Chapter 11: Complementarity between Internal and External Knowledge in Intradistrict Networks

No firm can rely entirely on its internal knowledge capacities and sources to create competitive innovation advantages. Firms would be proactively asking for the complementarity between the activities of internal knowledge creation and the assimilation of external knowledge from different sources, forming strategic alliances between them. Specifically, innovation can be regarded as resulting from research opportunities focused on how knowledge creation and diffusion processes would benefit from localized knowledge spillovers between firms colocated within industrial clusters, defined as a network of personnel, or an interorganizational and institutional network. However, the literature has not yet well understood how these processes benefit from both these localized knowledge spillovers and networks within the cluster or whether their effects are consistently positive. This chapter, grounded in the resource-based view, the Scandinavian Approach to the industrial district, and the social capital perspective, and with a multilevel analysis, presents a synthesis of the existing theory on the knowledge creation and transfer processes within industrial districts, and proposes a theoretical framework by studying in depth the relationships between district-level and firm-specific capacities, as well as the effects of the intracluster networks on both the firm’s knowledge-generative and absorptive capacities, and its skill in facing both incremental and radical technological innovation. This understanding of the topic allows the proposition of firm-specific strategies for value creation and value appropriation in intracluster networks and alliances by increasing the company’s exploration and knowledge-absorption capacities.