Stepping-up innovation in manufacturing firms: Knowledge combinations in an Italian local production system

Industry 4.0 requires from manufacturing firms to become more innovative in order to remain relevant and competitive. To step-up firm innovation, several studies in Innovation and Economic Geography foreground that firms need to combine knowledge in novel ways either within local industrial structures or over distance. The contribution of this paper is to investigate in-depth how manufacturing firms with traditional roots combine new generative knowledge in and beyond a local production system (LPS), what enables them to access and integrate such knowledge from external sources, and how this relates to the firms’ innovation performance, with a focus on radical and varied forms of innovation. The contribution of this paper lies also in a mixed-methods research approach, which combines a population-based survey of mechatronics firms in an Italian LPS, with in-depth interviews. This allows for a qualitative interpretation of the causes of the identified distributions and correlations. The main finding of the paper is that firms generating radical innovations and varied forms of innovation combine unrelated types of knowledge in-house and through external sources. The pattern is that the traditional manufacturing knowledge of mechatronics firms still prevails but that firms increasingly complement this with new knowledge, in particular science-based analytical knowledge. Firms that have acquired complementary knowledge in-house are able to access new knowledge nationally or internationally. Even though firms source knowledge relatively frequently within the local production system, the firms who access new knowledge nationally and internationally stand out in terms of their innovation performance.