Buzz and pipelines: the costs and benefits of local and nonlocal interaction

Explanations for why firms in some clusters outperform others rest on the assumed benefits of local and nonlocal interaction. In this article, we extend research on knowledge sharing by modeling local and global interactions between firms distributed across industrial clusters. Our simulation model develops an evolutionary framework where firms explore and exploit knowledge sets accumulated over time by recombining technologies held by local and nonlocal partners. In investigating the opportunity cost structure of local and nonlocal interaction, our simulation raises two important questions that call for additional theoretical and empirical analysis. First, can too much local interaction induce technological lock-in and restrict innovation in clusters? Second, does nonlocal interaction entail opportunity costs to clusters that can outweigh its benefits?