Network Characteristics and Firm Performance: An Examination of the Relationships in the Context of a Cluster

Abstract

The study examined the impact of spatial relationships on firm performance. It also assessed the impacts of network structural and relational characteristics on performance, as well as the moderating effects of these variables on the spatial relationship to performance linkages. The sample comprised 252 firms located in a mold industry cluster in the Zhejiang province of China. Both in-cluster ties and extra-cluster ties positively impacted performance. However, the effects of distant ties were more pronounced. Tie stability had a positive effect whereas tie quality had a negative effect on performance. Network centrality, tie strength, and tie stability strengthened the relationship between in-cluster ties and performance. By contrast, all network tie characteristics weakened and changed the form of the relationship between extra-cluster ties and performance. The findings suggest the need for cluster firms to consciously cultivate distant linkages in their network ties in order to neutralize the tendencies for lock-in and to arrest entropic deterioration in their respective clusters. © 2012 International Council for Small Business.