Firms, Entrepreneurship & Microfinance

Spatial Proximity, Knowledge Networks and Firm Performance: The Case of Sialkot Surgical Instrument Manufacturers

Project members:
Maryiam Haroon, Lahore School of Economics
Waqar Wadho, Lahore School of Economics

This research is funded by the Lahore School Research Development Fund (LSRDF). Despite substantial amount of work on the relationship between spatial proximity and firm performance, some of the important issues remain unresolved. In particular, does the geographical proximity among clustered firms facilitate inter-firm learning and innovation and thus growth? The geographical proximity is shown to facilitate knowledge spillovers (Audretsch & Feldman, 1996), promote interactive learning among local networks (Belussi et al., 2010) and facilitate the transmission of information and knowledge among firms and employees (Bell & Zaheer, 2007). On the other hand, Boschma (2005) claimed that geographical proximity is neither a necessary nor a sufficient condition for inter-firm learning and innovation. Another unresolved issue is the potential asymmetric benefits for co-located firms. Firms within geographic clusters are heterogeneous and not all firms benefit equally from being located in agglomerated regions (Rigby & Brown 2013; Giuliani 2007). In particular, the questions regarding who are the winners and the losers from co-location are not well settled yet. In this research, we contribute to these debates by studying an old and export oriented surgical instruments cluster in Sialkot, Pakistan to understand the firm network structure (including business, knowledge and social) and identify the important ties in knowledge diffusion and its creation; identify the role of geographic proximity in facilitating (or lack of it) inter-firm learning and network formation; understand how geographic proximity and network embeddedness facilitate innovation and firm performance; and identify firm level characteristics responsible for heterogeneity in the benefits accrued due to co-location.