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A Relational Account of the Causes of Spatial Firm Mobility

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  • Joris Knoben

Abstract

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

Suggested Citation

  • Joris Knoben, 2006. "A Relational Account of the Causes of Spatial Firm Mobility," ERSA conference papers ersa06p1, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa06p1
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    2. Lucas Bretschger, 1999. "original: Knowledge diffusion and the development of regionsKnowledge diffusion and the development of regions," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 33(3), pages 251-268.
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    1. Katja Bringmann & Ann Verhetsel & Thomas Vanoutrive & Jo Reynaerts, 2013. "The impact of venture capital linkages on start-ups' cluster embeddedness," ERSA conference papers ersa13p298, European Regional Science Association.
    2. Kristin Kronenberg, 2013. "Firm relocations in the Netherlands: Why do firms move, and where do they go?," Papers in Regional Science, Wiley Blackwell, vol. 92(4), pages 691-713, November.
    3. Kristin Kronenberg, 2011. "Business relocations in the Netherlands: Why do firms move, and where do they go?," ERSA conference papers ersa11p1450, European Regional Science Association.
    4. Yoojin Yi, 2018. "Firm relocation and age-dependent reliance on agglomeration externalities," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 61(2), pages 439-456, September.
    5. Tessa Conroy & Steven Deller & Alexandra Tsvetkova, 2017. "Interstate Relocation Of Manufacturers And Business Climate," Review of Urban & Regional Development Studies, Wiley Blackwell, vol. 29(1), pages 18-45, March.
    6. Lampón, Jesús F., 2019. "Relocation in conditions of uncertainty: the Spanish automobile components industry during the economic crisis (2008-2012)," MPRA Paper 92738, University Library of Munich, Germany.
    7. Wang, Xiao & Deltas, George & Khanna, Madhu & Bi, Xiang, 2017. "Community Pressure and the Relocation of Toxic Facilities," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258390, Agricultural and Applied Economics Association.
    8. In Hyeock (Ian) Lee & Eunsuk Hong & Shige Makino, 2016. "Location decisions of inward FDI in sub-national regions of a host country: Service versus manufacturing industries," Asia Pacific Journal of Management, Springer, vol. 33(2), pages 343-370, June.
    9. Conroy, Tessa & Deller, Steven & Tsvetkova, Alexandra, 2016. "Regional business climate and interstate manufacturing relocation decisions," Regional Science and Urban Economics, Elsevier, vol. 60(C), pages 155-168.
    10. Haifeng Wang & Longwei Tian & Yuan Li, 2019. "A tale of two cultures: Social networks and competitive advantage," Asia Pacific Journal of Management, Springer, vol. 36(2), pages 321-347, June.
    11. Lampón, Jesús F. & Cabanelas, Pablo & Carballo-Cruz, Francisco, 2017. "A model for international production relocation: Multinationals' operational flexibility and requirements at production plant level," Journal of Business Research, Elsevier, vol. 77(C), pages 95-101.
    12. Jesús F. Lampón & Pablo Cabanelas-Lorenzo & Santiago Lago-Peñas, 2013. "Why firms relocate their production overseas? The answer lies inside: corporate, logistic and technological determinants," Working Papers 2013/3, Institut d'Economia de Barcelona (IEB).
    13. James Foreman-Peck & Tom Nicholls, 2015. "Inter-regional mobility of entrepreneurial SMEs," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 54(1), pages 57-87, January.
    14. Jesús F. Lampón & Pablo Cabanelas-Lorenzo & Santiago Lago-Peñas, 2013. "Why firms relocate their production overseas? The answer lies inside: corporate, logistic and technological determinants," Working Papers 2013/3, Institut d'Economia de Barcelona (IEB).

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