Does Distance Affect the Role of Nonlocal Subsidiaries on Cluster Firms’ Innovation? An Empirical Investigation on Chinese Biotechnology Cluster Firms

Xiyao Xiang,Wei-Chiao Huang

doi:10.3390/su11236725

Xiyao Xiang, Wei-Chiao Huang

Open Access

https://doi.org/10.3390/su11236725

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Abstract

As translocation strategy has been pursued by cluster firms, two types of nonlocal subsidiaries, nonlocal manufacturing subsidiaries (NMS) and nonlocal R&D subsidiaries (NRS) contribute to their holding firms’ innovation in different ways. Prior studies have not paid much attention to the role of NMS and NRS, and how their effects are contingent on distance. To address this gap, this paper assesses the contribution of NMS and NRS on cluster firms’ innovation performance respectively and ascertains the moderating effect of geographical distance and social distance. The empirical investigation is conducted using a sample of 79 Chinese cluster firms. Our results indicate that both NMS and NRS have positively influenced cluster firms’ innovative performance. Moreover, geographical distance negatively moderates both the role of NMS and NRS. On the other hand, social distance only increases the influence of NRS on their holding firms’ innovation. Thus, spatial distance may hamper knowledge acquisition through NMS and NRS while loosely connected NRS would contribute more to their parent companies in local clusters. Our research contributes to the literature on cluster firms’ relocation strategy by clarifying the distinct role of NMS and NRS and recognizing the contingent effect caused by geographical and social distance.

Highlights

Over the past decades, much attention has been devoted to industry territorial agglomeration [1] and its contribution to the economic development of emerging countries [2]
Where INP stands for innovative performance; NMS represents nonlocal manufacturing subsidiaries and NRS is the number of nonlocal R&D subsidiaries
Based on a 79-firms sample from China, this study provided evidence that NMS and NRS had significantly contributed to innovative performance of their holding firms

Summary

Introduction

Much attention has been devoted to industry territorial agglomeration [1] and its contribution to the economic development of emerging countries [2]. Most of the work in this area view relocation as a solution for firms facing cost pressure and innovative dilemma [13] or as a natural evolution process for clusters [14,15], especially for Chinese cluster firms, which have long been labeled as a proficient imitator This is exemplified by the cross-border mobilization of Taiwan IT firms to mainland China since the 1990s [16] and the recent movement of manufacturing firms from Pearl River Delta to inland provinces in China [17]. NRS are key platforms that hold crucial nonlocal knowledge linkages, which play an irreplaceable role in cluster firms’ innovation [19]. These two types of subsidiaries contribute to cluster firms’ innovation with distinct types of knowledge and pathways. Not much attention has been paid to distinguish the distinct role of nonlocal subsidiaries on their holding companies’ innovation

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