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. Besides serving as a mechanism to source knowledge, we argue that strong internal linkages also represent tighter control over local innovation and higher levels of technological interdependency across locations, which allow firms to increase internalization and reduce the risk of knowledge outflow to competitors. Our empirical analysis of the global semiconductor industry shows that the industry leaders tend to intensify their internal linkages across location in response to the presence of direct market competitors but not to the presence of innovators in the same technological field. In addition, we find that such internal linkages are associated with more intra-firm knowledge flow and lower knowledge flow to competitors in the same cluster. Our results suggest that research in cluster innovation should take into account multilocation firms with linkages across locations, and their different responses to technological competition and market competition in the cluster.