The Industrial District as a Social System: Influence of Proximity on Value Creation

Abstract

This paper draws upon the idea that an organisation can be understood as an open system embedded in a larger social system. We propose that geographical proximity is a key determinant of the porous boundaries of organisations. Proximity produces repeated, trusting and long-term perspective relationships. Consequently, clustered firms (i.e. in an industrial district) develop relevant relations and interactions within this social system. Firms acquire new resources and capabilities using external endowments. In an industrial district, firms benefit from a common reputation, from an intense exchange and combination of resources, and the presence of different local institutions. As a result, firms in the industrial district may improve innovation and net-value creation capacities, which explain the competitive superiority of these firms. Our study draws on an empirical study involving a sample of 350 Spanish industrial firms in which we compared district and non-district member firms. Findings suggest relevant conclusions with respect to our theoretical propositions.

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