Network position, absorptive capacity and firm success

Abstract

Interaction between firms or institutions in a regionally bounded area leads to a substructure conductive for innovative activities. In a vital Regional Innovation System (RIS) the actors benefit from a multilayer network consisting of business relations, innovative cooperations and daily personal contacts by which they get access to external innovative impulses. We ask in this paper whether these knowledge flows and the way firms attempt to manage them have a positive influence on the firm's success. Our analysis is based on data from an industrial sub-region of Jena, Jena-Goeschwitz. We find that Knowledge Management (KM) is positively related to a firm's central network position. This central position in turn plays a significant role with respect to expected economic success and innovative performance. Moreover, what is decisive for that is the firms' propensity to engage in research cooperation with suppliers in the region, with national public research and foreign customers respectively. Especially, the last finding illustrates the necessity of so-called global pipelines for firms located in a regional innovation system.