Geographical proximity and the diffusion of knowledge

Abstract

Since the principle that the capacity for innovation is a driving force in the growth of firms or other productive systems has been acknowledged, public policies hold to the view that geographical proximity plays a part in the process of the circulation of technology and knowledge, by fostering the kind of face to face relationships needed to establish and maintain a common pool of knowledge. The aim of this article is to question the relevance of these ideas, and enquiring as to whether geographical proximity is really needed for the diffusion and exchange of knowledge. A body of literature (local systems of production and externalities) considers permanent geographical proximity as a necessary condition for the diffusion of knowledge (I) whereas the articles dealing with transmission channels for externalities, show that geographical proximity only influences the innovative performance of firms if there is effective interaction between the agents (II). We show that organisation is the first modality in the transmission of knowledge, and that geographical proximity can be temporary, particularly in the initial phases of the R&D processes. The smaller firms are then more acutely aware to fulfil the need of de geographical proximity (III). This pattern, applied to plant biotechnology (IV), reveals that SME’s related to the AFI and to agriculture are part of a less diversified and more local innovation network than pharmaceutical SME’s and are more involved in frequent and repeated contacts with the clients and the suppliers.