Location, Control and Innovation in Knowledge-Intensive Industries

Posted: 15 Aug 2008

See all articles by Ram Mudambi

Ram Mudambi

Temple University - Department of Strategic Management

Date Written: September 2008

Abstract

The rising share of intangibles in economies worldwide highlights the crucial role of knowledge-intensive and creative industries in current and future wealth generation. The recognition of this trend has led to intense competition in these industries. At the micro-level, firms from both advanced and emerging economies are globally dispersing their value chains to control costs and leverage capabilities. The geography of innovation is the outcome of a dynamic process whereby firms from emerging economies strive to catch-up with advanced economy competitors, creating strong pressures for continued innovation. However, two distinct strategies can be discerned with regard to the control of the value chain. A vertical integration strategy emphasizes taking advantage of ‘linkage economies’ whereby controlling multiple value chain activities enhances the efficiency and effectiveness of each one of them. In contrast, a specialization strategy focuses on identifying and controlling the creative heart of the value chain, while outsourcing all other activities. The global mobile handset industry is used as the template to illustrate the theory.

Keywords: innovation, value chains, intangibles, vertical integration, specialization, knowledge-intensive industries

JEL Classification: F23, O33, O32, F02

Suggested Citation

Mudambi, Ram, Location, Control and Innovation in Knowledge-Intensive Industries (September 2008). Journal of Economic Geography, Vol. 8, Issue 5, pp. 699-725, 2008, Available at SSRN: https://ssrn.com/abstract=1227963 or http://dx.doi.org/lbn024

Ram Mudambi (Contact Author)

Temple University - Department of Strategic Management ( email )

Fox School of Business and Management
Philadelphia, PA 19122
United States
215-204-2099 (Phone)
215-204-8029 (Fax)

HOME PAGE: http://sbm.temple.edu/~rmudambi/index.html

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