How agglomeration affects alliance governance and innovation performance: The role of cluster size

Abstract

We investigate how the size of the geographic cluster in which a firm is located influences its governance choice between equity and non-equity alliances and subsequent innovation performance. We argue that firms located in larger clusters tend to form non-equity alliances rather than equity alliances because the communication and control benefits of cluster membership, which increase with cluster size, reduce in-cluster firms' need to form equity alliances. We also claim that the effect of this preferential use of non-equity alliances on innovation becomes stronger when firms are located in larger clusters. Our arguments are supported by a panel analysis of alliances formed by US-listed semiconductor firms. | INTRODUCTIONThe geographical agglomeration of similar firms is an important economic phenomenon frequently observed across various industries and countries. Since Marshall (1920) suggested access to specialized resources (labor and inputs) and knowledge spillovers as the main benefits of geographical collocation, the agglomeration literature has sought to understand why agglomeration might occur and what benefits (i.e., agglomeration externalities) firms can enjoy from collocating. In particular, several studies have focused on how membership in a cluster 1 affects innovation performance in high-technology industries, such as the semiconductor (Almeida &

An Interdisciplinary and Multilevel Analysis of Local Economy Determinants and Their Impact on Firm Performance—Considering Porter’s Diamond Model, Clusters, and Industry

“…At the same time, ref. [68] found a positive relationship between cluster size and alliance governance. Scholars reported that alliance governance moderated the influence of local clusters on a firm's innovation-related performances.…”

“…Despite the rising interest in studying local clusters and the high enthusiasm with which business managers and local authorities embraced these new advancements, there is also some contradictory evidence regarding the positive effect of local clusters on firm performance. For instance, while some studies reported a positive and strong effect of local clusters on firm performance [10,68,70], other researchers found only a weak intensity effect for the same relationship [12,29]. Other studies even reported contradictory evidence [14].…”

Geographic proximity to socially dominant partners and firms' innovation outcomes: Empirical evidence from the medical device industry

“…Prior studies on economic geography have emphasised that geographic proximity strengthens externalities from partners located near one another (Capaldo & Petruzzelli, 2014; Kwon et al, 2022; Ryu et al, 2023). Specifically, first, when working with nearby partners, firms can increase face‐to‐face interactions.…”

“…In this context, firms can utilise their geographic proximity to socially dominant partners to increase (or decrease) the benefits (or costs) of collaborations. The literature on economic geography has already explored how geographic proximity affects firms' innovation outcomes (Bignami et al, 2019; Feldman & Florida, 1994; Presutti et al, 2019; Ryu et al, 2023). Moreover, prior studies have noted the positive effects of firms having geographic proximity to their inter‐organisational partners because it encourages knowledge sharing (Capaldo & Petruzzelli, 2014; Parrino, 2015).…”

How Do Clusters Drive Firm Performance in the Regional Innovation System? A Causal Complexity Analysis in Chinese Strategic Emerging Industries

“…Cluster firms are those organizations in a cluster. In industrial clusters, multiple linkages and geographic proximity are two fundamental characteristics [3] Establishing both vertical and horizontal links with other firms and associated institutions geographically localized [4] brings various benefits to all members in an industrial cluster, such as agglomeration economies, improved productivity, better knowledge sharing and collaborative innovation, and can better adapt to a more complex and turbulent technological environment [5][6][7][8][9][10]. Such advantages of clusters are especially salient and critical for firms in strategic emerging industries (SEIs).…”