Join the club! : knowledge spillovers and the influence of social networks on firm performance

Abstract

Social networks are frequently claimed to provide advantages to firms, but rarely has this been empirically demonstrated. It is generally assumed that networks benefit not only individual firms, but also the regional economy as a whole. Localized knowledge spillovers are seen as the basis of these gains. This study investigates whether the role of social networks, as the ‘tubes’ through which knowledge spills over and flows, does indeed provide benefit. The starting point of this study is the idea that the social capital embodied in these networks strengthens firms, giving them knowledge that supports their development. Both formal and informal networks are studied here. A part of the empirical data for this study derives from a large-scale analysis of cooperative patents within the Netherlands. The results of this analysis show that this formal type of network cooperation occurs much less frequently than is widely assumed and, furthermore, that they appear to have no effect on the performance of high-tech firms. The second part of the data collection focused on business association networks. The analysis from this data, performed on a larger scale than in previous studies, confirms that informal inter-firm networks are one of the micro-foundations of knowledge spillovers. However, their effects appear to be limited to individual firms and do not extend to regions as a whole. This implies that only individual firms benefit from participation in business associations. The results of this study thus provide new insights into the mechanisms behind knowledge spillovers as drivers of a regional economy.