Geographic proximity to socially dominant partners and firms' innovation outcomes: Empirical evidence from the medical device industry

Abstract

Socially dominant partners offer key innovation resources as actors with socially legitimate power, and firms can utilise the geographic proximity to such partners to increase partnership benefits. We examine the impact of geographic proximity to socially dominant partners on firms' innovation outcomes when firms collaborate with partners under varying partnership conditions (i.e., partners' capabilities, partner portfolio size and the presence of local intermediaries) using the Korean implantable medical device industry as a case study. The study found that firms' innovation outcomes increase when teaming up with nearby socially dominant partners if firms collaborate with strongly capable partners and many of them. In contrast, if firms collaborate with less-capable partners and only a few of them, firms' innovation outcomes increase when partnering with distant socially dominant partners. Moreover, such outcomes also increase when they collaborate with distant socially dominant partners and intermediaries are present in the firms' regions. The study offers theoretical contributions to the extant literature on power imbalance and economic geography regarding inter-organisational relations.