Network versus spatial proximity and firm innovation: The case of the R&D service sector

Abstract

The paper analyzes the relationship between different types of proximities—network and spatial—in relation to innovation in the context of the R&D service industry. In doing so, it contributes to the recent debate in the literature on the effects of network connectivity versus geographical colocation. The paper uses original data from a survey of 145 R&D service establishments in Montreal (Canada) and their interactions with both local and nonlocal organizations. The findings of the paper indicate that collaborative networks (both local and nonlocal) have a stronger association with R&D service innovation than spatial proximity to R&D service organizations and other collaborators. However, when these two dimensions are interacted, they are shown to function as substitutes. The paper also demonstrates that the relationship between spatial proximity and networking varies across three dimensions: local versus nonlocal networking, the type of relationship (client, supplier, competitor, and research institutes and university), and the type of network connectivity—brokerage versus closure.