Geographical proximity

Geographical proximity is defined as physical or spatial distance between economic actors (in absolute or relative terms). The scale of geographical proximity relates either to the distance between two interacting actors (dyadic level) or the concentration of actors in a geographical unit (agglomerations). Geographical proximity is not a static status, as it changes whenever actors move in space (Knoben & Oerlemans, 2006).

In economic geography, the relation between geographical proximity and innovation is widely discussed. Thereafter, physical co-location provides increasing opportunities for intended or unintended personal interaction, which eventually leads to the exchange of information and knowledge based on enhanced mutual trust and commitment. Face-to-face interaction is particularly important when knowlegde is tacit, sticky and complex. Also, the exchange and absorption of codified knowledge is realized more easily, as its implemention often requires tacit knowledge and personal interaction (Gertler, 1995). In addition, spatial proximity not only reduces transaction costs and easies the coordination of intended knowledge sharing, but also creates enhanced opportunities for unintended knowledge spillovers due to the contant and informal stream of information, coined as local buzz by

32 Alternatively, Knoben and Oerlemans (2006) have underlined an integrated approach, which combines the different dimensions of proximity into the three main categories geographical, technological and organiza-tional proximity. Accordingly, organizaorganiza-tional proximity captures the assumed raorganiza-tionales of shared routines, norms, values and cultures that are originally highlighted by social, institutional and organizational proximi-ty. This integrated approach especially aims to reduce the conceptual ambiguity between the different types (Knoben & Oerlemans, 2006). Other scholars (e.g. Ibert & Müller, 2015) have also stressed the relevance of cultural, network, and hierachical proximity, as well as proximity of interest, among others.

Bathelt et al. (2004). However, the literature also highlights that too much geographical proximity and reliance on exclusively local knowledge sources may lead to spatial lock-in and, thus, result in firms’ reduced innovativeness (Broekel & Boschma, 2012).

Maskell et al. (2006) distinguish three dimensions of geographical proximity – vertical, horizontal and social. Interactive learning in localized vertically-integrated relationships define the vertical dimension, while the horizontal dimension underscores learning by comparing and observing co-located competitors. Finally, learning processes propeled by unintentional knowledge spillovers and informal interaction define the social dimension of geographical proximity. Temporary geographical proximity adds another component to this type of proximity and its relevance to knowledge relations (Maskell et al., 2006). It implies that permanent co-location is not necessary to build and to take advantage of interactive relations. Instead, temporary co-presence in terms of short visits and joint meetings in conjunction with personal interaction are sufficient enough to develop other forms of proximity, especially social, cognitive and organizational proximity, that can enable effective communication over distance (Bathelt & Henn, 2014).³³ In particular technologial advancements in transportation and communication have modified the perception of geographical distance significantly and have contributed to this notion. As a result, the need for geographical co-location for knowledge exchange and diffusion has become more temporary, which is realized through increased mobility and face-to-face interaction now and then (Torre, 2008). In this respect, specific industry and community gatherings such as conferences and trade shows are considered as critical platforms for local and non-local knowledge relations and, thus, are referred to as temporary clusters (Maskell et al., 2006) and temporary trans-local knowledge nodes (Bathelt & Zakrzewski, 2007). As a result, temporary geographical proximity is considered to compensate spatial distance and substi-tute the need for permanent geographical proximity (Kujath, 2008).

Yet, research findings on the relevance of geographical proximity on learning and innovation activities are two-sided. On the one hand, research has confirmed the importance of co-location of firms and universities for knowledge externalities, especially concerning informal knowledge linkages (Jaffe et al., 1993; Audretsch & Feldman, 1996).

Geographical proximity in temporary or permanent settings also remains important to ena-ble the detection of new relevant knowledge, and to facilitate knowledge interaction and exchange (Kujath, 2008).

33 Bathelt and Henn (2014) have stressed three categories of transfers of knowledge over distance that are built upon temporary spatial proximity and face-to-face interaction, respectively; 1) international community gatherings, 2) international business travel, and 3) transnational network relations.

On the other hand, it has been shown that the exchange of tacit knowledge and, in turn, interactive learning is not spatially delimited. In formalized settings of cooperation, the dependence on unintended encounters due to co-location is weak, given that face-to-face interaction can be organized intentionally, for example, through increased mobility or use of ICT (Rallet & Torre, 2009; Bathelt & Henn, 2014). As a consequence, a large number of empirical studies (e.g. Amin & Cohendet, 1999; Hewitt-Dundas, 2013; Tödtling & Trippl, 2015) have emphasized the multiplicity of knowledge relations, i.e. the coexistence of local and non-local knowledge relations. Bathelt et al. (2004) have expressed this finding in the term local buzz and global pipelines.³⁴

Furthermore, research findings also indicate that the value of geographical proximity for knowledge interaction depends on the stage of cooperation and type of knowledge. For the former, geographical proximity is particularly critical in specific phases of collaborative innovation activities, for instance, when a research project starts. At this stage, highly complex and critical tacit knowledge is typically shared, and often knowledge bases between partner differ greatly, which requires intense and repetitive face-to-face interaction. In other phases of cooperation, such as the commercialization stage, less complex and divergent knowledge is shared, which does not require permanent co-location (Knoben & Oerlemans, 2006; Menzel, 2015). For the latter, firms depending on analytical knowledge tend to be less sensitive to co-location and show patterns of more dispersed interactive relationships. In contrast, companies operating in synthetic knowledge show a higher importance of geographical proximity towards collaborative partners.³⁵ Due to the strong need to relate to place-specific socio-cultural conditions, firms relying on symbolic and cultural knowledge are less involved in non-local knowledge relations (Martin &

Moodysson, 2013; Ibert & Hautala, 2015).

In sum, recent research underlines that geographical proximity alone cannot explain knowledge interaction and in particular not the increasing value of non-local knowledge sources and knowledge relations over distance. As a consequence, non-spatial natures of proximity are understood to work independently from geographical proximity and are perceived as more fundamental for knowledge interaction and interactive learning.

34 With the term local buzz, global pipelines, Bathelt et al. (2004) have distinguished between “on the one hand, the learning processes taking place among actors embedded in a community by just being there - dubbed buzz - and, on the other hand, the knowledge attained by investing in building channels of commu-nication – called pipelines – to selected providers located outside the local milieu” (Bathelt et al., 2004: 31).

Consequently, global pipelines refer to extra-local interaction in general, for example, on the regional, national and/or international scale.

35 Mansfield (1995) has stressed the important role of spatial proximity for business-to-science interaction in applied research.