The role of geographical proximity for project performance: evidence from the German Leading-Edge Cluster Competition

Abstract

The role of geographical proximity in fostering connections and knowledge flows between innovative actors ranks among the most controversial themes in the research of innovation systems, regional networks and new economic geography. While there is ample empirical evidence on the constituent force of co-location for the formation of research alliances, little attention has been paid to the actual consequences of geographical concentration of alliance partners for the subsequent performance of these linkages. In this paper, we address this underexplored issue and aim to complement the rare examples of studies on the relevance of geographical proximity for research outputs. We utilize original and unique survey data from collaborative R&D projects that were funded within the “Leading-Edge Cluster Competition” (LECC)—the main national cluster funding program in Germany in recent years. We find that the perception of the necessity of geographical proximity for project success is rather heterogeneous among the respondents of the funded projects. Moreover, the relationship between geographical distance and project success is by no means univocal and is mediated by various technological, organizational and institutional aspects. Our findings strongly support the assumption that the nature of knowledge involved determines the degree to which collaborators are reliant on being closely located to each other. The relevance of geographical proximity increases in exploration contexts when knowledge is novel and the innovation endeavor is more radical, while this effect is less pronounced for projects with a stronger focus on basic research. Moreover, geographical proximity and project satisfaction foster cross-fertilization effects of LECC projects.