Mechanisms of Knowledge Sharing within the Industry Cluster

Literature Review

Introduction of the Two Levels Model of Knowledge Sharing

Geographical proximity only predisposes companies to the possibility of sharing information with others in a shared industry, whereby, on its own, geographical proximity is not a predictor of knowledge sharing among companies regardless of other industry and market factors they may be sharing. The factors that determine the extent of knowledge sharing in industry clusters are grossly understudied, which means that the mechanisms of the processes that encourage or discourage knowledge sharing are poorly understood(Ibrahim and Fallah 2005; Malmberg and Power 2005). In this regard, it is necessary to identify the other factors that promote knowledge sharing, which Mitchell, Burgess and Waterhouse (2010) identify in their research on knowledge sharing among clustered firms in a shared industry. However, spatial distance is not the only factor that determined the extent to which companies share the knowledge in their possession for purposes of mutual benefits, and Mitchell, Burgess and Waterhouse (2010) identify relational proximity as the other aspect of firm closeness that can determine knowledge sharing, especially in an emerging new industry cluster that is the focus of this study. Based on their findings, a model of study for this research has been formulated, the two level model, in which each aspect of proximity is treated as a knowledge sharing level on its own. One the level is the one determined by distance proximity, hereby referred to as the distance proximity level, and the other level is the one determined by relational proximity, hereby known as the relational proximity level. Secondary sources will be used to discuss the roles played by the two in determining the extent of knowledge sharing, discuss the mechanisms through which these levels operate, determine the relationship between the mechanisms of these levels, and identify the similarities and differences between the two levels.

Distance Proximity Level

The distance proximity level is primarily dictated by geography, whereby companies are said to have distance proximity, especially in the case where they operate in the same market, sell products to similar customer segments, and produce products that are closely related. Since operating in the same geographical location necessitates competition in order for companies to survive, close physical proximity predisposes companies to withhold the knowledge in their possession since doing so keeps them at a competitive advantage relative to other companies in their immediate environment. Although the distance proximity level does not correlate directly to increased collaboration among companies in the same industry, it does put them in a position where clusters based on trustful relations, short cognitive distance, common language, immediate comparison and easy observation (Malmberg and Maskell 2002). Due to these variables that correlate with the distance proximity level of knowledge sharing, geographical proximity cannot be studied in isolation, but should always be evaluated in relation to and association with other proximity dimensions that, together with distance proximity, affect interaction among companies in a common cluster (Boschma 2005). On the other hand, since locational proximity predisposes companies to other dimensions of proximity, the distance proximity level is necessary to any study of knowledge sharing in industry clusters since other dimensions and levels of knowledge sharing cannot exist without distance proximity.

In spite of the positive role of distance proximity to knowledge sharing in industry clusters, Boschma (2005) pointed out that close distance proximity, especially if it is too little or too much, may have negative effects on company innovation primarily due to lock-in. In order to account for all the perspectives of the factors that affect knowledge sharing, Boschma (2005) included cognitive, social, organizational and institutional perspectives of in addition to the geographical aspect. By so doing, the author managed to show that the various dimensions of the distance proximity level produce effects on knowledge sharing in combination or isolation to result in solutions for industry problems, both current and anticipated. The ultimate effects of these mechanisms include more effective control and coordination, and increase flexibility and openness, both of which are solutions to problems of too little proximity and too much proximity respectively.

Geographical proximity is still the primary factor in knowledge production and innovation activities despite increased ability to communicate without geographical limitations due to modern information communication technologies. Although experts suggest that the importance of distance proximity in knowledge creation and sharing may reduce and ultimately disappear with time due to telecommunications developments, the role played by the distance proximity level in knowledge sharing remains important to innovation in the current market environment. In fact, Sonn and Storper (2008) found out that, despite various predictions about the reducing role of geography, the role of geographical proximity on innovation and proximity is currently increasing. Furthermore, multiple combinations of the mechanisms and effects of geographical proximity results in proven increases in innovative activities regardless of the industry in which the companies of interest operate (Silvestre and Dalcol 2009). Geographical proximity, which is the primary component of the distance proximity level, interacts closely with organisational proximity as defined by Lagendijk and Lorentzen (2007). In their definition of the relationship between organisational and geographical proximity, the authors point out that some various factors that may lead to increases in the closeness of an organisation with its peers include the internal characteristics of the organisation itself. For instance, although two firms may be located in the same geographical region, their interaction in knowledge sharing is more likely to be more productive if those companies share characteristics like targeting a similar market segment or being start-ups in an emerging industry (Lagendijk and Lorentzen 2007). In addition, organisational culture factors that result in commitment of resources in communication and building global connections rather than local ones play an important role in improving knowledge sharing within industry clusters.

Management of knowledge through collection, accumulation, organisation and sharing highly determines the competitive ability of market players within a region, which underpins the central role played by geography on successful and sustainable business. According Schamp, Rentmeister, and Lo (2004), knowledge management among companies in industry networks is a demanding and cognitive process that requires other proximity dimensions other than the geographical dimensions. For instance, company players must be able to interact socially, which means that workers from competing companies have to associate for the mutual benefit of all the participating parties (Schamp, Rentmeister, and Lo 2004). By so doing, the knowledge sharing becomes a complex process that presents a governance challenge since the management of companies have to balance between withholding knowledge in order to build a competitive edge but still divulge enough to contribute to the growth and development of the industry.

Relational Proximity Level

Geographical proximity, which is the central factor in the distance proximity level discussed above, depends on the spatial distance between the separate units in an industry cluster and close proximity is an antecedent to other forms of proximity and interaction. On the other hand, relational proximity facilitates interaction of units in an industry cluster as a result of the level at which the units are embedded into the routines and relations of the systems in question (Boschma 2005). In addition, as opposed to the impersonal nature of the distance proximity level, the relational proximity level is more personal as it is responsible for the flow of knowledge across interpersonal networks. Furthermore, this level has been observed to play a central role in the transfer of information, increased learning and solving complex problem solving since they necessitate precise sharing of knowledge (Knoben and Oerlemans 2006).


To be completed in 24 hours… Thanks J


Boschma, Ron. 2005. “Proximity and Innovation: A Critical Assessment.” Regional Studies 39 (1). Taylor & Francis: 61–74.

Ibrahim, Sherwat, and M Hosein Fallah. 2005. “Drivers of Innovation and Influence of Technological Clusters.” Engineering Management Journal 17 (3).

Knoben, Joris, and Leon A G Oerlemans. 2006. “Proximity and Inter‐organizational Collaboration: A Literature Review.” International Journal of Management Reviews 8 (2). Wiley Online Library: 71–89.

Lagendijk, Arnoud, and Anne Lorentzen. 2007. “Proximity, Knowledge and Innovation in Peripheral Regions. On the Intersection between Geographical and Organizational Proximity.” European Planning Studies 15 (4). Taylor & Francis: 457–66.

Malmberg, Anders, and Peter Maskell. 2002. “The Elusive Concept of Localization Economies: Towards a Knowledge-Based Theory of Spatial Clustering.” Environment and Planning A 34 (3). PION LTD 207 BRONDESBURY PARK, LONDON NW2 5JN, ENGLAND: 429–50.

Malmberg, Anders, and Dominic Power. 2005. “(How) Do (firms In) Clusters Create Knowledge?” Industry and Innovation 12 (4). Taylor & Francis: 409–31.

Mitchell, Rebecca, John Burgess, and Jennifer Waterhouse. 2010. “Proximity and Knowledge Sharing in Clustered Firms.” International Journal of Globalisation and Small Business 4 (1). Inderscience: 5–24.

Schamp, Eike W, Bernd Rentmeister, and Vivien Lo. 2004. “Dimensions of Proximity in Knowledge-Based Networks: The Cases of Investment Banking and Automobile Design.” European Planning Studies 12 (5). Taylor & Francis: 607–24.

Silvestre, Bruno dos Santos, and Paulo Roberto Tavares Dalcol. 2009. “Geographical Proximity and Innovation: Evidences from the Campos Basin Oil & Gas Industrial agglomeration—Brazil.” Technovation 29 (8). Elsevier: 546–61.

Sonn, Jung Won, and Michael Storper. 2008. “The Increasing Importance of Geographical Proximity in Knowledge Production: An Analysis of US Patent Citations, 1975-1997.” Environment and Planning A 40 (5). PION LTD 207 BRONDESBURY PARK, LONDON NW2 5JN, ENGLAND: 1020.


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