The Impact of Face-to-face and Frequent Interactions on Innovation: Evidence from Upstream-Downstream Relations

This paper proposes a new mechanism linking innovation and networks in developing economies to identify explicit production and information linkages. We investigate the testable hypotheses of these linkages using survey data gathered from manufacturing firms in East Asia: Indonesia, Thailand, the Philippines, and Vietnam. We found that firms that dispatched engineers to customers achieved more product and process innovations than firms that did not. Just-in-time relationship is effective for dealing with process innovation. We found that such strong complementarities as Just-in-time are not effective for product innovation. These findings support the hypothesis that face-to-face communication and strong complementarities among buyer-seller networks have different roles in product and process innovation.