Local R&D Strategies and Multilocation Firms: The Role of Internal Linkages

Abstract

T his study looks at the role of internal linkages in highly competitive clusters. We argue that, in addition to serving as a mechanism for sourcing knowledge, strong internal linkages help firms increase internalization and create higher levels of technological interdependence across firm locations. Firms with strong networks of internal linkages are able to maintain tighter control over local innovation and reduce the risk that knowledge outflows will advantage competitors in clusters. Our empirical analysis of the global semiconductor industry shows that industry leaders intensify internal linkages across locations when they collocate with direct market competitors, but not when they collocate with innovators in the same technological field. We also find that internal linkages are associated with more knowledge flow within firms and less knowledge expropriation by collocated competitors. Our results suggest that future research in cluster innovation should consider the critical role of multilocation firms, their internal organization across clusters, and their responses to technological and market competition in clusters.

The architecture of transaction networks: a comparative analysis of hierarchy in two sectors

“…Inevitably, to get the various components to work together properly, suppliers and customers must share knowledge and, because of that, a big concern is that valuable knowledge may leak out to customers that are also competitors (Baldwin and Henkel, 2011;Alcácer and Zhao, 2012).…”

Internationalization in the information age: A new era for places, firms, and international business networks?

“…In studies of multinational R&D strategies, Zhao (2006) and Zhao and Islam (2016) found that firms with strong internal linkages are able to conduct R&D in environments with weak IP protection by substituting their internal organization for external institutions. Alcácer and Zhao (2012) also found that a combination of fragmented knowledge and strong external linkages allow competing firms in the semiconductor industry to locate close to rivals while enjoying the benefits of agglomeration economies, including local knowledge spillovers, in a geographic cluster.…”

Strategic Location Choice Under Dynamic Oligopolistic Competition and Spillovers

“…Head et al (1995), Audretsch and Feldman (1996), Alcácer and Chung (2007), Belderbos et al (2008a), and Alcácer and Zhao (2012)), the effects of knowledge flows on firms' location choices has received relatively little attention in the theoretical literature, but for a few notable exceptions. Gersbach and Schmutzler (1999) focus on a two stage Bertrand duopoly model in which firms first decide on the location of both production and (cost-reducing) innovative activities in the presence of internal and external knowledge spillovers and then compete with respect to the product price 5 .…”