Handbook of Research on Innovation and Clusters
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Handbook of Research on Innovation and Clusters

Cases and Policies

Edited by Charlie Karlsson

The role of innovations and clusters has increasingly dominated local and regional development policies in recent decades. This authoritative and accessible Handbook considers important aspects of high-tech clusters, analyses insightful cluster case studies, and provides a number of recommendations for cluster policies.
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Chapter 14: Networks and Geographic Clustering as Sources of MNE Advantages: Foreign and Indigenous Professional Service

Lilach Nachum, Robert Laud and David Keeble


firms in Central London Lilach Nachum, Robert Laud and David Keeble* Using the combined insights of international management and network theories, we seek understanding of the networking behaviour of foreign affiliates. We focus on a specific kind of network, the one taking place between firms based in geographic proximity. Comparative analyses of foreign and indigenous firms in professional service industries located in Central London are used to isolate the networking attributes of firms in general from those that are unique to foreign affiliates. The findings show that there are considerable differences between foreign and indigenous firms in terms of some elements of network behaviour, and similarities along others. We attribute these differences to the specific nature of the competitive advantages of foreign affiliates as well as to their being part of an MNE network that partly replaces external networks. We stress the importance of studying interorganizational network relationships of professional service firms at a time in which these industries are being transformed by new forms of value creation activities. 1 Introduction International business and management theories suggest that the competitive advantages of foreign and indigenous firms will differ. Foreign firms doing business overseas confront additional costs, arising from their operation in foreign countries, which are not incurred by indigenous firms (Hymer, 1960), what Zaheer has named ‘the liability of foreignness’ (Zaheer, 1995; Zaheer and Mosakowski, 1997). They offset these costs by their firmspecific advantages, and hence develop a somewhat di...

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