Article | Management Science | May 2007

Location Strategies and Knowledge Spillovers

by Juan Alcacer and Wilbur Chung

Abstract

Given the importance of proximity for knowledge spillovers, we examine firms' location choices expecting differences in firms' strategies. Firms will locate to maximize their net spillovers as a function of locations' knowledge activity, their own capabilities, and competitors' anticipated actions. Using new entrants into the United States from 1985 to 1994, we find that firms favor locations with academic innovative activity. Other results highlight differences in firms' location strategies suggesting that firms consider not only gains from inward knowledge spillovers but also the possible cost of outward spillovers. While less technologically advanced firms favor locations with high levels of industrial innovative activity, technologically advanced firms choose only locations with high levels of academic activity and avoid locations with industrial activity to distance themselves from competitors.

Keywords: Business Strategy; Corporate Strategy; For-Profit Firms; Knowledge Management; Research and Development; Organizational Change and Adaptation; Disruptive Innovation; Five Forces Framework; Cost Management; Technology; Competition; United States;

Citation:

Alcacer, Juan, and Wilbur Chung. "Location Strategies and Knowledge Spillovers." Management Science 53, no. 5 (May 2007): 760–776.