Geographical Clustering and Quality of Subsidiary Innovation in a Developing Economy

Abstract

Clustering has been found to have a positive impact on firm innovation and performance across the world. Clustering leads to local knowledge spillover which is vital to innovation. This chapter attempts to study the impact of clustering on the quality of subsidiary innovation in a developing country context of India. Comparing the patent data of two semiconductor design subsidiaries located in India, this chapter analyzes the moderating effect of clustering on the relationship between subsidiary age, local knowledge spillover, internal networks and the quality of subsidiary innovation. Being located in a cluster is found to have a positive impact on the quality of innovation. Clustering has also been found to positively moderate the impact of subsidiary age and internal network on the quality of innovation, while it has been found to have no moderating impact of local knowledge spillover on the quality of subsidiary innovation.