Cluster and performance in foreign firms: The role of resources, knowledge, and trust

Abstract

Clustering, the grouping of firms in close geographic proximity to one another, can enhance the performance of affiliated firms by providing access to complementary resources. Despite that some studies have produced empirical evidence supporting the positive impact of clustering, other studies have found no such evidence. Consequently, the consideration of clustering alone to explain differences in firm performance may be insufficient. This study seeks to determine whether the enhancement of firm performance comes as a consequence of clustering at the location level, interorganizational trust at the relationship level, or resource and knowledge management (i.e., the mechanisms of system dependence) at the firm level. Examining a sample group of Taiwanese manufacturers investing in China, we find that interorganizational trust, resources, and the mechanisms of system dependence all have a positive impact on performance. Further, we find that resources interact with clustering to positively impact firm performance.