Knowledge transfer and inter-firm relationships in industrial districts: the role of the leader firm

Abstract

In the literature, knowledge transfer is widely emphasized as a strategic issue for firm competition. In this paper, the knowledge transfer is investigated referring to customer–supplier relationships in industrial districts. The knowledge transfer process is described and a framework is provided to define the main components of the process. A model is proposed to analyse how a leader firm of an industrial district can modify the knowledge nature and adopt different types of supply relationship to increase the effectiveness of knowledge transfer. The model stresses that, when the knowledge transfer has to be fast and reliable between customer and supplier, knowledge has to be codified. However, as the codification level increases, knowledge can be easily shared with other district competitors. Then, the leader firm can also try to control the knowledge transfer by the reduction of the number of suppliers. Referring to the case of an industrial district, some considerations are made to show the practical implications of the knowledge control by the district leader firm.

Introduction

In the literature, the organization's abilities to develop and exploit specific and critical competencies useful to succeed in a changing market have been the subject of growing interest (Barney, 1991, Prahalad and Hamel, 1990, Prahalad, 1993). The concept of “core capabilities”, that can be viewed as a set of different production and organization skills, multiple and complementary technologies, values and norms, and the ability to manage them, has been introduced, providing the basis for the firm's sustainable competitive advantage within a particular business (Leonard-Barton, 1992). In this context, the knowledge has been recognized as the lowest common denominator that defines a firm's ability to handle the evolution of its competitive environment and uncertainty in general (Kogut and Zander, 1992Nonaka, 1991Nonaka, 1994). Thus, knowledge represents the main resource upon which competitive advantage is founded, and its transfer is widely emphasized as a strategic issue for the firm competition. In particular, this argument is dealt with by Cohen and Levinthal (1990), who stress that knowledge transfer is a critical factor for a firm, necessary to rapidly respond to changes, innovate and achieve competitive success.

Knowledge transfer is important both within the firm and between different firms. The success of many companies can be based on their ability to transfer the knowledge embodied in organizational routines from one organization unit to another (Szulanski, 1996) as well as to improve their capabilities by assimilating new technology (Gilbert and Cordey-Hayes, 1996). From the inter-organizational point of view, knowledge transfer has been analysed as a key to explain the nature of the collaboration agreements that can greatly vary from licensing agreements to research contracts, joint ventures, etc. Some studies utilize patent citation data to track knowledge transfer between firms (Almeida, 1996, Mowery et al., 1996). Other studies analyse the degree of interaction between collaborating firms, pointing out the relationship between the nature of the knowledge exchanged and the level of organizational interaction (Steensma, 1996). The last approach, in particular, can be used to explain the evolution process of inter-firm relationships in many industrial districts.

An industrial district is a system of small/medium firms located in a limited geographic area and devoted to the different production stages of a specific type of product. The local specificity has been traditionally considered fundamental for the success of an industrial district (Piore and Sabel, 1984). However, it has been observed that in the global competition industrial districts can be more vulnerable than large companies, and that the district survival and development seems related to its internationalization and to the growth of a leader firm (Albino et al., 1996). The leader firm's strategy can both influence and be affected by the inter-firm relationships and knowledge transfer which take place within the district, where customers and suppliers can be characterized by different levels of integration. When a more coordinated and integrated relationship between customer and supplier is requested, the transferred knowledge needs to be codified. However, as the codification level increases, knowledge can be more easily acquired by the other companies of the district, in particular by competitors. Then, companies tend to control the knowledge transfer by appropriate strategies.

In this paper, the knowledge transfer process is analysed on the base of a knowledge definition, pointing out its peculiar dimensions (Section 2). An analysis framework providing the main components of the knowledge transfer is proposed (Section 3). The knowledge characteristics and the inter-firm relationships in an industrial district are then presented (Section 4). A model to analyse the role of a leader firm in the evolution of an industrial district is proposed, pointing out the leader firm's tendency to codify the knowledge to be transferred and to control the knowledge spread in the district (Section 5). Finally, an example of an industrial district producing leather sofas in south-eastern Italy is presented, analysing the evolution of the relationships between the leader company and its suppliers (Section 6).