Management Insights, a regular feature of the journal, is a digest of important research in business, management, operations research, and management science. It appears in every issue of the monthly journal.
"Location Strategies and Knowledge Spillovers"Â is by Juan Alcacer of the Stern School of Business at NYU and Wilbur Chung of the Smith School of Business, University of Maryland.
A benefit of geographic proximity is greater ease in learning what neighboring firms are doing through shared points of contact. Use of common suppliers, hiring and firing of workers, and chance meetings between companies' employees aids communication of ideas across firms. Besides gleaning knowledge from competitors, firms might also be interested in potential knowledge spillovers from academic institutions and government labs.
In their paper, Professors Alcacer and Chung examined a sample of 620 firms that established new facilities in the United States from 1985 to 1994 to see which firms are more likely to locate near other competitors, academic institutions, and government labs.
Their results suggest that firms are attracted to academic and competitor activity. This attraction varies based upon the firms' technical capabilities. While less capable firms congregate around locations rich with competitor activity, more capable ones avoid such locations and instead go for regions rich with academic activity.
The implication is that managers should cultivate their firms' own technical capabilities in order to get the most from academically rich regions.-Institute for Operations Research and the Management Sciences
