Does Open Innovation Work Better in Regional Clusters?

Abstract

In this study, we link the research on open innovation with issues relating to geographical proximity and regional clustering. Based on our analysis of a sample of 3,468 European firms, we find that close geographical proximity tends to increase firm-university linkages, enhance inter-firm explicit and tacit knowledge flows and lead to comparatively less reliance on internal research and development. We attribute these effects to the underlying benefits created by reduced transaction costs and increased trust and reciprocity created within regional clusters. These cluster-based effects tend to facilitate the 'connect and develop' operational philosophy of open innovation. Our findings are highly relevant to the open innovation literature, and also potentially extend an open innovation perspective to the analysis of regional clustering's effects on innovation and organizational performance.