Local R&D Strategies and Multilocation Firms: The Role of Internal Linkages

This study looks at the role of internal linkages in highly competitive clusters. We argue that, in addition to serving as a mechanism for sourcing knowledge, strong internal linkages help firms increase internalization and create higher levels of technological interdependence across firm locations. Firms with strong networks of internal linkages are able to maintain tighter control over local innovation and reduce the risk that knowledge outflows will advantage competitors in clusters. Our empirical analysis of the global semiconductor industry shows that industry leaders intensify internal linkages across locations when they collocate with direct market competitors, but not when they collocate with innovators in the same technological field. We also find that internal linkages are associated with more knowledge flow within firms and less knowledge expropriation by collocated competitors. Our results suggest that future research in cluster innovation should consider the critical role of multilocation firms, their internal organization across clusters, and their responses to technological and market competition in clusters. <i>This paper was accepted by Bruno Cassiman, business strategy.</i>