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Empirical tests of optimal cognitive distance

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  • Wuyts, Stefan
  • Colombo, Massimo G.
  • Dutta, Shantanu
  • Nooteboom, Bart

Abstract

This article provides empirical tests of the hypothesis of ‘optimal cognitive distance’, proposed by Nooteboom (1999, 2000), in two distinct empirical settings. Variety of cognition, needed for learning, has two dimensions: the number of agents with different cognition, and differences in cognition between them (cognitive distance). The hypothesis is that in interfirm relationships optimal learning entails a trade-off between the advantage of increased cognitive distance for a higher novelty value of a partner’s knowledge, and the disadvantage of less mutual understanding. If the value of learning is the mathematical product of novelty value and understandability, it has an inverse-U shaped relation with cognitive distance, with an optimum level that yields maximal value of learning. With auxiliary hypotheses, the hypothesis is tested on interfirm agreements between pharmaceutical companies and biotech companies, as well as on interfirm agreements in ICT industries.
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  • Wuyts, Stefan & Colombo, Massimo G. & Dutta, Shantanu & Nooteboom, Bart, 2005. "Empirical tests of optimal cognitive distance," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 277-302, October.
    • Handle: RePEc:eee:jeborg:v:58:y:2005:i:2:p:277-302
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    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General

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