Network Structure, Absorptive Capacity, and Innovation of Cluster Firms

At current competitive landscape, firms can sustain competitive advantages only through innovation. Traditional industrial district theory elaborates the important role played by inter-firm networks in upgrading the whole cluster's innovation function. With the perfection of network analysis tools, more and more network researchers took individual firms in clusters as research objects, and studied the effect of superior network positions on firm innovation. However, network researchers stressed too much on the innovation function of firms' external contacts, thus bringing about a neglect of the innovation function of firms' internal absorptive capacities. This paper integrates network theory and firms' internal capabilities theory, and argues that it is of great significance to simultaneously take into account firms' network position and absorptive capacity in understanding and upgrading cluster firms' innovation.