Does Distance Still Matter? Geographic Proximity and New Product Development

Many firms rely on external organizations to acquire knowledge that is useful for developing creative new products and reducing the time needed to bring these products to market. Cluster theory suggests that this knowledge is often obtained from organizations located in close geographic proximity. Specifically, proximity is assumed to foster heightened face-to-face communication, strengthened relational ties, increased knowledge acquisition, and enhanced new product outcomes. The authors identify the limitations of these assumptions and offer an enriched model of the influence of geographic proximity on new product development, which they test using both a cross-sectional survey of 155 firms in the U.S. optics industry and a longitudinal follow-up survey of 73 of these firms. They find that firms located in close proximity engage in increased face-to-face communication, but this communication has little effect on the acquisition of the types of knowledge that lead to enhanced new product outcomes. In contrast, they find that e-mail communication leads to both enhanced new product creativity and development speed. In addition, they find that relational ties moderate rather than mediate the path connecting geographic proximity and new product outcomes. These findings imply that the new product development outcomes typically ascribed to close geographic proximity may actually be attributed to strong relational ties.

[1]  J.J.H. Bartholomée,et al.  Campell, Donald T. , 2005 .

[2]  A. Majchrzak,et al.  Can absence make a team grow stronger? , 2004, Harvard business review.

[3]  Jonathon N. Cummings.  Work Groups, Structural Diversity, and Knowledge Sharing in a Global Organization , 2004, Manag. Sci..

[4]  R. Kaplan,et al.  Time-driven activity-based costing. , 2003, Harvard business review.

[5]  Christine Moorman,et al.  Interfirm Cooperation and Customer Orientation , 2003 .

[6]  Lori Rosenkopf,et al.  Overcoming Local Search Through Alliances and Mobility , 2003, Manag. Sci..

[7]  John Scott,et al.  Absorptive Capacity and the Efficiency of Research Partnerships , 2003, Technol. Anal. Strateg. Manag..

[8]  Claas van der Linde,et al.  The Demography of Clusters—Findings from the Cluster Meta-Study , 2003 .

[9]  S. Zahra,et al.  Absorptive Capacity: A Review, Reconceptualization, and Extension , 2002 .

[10]  Srilata Zaheer,et al.  Concentration and Dispersion in Global Industries: Remote Electronic Access and the Location of Economic Activities , 2001 .

[11]  David M. Szymanski,et al.  Why Some New Products are More Successful than Others , 2001 .

[12]  Edward E. Leamer,et al.  The Economic Geography of the Internet Age , 2001 .

[13]  Anne S. Miner,et al.  Organizational Improvisation and Learning: A Field Study , 2001 .

[14]  V. Mahajan,et al.  The Effect of Reward Structures on the Performance of Cross-Functional Product Development Teams , 2001 .

[15]  C. Moorman,et al.  The Acquisition and Utilization of Information in New Product Alliances: A Strength-of-Ties Perspective , 2001 .

[16]  Joseph P. Cannon,et al.  Buyer–Supplier Relationships and Customer Firm Costs , 2001 .

[17]  Rui Baptista,et al.  Geographical Clusters and Innovation Diffusion , 2001 .

[18]  Nick Henry,et al.  Spatialising knowledge: placing the knowledge community of Motor Sport Valley , 2000 .

[19]  Elena L. Grigorenko,et al.  Practical Intelligence in Everyday Life , 2000 .

[20]  P. Cooke,et al.  The Associational Economy: Firms, Regions, and Innovation , 2000 .

[21]  P. McCann,et al.  Industrial Clusters: Complexes, Agglomeration and/or Social Networks? , 2000, Urban Studies.

[22]  I. Nonaka,et al.  SECI, Ba and Leadership: a Unified Model of Dynamic Knowledge Creation , 2000 .

[23]  F. Dwyer,et al.  An Examination of Organizational Factors Influencing New Product Success in Internal and Alliance-Based Processes , 2000 .

[24]  A. Zaheer,et al.  Bridging ties: a source of firm heterogeneity in competitive capabilities , 1999 .

[25]  Oren Etzioni,et al.  Face-to-Face and Computer-Mediated Communities, A Comparative Analysis , 1999, Inf. Soc..

[26]  Rolf Sternberg,et al.  Innovative Linkages and Proximity: Empirical Results from Recent Surveys of Small and Medium Sized Firms in German Regions , 1999 .

[27]  Morten T. Hansen,et al.  The Search-Transfer Problem: The Role of Weak Ties in Sharing Knowledge across Organization Subunits , 1999 .

[28]  Bonnie Durrance,et al.  Some Explicit Thoughts on Tacit Learning. , 1998 .

[29]  M. Porter.  Clusters and the new economics of competition. , 1998, Harvard business review.

[30]  R. Grover,et al.  From Embedded Knowledge to Embodied Knowledge: New Product Development as Knowledge Management , 1998 .

[31]  Christine Moorman,et al.  The Convergence of Planning and Execution: Improvisation in New Product Development , 1998 .

[32]  T. S. Robertson,et al.  TECHNOLOGY DEVELOPMENT MODE: A TRANSACTION COST CONCEPTUALIZATION , 1998 .

[33]  D. Audretsch.  Agglomeration and the location of innovative activity , 1998 .

[34]  P. Cooke,et al.  The Institutions of Innovation , 1998 .

[35]  Technical Systems,et al.  Harnessing light : optical science and engineering for the 21st century , 1998 .

[36]  V. Mahajan,et al.  Editorial: Issues and Opportunities in New Product Development: An Introduction to the Special Issue , 1997 .

[37]  Vijay Mahajan,et al.  Issues and Opportunities in New Product Development: An Introduction to the Special Issue , 1997 .

[38]  Stuart A. Rosenfeld.  Bringing business clusters into the mainstream of economic development , 1997 .

[39]  Daniel C. Smith,et al.  In Search of the Marketing Imagination: Factors Affecting the Creativity of Marketing Programs for Mature Products: , 1996 .

[40]  Paula E. Stephan,et al.  Company-Scientist Locational Links: The Case of Biotechnology , 1996 .

[41]  Jakki J. Mohr,et al.  Collaborative Communication in Interfirm Relationships: Moderating Effects of Integration and Control , 1996 .

[42]  C. Moorman.  Organizational Market Information Processes: Cultural Antecedents and New Product Outcomes , 1995 .

[43]  B. Kogut,et al.  Knowledge and the Speed of the Transfer and Imitation of Organizational Capabilities: An Empirical Test , 1995 .

[44]  Eric M. Olson,et al.  Organizing for effective new product development: The moderating role of product innovativeness. , 1995 .

[45]  M. Kotabe,et al.  The role of strategic alliances in high‐technology new product development , 1995 .

[46]  I. Nonaka,et al.  The Knowledge Creating Company , 2008 .

[47]  H. Håkansson,et al.  Dyadic Business Relationships within a Business Network Context , 1994 .

[48]  Shankar Ganesan.  Determinants of Long-Term Orientation in Buyer-Seller Relationships , 1994 .

[49]  A. Chandler,et al.  Regional Advantage: Culture and Competition in Silicon Valley and Route 128 , 1994 .

[50]  R. Bagozzi,et al.  A general approach to representing multifaceted personality constructs: Application to state self‐esteem , 1994 .

[51]  Jan B. Heide.  Interorganizational Governance in Marketing Channels , 1994 .

[52]  Allen S. Lee.  Electronic Mail as a Medium for Rich Communication: An Empirical Investigation Using Hermeneutic Interpretation , 1994, MIS Q..

[53]  Jonathan K. Frenzen,et al.  Structure, Cooperation, and the Flow of Market Information , 1993 .

[54]  R. Hall,et al.  Productivity and the Density of Economic Activity , 1993 .

[55]  A. Griffin.  Metrics for Measuring Product Development Cycle Time , 1993 .

[56]  J. Farley,et al.  Corporate Culture, Customer Orientation, and Innovativeness in Japanese Firms: A Quadrad Analysis , 1993 .

[57]  G. Zaltman,et al.  Relationships between Providers and Users of Market Research: The Dynamics of Trust within and between Organizations , 1992 .

[58]  B. Kogut,et al.  Knowledge of the Firm, Combinative Capabilities, and the Replication of Technology , 1992 .

[59]  D. Wilemon,et al.  A Survey of Major Approaches for Accelerating New Product Development , 1992 .

[60]  Vadim Radaev.  The Competition , 1992 .

[61]  Bennett Harrison,et al.  Industrial Districts: Old Wine in New Bottles? , 1992 .

[62]  Ernest Sternberg,et al.  The Sectoral Cluster in Economic Development Policy: Lessons from Rochester and Buffalo, New York , 1991 .

[63]  Michael E. Porter,et al.  The Competitive Advantage of Nations. , 1990 .

[64]  Daniel A. Levinthal,et al.  ABSORPTIVE CAPACITY: A NEW PERSPECTIVE ON LEARNING AND INNOVATION , 1990 .

[65]  Eugene F. Stone,et al.  Clarifying some controversial issues surrounding statistical procedures for detecting moderator variables: Empirical evidence and related matters. , 1989 .

[66]  Ira R. Weiss,et al.  Issues and opportunities , 1988, DATB.

[67]  David W. Gerbing,et al.  An Updated Paradigm for Scale Development Incorporating Unidimensionality and Its Assessment , 1988 .

[68]  R. Bagozzi,et al.  On the evaluation of structural equation models , 1988 .

[69]  E. Hippel.  Cooperation between Rivals: Informal Know-How Trading , 1987 .

[70]  L. Hayduk,et al.  Structural Equation Modeling with LISREL: Essentials and Advances , 1989 .

[71]  R. Daft,et al.  Media Symbolism, Media Richness, and Media Choice in Organizations , 1987 .

[72]  L. Hayduk.  Structural equation modeling with LISREL , 1987 .

[73]  R. Young,et al.  Economies of Scale , 1987 .

[74]  Richard L. Daft,et al.  Organizational information requirements, media richness and structural design , 1986 .

[75]  Mark S. Granovetter.  Economic Action and Social Structure: The Problem of Embeddedness , 1985, American Journal of Sociology.

[76]  Timothy J. Gronberg,et al.  Economies of scope and economies of agglomeration , 1984 .

[77]  C. Fornell,et al.  Evaluating structural equation models with unobservable variables and measurement error. , 1981 .

[78]  John R. Hauser,et al.  Design and marketing of new products , 1980 .

[79]  Terry S. Overton,et al.  Estimating Nonresponse Bias in Mail Surveys , 1977 .

[80]  D. Conrath.  Communications Environment and its Relationship to Organizational Structure , 1973 .

[81]  Mark S. Granovetter.  The Strength of Weak Ties , 1973, American Journal of Sociology.

[82]  P. Green,et al.  Planning and problem solving in marketing , 1968 .

[83]  L. P. Bucklin.  A theory of distribution channel structure , 1966 .

[84]  M. Polanyi.  Chapter 7 – The Tacit Dimension , 1997 .

[85]  Bruno A. M. Guerreiro.  Marketing management: analysis and decision , 1961 .

[86]  Reavis Cox,et al.  Consumer Convenience and the Retail Structure of Cities , 1959 .

[87]  D. Campbell.  The Informant in Quantitative Research , 1955, American Journal of Sociology.

[88]  John T. Gullahorn,et al.  Distance and Friendship as Factors in the Gross Interaction Matrix , 1952 .

[89]  A. Marshall,et al.  Principles of Economics , 1890 .