Regional social networks as conduits for knowledge spillovers: explaining performance of high-tech firms

The purpose of this paper is to open the 'black box' of knowledge spillovers by testing the extent to which social interactions between firms in a region positively contribute to firm performance. Specifically, we examine the Marshall-Jacobs controversy, a debate over whether these spillovers occur across firms operating in similar or dissimilar fields. Our empirical examination of the debate relies on a dataset that is constructed from three sources: firm-level data of 1,881 high-tech firms in all 40 Dutch regions, regional economic data and network data constructed from the membership registrations of all business associations in a sample of 11 regions. The results show that the total amount of regional network activity has no effect on individual firm performance; however, participation in local business networks does support firm employment growth. With regards to the Marshall-Jacobs controversy, the results show that having local links to other high-tech firms is conducive to a firm's employment growth, while links to other types of firms provided no such lift.