Global Competitors as Next-Door Neighbors: Competition and Geographic Concentration in the Semiconductor Industry

34 Pages Posted: 20 Jul 2007

See all articles by Minyuan Zhao

Minyuan Zhao

University of Pennsylvania

Juan Alcacer

Harvard University - Strategy Unit

Date Written: March 2007

Abstract

Despite the many advantages offered by technology clusters, firms located in them face the risk of losing valuable knowledge to nearby competitors. In this study, we argue that multi-location firms strategically organize their R&D activities to appropriate the value of innovations generated in clusters, mainly through three mechanisms: technological distance, value internalization, and control. Empirical analysis of the global semiconductor industry provides supportive evidence of such mechanisms. In clusters where direct competitors are right next door, leading firms generate innovations that are technologically distant from their neighbors, have more internalized value, and involve inventors from other geographic locations, particularly from headquarters. Interestingly, the strategies seem to be much more sensitive to neighboring firms competing in the same marketplace than those sharing the same technological space. The findings offer important insights into the interaction between firms' internal organization and their external environment.

Keywords: technology clusters, knowledge spillover, internalization, appropriability

JEL Classification: L20, F23

Suggested Citation

Zhao, Minyuan and Alcacer, Juan, Global Competitors as Next-Door Neighbors: Competition and Geographic Concentration in the Semiconductor Industry (March 2007). Ross School of Business Paper No. 1091. Available at SSRN: https://ssrn.com/abstract=1000455 or http://dx.doi.org/10.2139/ssrn.1000455

Minyuan Zhao (Contact Author)

University of Pennsylvania ( email )

The Wharton School
Philadelphia, PA 19104-6370
United States

Juan Alcacer

Harvard University - Strategy Unit ( email )

Harvard Business School
Soldiers Field Road
Boston, MA 02163
United States
617 495-6338 (Phone)
617 495-0355 (Fax)

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