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A Relational Account of the Causes of Spatial Firm Mobility

Listed author(s):
  • Joris Knoben


It is accepted in the literature that exchanges within networks have an ongoing social structure that both enables and constrains the behavior of its members (Pfeffer and Nowak 1976; Uzzi 1996). However, most research in inter-organizational settings has focused on the enabling effects of networks and network structures only, even though some noteworthy exceptions exist (e.g. Romo and Schwartz 1995; Singh and Mitchell 1996). A possible constraining effect of network participation is spatial lock-in, also known as spatial inertia, of a firm. Following Resource Dependence Theory (Pfeffer and Salancik 1978), it can be argued that a firm that makes extensive use of knowledge resources possessed or controlled by external actors for its innovative processes can become dependent on these actors. By themselves, the relationships in which these dependencies exist are non-spatial. However, since geographical proximity is assumed to facilitate the successful exchange of (especially tacit) knowledge through inter-organizational relationships (IORs) (Bretschger 1999), dependency on other firms located in the same region can also lead to dependency on a certain geographical location, and thus to spatial lock-in (Stam 2003). The IORs that are enabling for the firm in terms of its innovative processes act, at the same time, as constraining factors for the spatial behavior of the firm. Similar reasonings can be found in the literature on Territorial Innovation Models (Moulaert and Sekia 2003), which indicates that economic embeddedness in a region can be beneficial for the performance of firms. However, this embeddedness can also lead to dependence on localized inputs and production factors. Due to these dependencies, a firm can become very unlikely to relocate, even if doing so is beneficial from a cost perspective. As Romo and Schwartz state: “Firms are usually too dependent on the material, political and social resources available in the local production culture to risk departure, even when production costs might be substantially reduced (Romo and Schwartz 1995:874).†There currently is, however, only weak empirical evidence for the proposed relationship between the level of (local) embeddedness and a firm’s propensity to relocate. Moreover, several authors even propose that geographical distance in IORs is becoming irrelevant since it effects can be replicated by ICT (Morgan 2004), or high levels of organizational or technological proximity (Kirat and Lung 1999). If this is indeed the case, then participation in localized innovative IORs will have no effect on the spatial behavior of firms, since a firm can operate exactly the same on a different geographical location. The main goal of this research is to provide empirical insights into the effects of a firm’s level of participation in innovative (localized) inter-organizational relationships (IORs) on its propensity to relocate. Based on the above, the following research question has been formulated is “To what extent is the level of embeddedness of a firm in (localized) innovative inter-organizational relationships of influence on its propensity to relocate?†Answering this research question adds to the insights about the constraining effects of networks by focusing on the spatially constraining effect of inter-organizational relationships. This research question will be answered based on a data from a survey among Dutch automation service firms in 2006. In line with earlier research (c.f. Van Dijk and Pellenbarg 2000; Brouwer et al. 2004) an ordinal logit model will be used to relate the relocation propensity of a firm to that firm’s participation in localized innovative IORs, the strength of these IORs, and the level of geographical, organizational and technological proximity. It also provides insight into the question whether or not high levels of technological and organizational proximity can negate the need for geographical proximity in inter-organizational collaboration (Boschma 2005). References: Boschma, R. A. (2005). "Proximity and innovation: A critical assessment." Regional Studies 39(1): 61-74 Bretschger, L. (1999). "Knowledge diffusion and the development of regions." Annals of Regional Science 33(3): 251-268 Brouwer, A. E., I. Mariotti and J. N. van Ommeren (2004). "The firm relocation decision: An empirical investigation." Annals of Regional Science 38(2): 335-347 Van Dijk, J. and P. H. Pellenbarg (2000). "Firm relocation decisions in The Netherlands: An ordered logit approach." Papers in Regional Science 79(1): 191-219 Kirat, T. and Y. Lung (1999). "Innovation and proximity - Territories as loci of collective learning processes." European Urban and Regional Studies 6(1): 27-38 Morgan, K. (2004). "The exaggerated death of geography: Learning, proximity and territorial innovation systems." Journal of Economic Geography 89(1): 3-21 Moulaert, F. and F. Sekia (2003). "Territorial innovation models: A critical review." Regional Studies 37(3): 289-302 Pfeffer, J. and P. Nowak (1976). "Joint-ventures and interorganizational interdependence." Administrative Science Quarterly 21(3): 398-418 Pfeffer, J. and G. R. Salancik (1978). The external control of organizations: A resource dependency perspective. New York, Harper and Row Romo, F. P. and M. Schwartz (1995). "The structural embeddedness of business decisions: The migration of manufacturing plants in New York state, 1960 to 1985." American Sociological Review 60(1): 874-907 Singh, K. and W. Mitchell (1996). "Precarious collaboration: Business survival after partners shut down or form new partnerships." Strategic management journal 17(2): 99-116 Stam, F. C. (2003). Why butterflies don't leave: Locational evolution of evolving enterprises. Utrecht, Utrecht University Uzzi, B. (1996). "The sources and consequences of embeddedness for the economic performance of organizations: The network effect." American Sociological Review 61(4): 674-698

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa06p1.

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Date of creation: Aug 2006
Handle: RePEc:wiw:wiwrsa:ersa06p1
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  1. Havnes, Pers-Anders & Senneseth, Knut, 2001. "A Panel Study of Firm Growth among SMEs in Networks," Small Business Economics, Springer, vol. 16(4), pages 293-302, June.
  2. F Medda & P Nijkamp & P Rietveld, 1999. "Urban industrial relocation: the theory of edge cities," Environment and Planning B: Planning and Design, Pion Ltd, London, vol. 26(5), pages 751-761, September.
  3. van Dijk, Jouke & Pellenbarg, Piet H., 1999. "Firm relocation decisions in The Netherlands: an ordered logit approach," ERSA conference papers ersa99pa418, European Regional Science Association.
  4. Leon Oerlemans & Marius Meeus, 2005. "Do Organizational and Spatial Proximity Impact on Firm Performance?," Regional Studies, Taylor & Francis Journals, vol. 39(1), pages 89-104.
  5. Vincent Frigant & Yannick Lung, 2002. "Geographical Proximity and Supplying Relationships in Modular Production," Post-Print hal-00204245, HAL.
  6. Roger W. Schmenner, 1980. "Choosing New Industrial Capacity: On-Site EXpansion, Branching, and Relocation," The Quarterly Journal of Economics, Oxford University Press, vol. 95(1), pages 103-119.
  7. Oerlemans, L.A.G. & Meeus, M.T.H. & Boekema, F.W.M., 2001. "On spatial embeddedness of innovation networks : An exploration of the proximity effect," Other publications TiSEM 05a1ad7e-a27e-4ef0-85c5-4, Tilburg University, School of Economics and Management.
  8. Brouwer, A.E. & Mariotti, I. & Ommeren, J.N. van, 2003. "The firm relocation decision: an empirical investigation," Serie Research Memoranda 0023, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  9. Gilsing, V.A. & Nooteboom, B., 2005. "Density and Strength of Ties in Innovation Networks : An Analysis of Multi-Media and Biotechnology," Discussion Paper 2005-41, Tilburg University, Center for Economic Research.
  10. Saviotti, Pier Paolo, 1998. "On the dynamics of appropriability, of tacit and of codified knowledge," Research Policy, Elsevier, vol. 26(7-8), pages 843-856, April.
  11. Adelheid Holl, 2004. "Start-ups and relocations: Manufacturing plant location in Portugal," Economics of Governance, Springer, vol. 83(4), pages 649-668, October.
  12. Andre Torre & Alain Rallet, 2005. "Proximity and Localization," Regional Studies, Taylor & Francis Journals, vol. 39(1), pages 47-59.
  13. Leon Oerlemans & Marius Meeus & Frans Boekema, 2001. "On the spatial embeddedness of innovation networks: an exploration of the proximity effect," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 92(1), pages 60-75, 02.
  14. Ron Boschma, 2005. "Proximity and Innovation: A Critical Assessment," Regional Studies, Taylor & Francis Journals, vol. 39(1), pages 61-74.
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