Geographic clustering, network relationships and competitive advantage: Two industrial clusters in Taiwan

There are contradicted perspectives on relationship between geographic cluster and competitive advantage of firms in previous research. Extant research has paid extremely attention to the effect of both geographic cluster and industrial network on firms’ performance; however, little studies have delineated the relationship between geographic cluster, industrial network, and competitive advantage. The purpose of this paper is to demonstrate that firms within the same cluster that have established idiosyncratic network resources have stronger competitive advantages than firms that have not.

An empirical study of two prominent geographic clusters from Taiwan is analyzed by structural equation modeling.

The results indicate that the degree of networking does play a mediating role between geographic cluster and competitive advantage, which may help resolve the conflicting results obtained by researchers on the influence of clusters on competitive advantage. The results also find that both degree of networking and betweenness position are conducive to the pursuit of competitive advantage.

The research shows that firms merely locate themselves in the right cluster does not guarantee they can outperform their rivals. Rather, developing of network relationship with other firms proximate to the same cluster will strengthen a firm's competitive advantages.

In the theoretical perspective, this paper attempts to fill the gap in the links between clusters, networks, and competitive advantage by providing that the networking as a mechanism for firms in a cluster to improve their competitive advantage.