of organizational adjustments to structural change. The way in which the size distribution of firms has changed is discussed (in particular the role of large companies), how the (power) relationships between local organizations have evolved, what are the current sources and mechanisms of learning, and to what extent institutional lock–in has set in. Finally, a number of trajectories districts may go through in the near future are presented.     

Reflections on the “Old” Economy, “New” Economy,and Services

ABSTRACT Economic competitiveness now has less to do with new materials than with new ways of producing, utilizing, and combining diverse knowledges. It is branded as symptomatic of a “new” economy and is often juxtaposed against the “old” economy. As accelerating technological change has greatly increased the volume and quality of the information available to organizations, to firms, and to individual employees, it is asserted that the economy has become more “new” than “old.” But this is predicated on the assumption that there is a “new” economy and that it is somehow distinguishable from the “old.” This paper explores the basis for this dichotomy and whether it really adds anything to understanding contemporary economies and their ongoing development. It will be argued that it is more useful and constructive to examine the economy through a lens dominated by service industries that are now the key drivers of change (innovation, competition, employment) and development. The paper is concluded with a discussion of some items that could usefully be part of an agenda for further research by economic geographers on the evolving spatial and structural attributes of service work and organizations and their impact on cities or regions at different scales of analysis.     

Rethinking Technology‐Oriented Business Incubators: Developing a Robust Policy Instrument for Entrepreneurship,Innovation, and Regional Development?

ABSTRACT Today, technology‐oriented business incubators are a worldwide phenomenon, although empirical research evidence clearly suggests that they tend to fail in supporting entrepreneurship, innovation, and regional development and, therefore, do not fulfil their expected role as policy instrument. The paper focuses on this obvious antagonism. It deliberates upon political rationales, reviews evaluation literatures, and delineates suggestions for the future of the incubation industry. The main conclusion is that technology‐oriented business incubators should be run as private organisations without public funding.     

The impact of external knowledge sourcing on innovation outcomes in rural and urban businesses in the U.S.

This paper examines the relationship between external knowledge sourcing and a diverse set of innovation outcomes in rural and urban establishments in the U.S. Existing studies in the broader knowledge management literature principally examine firms in a single industry, overwhelmingly rely on patent data to proxy for innovation, and cannot account for the innovations of businesses in rural American markets. By addressing these limitations using data from the 2014 Rural Establishment Innovation Survey of the USDA's Economic Research Service, this research provides novel insights into how externally acquired knowledge by American establishments may support innovation. Results of the analysis suggest that external knowledge sourcing may specifically promote product, process, and green innovation in U.S. firms. While collective results when external sources of information are divided by industry orientation fail to show that sources outside of a firm's industry play a dominant role in the innovation processes of American establishments in general, findings provide evidence for an outsized impact of these relationships within rural establishments specifically and suggest that external knowledge sourcing from extra‐industry organizations is most critical for promoting successful innovation in rural firms. Results additionally indicate that knowledge sourcing from non‐local organizations may be more important for supporting innovation in rural compared to urban markets.     

Diverse diversities—Open innovation in small towns and rural areas

It is generally accepted that cities and other forms of geographic agglomerations are conducive to innovation because their density and variety of firms, sectors and individuals create a diverse environment. However, a growing body of work shows that innovation also occurs in peripheral regions and small towns. Furthermore, work on rural social networks shows that diversity is multidimensional, and that along certain dimensions networks developed in rural areas are more diverse than those observed in cities. In this paper, we develop these arguments, then report our observations of seven successful firms in Swiss small towns. These firms benefit from at least three types of diversity: internal diversity; multiplexed interactions between workers at different hierarchical levels; and external diversity as firms reach beyond the region. We conclude that diversity conducive to firm‐level innovation is not a specifically urban attribute: at least some of its dimensions are present in small towns and more peripheral areas.     

Environmental Legislation,Real Estate Appraisal and Investment in the UK

This paper considers the behavior of actors in real estate markets in the face of environmental uncertainty. Environmental legislation has increased in scale and scope with obvious implications for property markets. Developers, investors, occupiers, and lenders may all be affected by changing environmental standards. Any factor that creates valuation uncertainty will have major impacts. Blighted sites and properties will be shunned, while existing real estate portfolios will be adversely affected. A survey of UK property practitioners on their attitudes to environmental hazard reveals that firms seem pessimistic as to their ability to quantify and model the economic and investment implications of environmental risk. There are concerns here for the wider economy and for the business community through supply-side constraints and suboptimal location. There are implications, too, for local and regional regeneration strategies as whole areas may be blighted by potential contamination. There may be mispricing and arbitrage opportunities in relation to such assets that can be exploited through first mover advantage by firms willing and able to develop effective risk-sensitive appraisal models.     

China’s transport and communications firms: transforming national champions into global players

China’s entry into the World Trade Organisation (WTO) exposes its state‐owned maritime, aviation and telecommunications operators to unprecedented competition. This development raises a series of critical issues about China’s transition from a state‐planned regime towards a real market economy. How will China’s leading state‐owned firms in deep‐sea container shipping, air passenger transport and telecommunications respond to the dilemma posed by the World Trade Organisation and to what extent has Hong Kong been involved in China’s transport and communications restructuring process? These broad issues are addressed by examining progress on the Chinese Government’s post‐1993 plans to restructure each of the key state enterprises in sea‐land transport, air transport and telecommunications. Specifically we are concerned with the degree to which China’s national champions in these transport and communications arenas have been remade into global players. Particular attention is paid to the role of Hong Kong in this transformation since its return to China in 1997. Our studies show that China has transformed its national champions into a global players in container shipping. The process may be beginning to happen in air transport but has yet to get underway in telecommunications.     

Emerging geography of technological innovation in China's ICT industry: Region,inter‐firm linkages and innovative performance in a transitional economy

This study critically evaluates the relevance of the existing theory of technological innovation to the case of China's information and communications technology industry. Based on a large‐scale questionnaire survey conducted in China's three most important city‐regions, namely, Beijing, Shanghai and Shenzhen, where the core of China's information and communications technology industry is located, this study reveals a significant regional variation in technological innovation in a political economy undergoing marketisation and globalisation. This research has found no significant relationship between the innovative performance of firms and the extent of production linkages; nor was there a significant knowledge exchange among firms. A further analysis has identified the significant role played by government purchases, research and development capital input and export propensity in the process of technological innovation. The findings of this research cast doubts over the prevailing theory of ‘new economic geography’ in which soft and unbounded relational assets have been overemphasised at the expense of some solid and bounded actors and agents that are pivotal to technological innovation in a developing economy.     

Innovation in suburban development zones: Evidence from Nanjing,China

While suburban areas have been typically related with urban sprawl, low density, cheap land price and low‐end manufacturing industries, relatively little attention has been paid to the spatial organization of innovation in suburban areas. In some Chinese cities, development zones (kai fa qu) in their suburban areas which are generally regarded as major spaces for traditional manufacturing industries have been transforming into spaces for innovation. This paper provides a case study of Nanjing, the capital of Jiangsu province in Eastern China by investigating and explaining the learning and innovation processes in suburban development zones. Drawing upon a unique database on 733 state‐certified high‐tech firms in Nanjing from 2008 to 2012 which contains detailed information on their addresses and number of patents, we observe strong spatial disparity in the distribution of innovation. Suburban districts of Nanjing where its three national‐level development zones and many provincial‐level development zones are located have become major spaces for innovation of the city. The planning of industrial clusters in development zones, the place‐based investment in the suburbs, and the suburbanization of universities are three major mechanisms behind the learning and innovation processes in Nanjing’s suburban development zones.     

The structure and proximity mechanism of formal innovation networks: Evidence from Shanghai high‐tech ITISAs

The discussion on innovation networks of patents or papers has attracted many economic geographers; however, the Industrial Technology Innovation Strategy Alliance (ITISA) has been ignored, although it is also an important innovation form of firms, and the formation mechanism of alliance innovation networks is unclear. This study is based on the data of Shanghai high‐tech ITISAs between 2010 and 2015, and employs the methods of social networks and negative binomial regression to analyse the actor structure, spatial structure, and proximity mechanism of innovation networks of Shanghai high‐tech ITISAs. Results highlight the following: (a) Firms comprise the largest number of actors in alliance innovation networks, and universities, research institutions, and industry associations also play some roles. (b) The local and rooted characteristics of the innovation networks of ITISAs are obvious. The spatial distribution of innovation partners is mainly in Shanghai, and a few innovation actors are located in neighbouring cities, such as Suzhou, Hangzhou, and Ningbo in the Yangtze River Delta Urban Agglomeration. (c) Proximity significantly promotes the formation of innovation networks in an ITISA and contributes to the improvement of innovation ability, and organizational proximity plays a greater role than geographical proximity or cognitive proximity.     

The complex network analysis of liner shipping networks: Lessons from the merger between COSCO and CSCL

COSCO and China Shipping Container Lines (CSCL) merged and reorganized as COSCO Shipping Lines in 2016. Through using a complex network methodology, we analyze the spatial patterns of their shipping networks before and after the merger. We evaluate the integration effects based on two main dimensions: network and hub economies. While complementarities are found between COSCO and CSCL networks before the merger, COSCO Shipping Lines increased the total number of service nodes and shipping routes significantly. The merger also had the effect of strengthening the hub capacity of 7 of the top 15 hub ports in the main markets covered by the new company. Results underline that this strategy of overseas pivotal ports promoted the development of hub economy and regional market expansion.     

World cities and peripheral development: The interplay of gateways and subordinate places in Argentina and Ghana’s upstream oil and gas sector

Serving as “gateways”, some world cities tie their wider hinterlands to global networks. The article revisits gateway–hinterland relations against the backdrop of assessments that lead to opposed conclusions on the benefits and shortcomings of integration into the world economy. Referring to the oil and gas sector in Argentina and Ghana, it answers the question of how gateways interact with subordinate places and also uncovers obstacles to peripheral development. The author finds that Accra and Buenos Aires concentrate corporate control. Argentina's capital serves as a gateway for knowledge generation and logistics too. Opportunities for peripheral development in both countries are considerable, albeit largely limited to generic services. Besides a certain concentration of business activities in the gateway cities, more important challenges to peripheral development are typical for small and medium enterprises (insufficient finance and management capabilities, unawareness of business opportunities, and the like). They include rent seeking and subcontracting. The latter leaves local companies in a particularly weak position vis‐à‐vis lead firms. The author argues that while integration into the world economy allows for peripheral development, the corresponding outcomes may not meet everyone's expectations. Related expectations must, therefore, be more down‐to‐earth than overly optimistic statements frequently made by politicians.     

The launch and evolution of a technology‐based economy: The case of Austin Texas

This paper uses the lens of institutional theory to explain the launch and evolution of Austin, Texas's technology‐based economy. The case underscores the importance of context, contingency, and the evolution of key local development organizations in explaining how regional economic development trajectories can change and evolve. The case history provides insights into how economic development networks form and operate to “set off” processes of industrial specialization and agglomeration and how they can promote successful adaptation to change in technology and industrial structure. The Austin story further suggests a “stage” process of regional technology‐based evolution where the development of industrial agglomerations linked to a substantial local research base is seen as a necessary precursor to increasing endogenous innovation and start‐up activity. Successfully navigating these stages is bolstered by the formation of institutions and networks that are durable, strategic, and adaptive, and which, at the right time, recognize and support entrepreneurial firm development to help sustain technology‐based growth.     

The Territorial Agglomerations of Firms: A Social Capital Perspective from the Spanish Tile Industry

ABSTRACT Using the Social Capital theoretical framework, territorial agglomerations of firms, such as in the industrial district, can be identified as dense strong‐tie networks and are thus suitable for exploiting activities. This paper addresses the possible exploring limitations of these clustered firms. Following alternative explanations, such as the structural holes and weak tie approaches, it is proposed that local institutions may play a role as intermediary agents between external disperse networks and internal dense networks, therefore enabling these firms to deal with the requirements of an ever‐changing environment. The paper also develops an empirical section where the Spanish ceramic tile industrial district is described in order to illustrate theoretical arguments. Findings suggested a number of ways in which local institutions may facilitate the creation of value for firms. Particularly, local institutions interact with many external firms and institutions and undertake research projects with local firms. In addition, some quantification of the participation of firms in the activities carried out by institutions is offered, suggesting explanations for the barriers that prevent firms from gaining direct access to external networks.     

Economic development incentive program deadweight: The role of program design features,firm characteristics,and location

This paper examines the effectiveness of state economic development incentive programs in stimulating new business activity. It reviews literature that identifies factors that potentially influence the effectiveness of incentives. Empirical work draws on a 2018 survey of approximately 150 firms that received at least one award for startup, expansion, or relocation purposes during the period SFY2010–SFY2016 from a state economic development incentive program (i.e., grant, tax credit, loan, equity investment) offered by the Commonwealth of Virginia. The paper evaluates the role of program design features (e.g., discretionary vs. automatic, relative size of incentive), firm characteristics (e.g., size of firm, industry), and locational variables (e.g., state boundary location, rurality) on firm assessments of the role of incentives in business growth decisions. It finds that firms that receive up-front or discretionary program awards and undertake multistate site searches are less likely to report that the incentive was not needed for their project to succeed. These results suggest that automatic, back-loaded award programs, and programs that fund noncompetitive projects are less likely to affect firm location and expansion decisions.     

Firm Innovation and Co‐Location in Portugal

This paper investigates the geographical distribution and concentration of firms’ innovation persistence and innovation type (product and process) based on three waves of the Portuguese Community Innovation Survey data covering the period 1998–2006. The main findings are: 1) both innovation persistence and innovation type are asymmetrically distributed across Portuguese regions, 2) the degree of correlation between geographical location and innovative output varies with the innovation type, and 3) the correlation between geographical unit and innovation increases when the spatial unit of analysis is narrower. The results suggest that the firms’ choices of geographical location have a long‐lasting effect, engendering no equal probabilities of being persistently innovative.     

The Role of Pre‐Entry Experience of Firm Founders in Peripheral Regions: Routines,Business Contacts,and Local Starting Conditions

This paper investigates how spinoffs in peripheral regions can profit from the work experience of their founders. More specifically, it discusses which firm routines and business contacts entrepreneurs gather through their prior work experience, and how this experience influences the organizational structure and orientation of the newly founded firm. The transfer of capabilities from parent firm to spinoff has been identified as important aspect of industrial clustering, but empirical evidence from peripheral areas is still sparse. It compares 22 semi‐structured interviews with founders of manufacturing firms from different peripheral regions in Switzerland to investigate whether routine and network transfer differs in varying peripheral contexts. The results show that not only inherited routines are important, but also inherited business contacts. Further, instead of simply reproducing acquired routines and networks, founders employ a mixture of continuity and change to find a good trade‐off between relying on well‐proven practices and introducing novelty. Finally, the geographical proximity of inherited business contacts seems to have an influence on the implementation strategy founders choose. Entrepreneurs with strong inherited local business contacts do not have to invest as much in building up new business contacts as those entrepreneurs in more isolated locations.     

Technology Clusters versus Industry Clusters: Resources,Networks, and Regional Advantages

ABSTRACT The tendency of firms to cluster within a region has been observed for quite some time. However, it is only over the past two decades that business researchers have focused much attention on clusters, particularly in terms of their entrepreneurial and innovative characteristics and potential. At the same time, regional developers around the world have put much effort in promoting the formation of clusters. A gap in such efforts is an understanding of the differences among types of clusters. This article draws a distinction between two generic types of clusters: technology‐based and industry‐focused. Using the resource‐based view as the organizing framework, we argue that the two generic cluster types create very different regional resource profiles over time, accumulating resources in a different manner, cultivating different capabilities, and deriving different sources of regional advantage. As concluded in the study, these differences are likely to have implications for firms located in the regions as well as for economic developers and public policy officials charged with developing cluster strategies.