Too Many Cooks Spoil the Broth? Geographic Concentration, Social Norms, and Knowledge Transfer

A long tradition in social science research emphasizes the potential for knowledge to flow among firms co-located in dense areas. Scholars have suggested numerous modes for these flows, including the voluntary transfer of private knowledge from one firm to another. Why would the holder of valuable private knowledge willingly transfer it to a potential and closely proximate competitor? In this paper, we argue that geographic concentration has an effect on the expected compliance with norms governing the use of transferred knowledge. The increased expected compliance favors trust and initiates a process of reciprocal exchange. To test our theory, we use a scenario-based field experiment in gourmet cuisine, an industry in which property rights do not effectively protect knowledge and geographic concentration is common. Our results confirm our conjecture by showing that the expectation that a potential co-located firm will abide by norms mediates the relationship between geographic concentration and the willingness to transfer private knowledge.