Near is more: learning efficiency in research and development innovation among interlocking firms

Abstract

Research question/issueThis study examines whether geographic proximity produces a proximity preference as interlocking firms observe each other and learn innovative behaviors through information transmission among interlocking directors.Research findings/insightsWe study the performance of A-share-listed companies in China from 2007 to 2017 on the basis of resource dependence theory, agglomeration effect theory, and Porter’s competitive theory. When target firms learn about research and development–related innovation behaviors from interlocking firms closer to them, they experience more efficient learning effects and have improved convergent traits. Moreover, this proximity advantage increases the willingness of the target firm to communicate with and learn from interlocking firms closer to them. Highly developed areas and research and development–intensive industries positively affect the learning efficiency of interlocking firms.Theoretical/academic implicationsOur conclusion is consistent with resource dependence theory; target firms in highly developed areas are more willing to imitate and study nearby interlocking firms to maintain their peer relations, innovation potential, and competitiveness. Our conclusion is also consistent with competition theory, which states that the exchange of information between target firms in highly research and development–intensive industries and distant interlocking firms increases innovation differentiation, innovation potential, and competitiveness, even when such exchange has a high cost.Practitioner/policy implicationsThe results support resource dependence theory and peers' effects. The information obtained by interlocking directorates through external social relations guides firm decision-making, and closer distances reveal more obvious effects.