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The spatial selection of heterogeneous firms

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Author Info
Okubo Toshihiro
Picard Pierre M.
Thisse Jacques-François () (CREA, University of Luxembourg)

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Abstract

Empirical research on strategic alliances has focused on the idea that alliance partners are selected on the basis of social capital considerations. In this paper we emphasize instead the role of complementary knowledge stocks (broadly defined) in partner selection, arguing not only that knowledge complementarity should not be overlooked, but that it may be the true causal force behind alliance formation. To marshal evidence on this point, we design a simple model of partner selection in which firms ally for the purpose of learning and innovating, and in doing so create an industry network. We abstract completely from network-based structural and strategic motives for partner selection and focus instead on the idea that firms’ knowledge bases must “fit” in order for joint leaning and innovation to be possible, and thus for an alliance to be feasible. The striking result is that while containing no social capital considerations, this simple model replicates the firm conduct, network structure, and contingent effects of network position on performance observed and discussed in the empirical literature.

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Paper provided by Center for Research in Economic Analysis, University of Luxembourg in its series CREA Discussion Paper Series with number 08-16.

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Date of creation: 2008
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Handle: RePEc:luc:wpaper:08-16

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Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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