The Five Notions of Proximity - Coursework Example

Name Professor Course Date The Five Notions of Proximity Introduction According to Boschma (2005), geographical proximity in learning and innovation does not feature as a necessary or as a sufficient condition that facilitates interactive learning. In his argument, he puts forward other four types of proximity that play a key role in interactive learning and can even replace geographic proximity. These four alternative mechanisms of interactive learning and innovation have the capacity to function as substitutes to geographic proximity since they can effectively connect different agents despite geographic location. Therefore, there are five types of proximity namely geographical, cognitive, social, organisational, and institutional proximity. The Five Notions of Proximity Geographical Proximity Geographical proximity can be referred to as the distance between agents (Boschma 61). It has been shown that knowledge capital and innovation often occur in a few isolated urban areas. Innovation has always been restricted to certain regions and as such close proximity to such regions has always enhanced the likelihood of experiencing interactive innovation. This is mainly as a result of the implicit knowledge and expertise that are always focused on a specific geographic location and are characterised by low levels of mobility (Kirat and Yannick 29). Sharing of knowledge is easier when agents are located within a suitable distance from one another (Torre and Alain 48). Geographic proximity enhances the development of trust between agents since there are constant face to face interactions. Due to geographic proximity, it is also likely that there will be socio-cultural values like routines that can further strengthen the localised interactions. Cognitive Proximity Cognitive proximity is the deficit in skills and competencies necessary to convey knowledge or the in other words the need for similarity of a collective knowledge pool between companies to help in the exchange and comprehension of information (Boschma 63). Individuals or organisations can only be able to effectively learn from fellow agents when they fall in relatively similar comprehension capacities whereby the gap in their level of knowledge is not too big (Cohen and Daniel 128). To effectively communicate, comprehend and utilize new knowledge to their advantage, they need to have close cognitive bases. If there is there is a deficiency in cognitive proximity, this will result in misunderstandings that can negatively affect interactive learning and innovation. This is because only agents who share a common knowledge base and level of expertise are in a position to gain from one another through the interactive learning process (Torre and Alain 56). On the other hand, excessive cognitive proximity can result in a lack of openness and flexibility, making it hard to recognize new markets and technologies due to strict guidelines within a firm. According to Knoben and Oerlemans firms can only effectively take advantage of one another’s knowledge when they fall into a common technology field (74). Cognitive proximity can negatively affect interactive learning and innovation. Excessive cognitive proximity will mean very minimal new knowledge can be developed since knowledge development requires differing and complementing pools of knowledge. Some level of gap in cognitive capacity is necessary and helps to boost the potential for interactive learning and innovation. Organisational Proximity Organisational proximity captures the degree of relations occurring among parties in an organisational set up by either capturing the relationships taking place inside an organisation or between different organisations (Boschma 66). Organisational proximity is influenced by the level of self-sufficiency that the cooperating parties gain (Knoben and Oerlemans 78). For instance, strong organizational proximity with lasting ties is like in the case of a hierarchical firm or networks. However, a hierarchical firm that entails a very tight organisational proximity is at risk of encountering bureaucratic challenges and flexibility challenges that inhibit interactive learning and innovation. Excessively distant organisational proximity may result in higher risks of opportunism due to insufficient control. Efficient control mechanisms are necessary to guarantee ownership rights and equitable rewards for investing in new technology which cannot be achieved through the market system as it would be very costly. As such, proximity accompanied by flexible organisational plans is very good to the firm since it facilitates the management of uncertainty and opportunism pertaining to creation of knowledge and innovation (Mascia et al 1354). Organisational proximity involves organisational arrangements that can facilitate the conveyance of knowledge and providing solutions to the coordination challenges. When there is sufficient organisational proximity such as the case of a strong central authority, geographical proximity becomes weak and ineligible since there is effective coordination of the separate tasks (Fu et al. 57). Travel can help bring people together for purposes of physical co-presence, therefore, helping bridge the coordination problem. Social Proximity Social proximity involves the socially rooted relations between parties at the interpersonal level, whereby these socially embedded relations are based on the understanding that relationships result from trust created through kinship, friendship, and past engagements (Boschma 67). This form of proximity can enhance interactive learning through the trust and assurance between parties although very minimal or very excessive proximity will result in negative results (Mascia et al 1351). Social proximity can facilitate bringing of people from varying geographical locations together. Social networks are built over long periods and they constitute social capital which involves strategic alliances and joint ventures (Lesser 11). Through social networks, knowledge can be conveyed through various channels that also have the capacity to generate more knowledge. Social proximity entails having the right networks as opposed to being in the right geographic location (Fu et al. 55). Social networks are agents connected through social ties such as friendship, kinship, and many more (Rotolo). Although social networks can be remotely based, they are social circles that leave out outsider regardless of the fact that they are local parties or distant parties. Based on this, geographical proximity does not present itself as a sufficient condition that can facilitate the exchange of knowledge. Social proximity may negatively affect learning and innovation. Tight relations can lead less emphasis on opportunism especially when the loyalty relations are as a result of emotional bonds of kinship and friendship. Long-term relations that have commitments that focus on the existing ways and methods can exclude agents from their own innovative and learning capacities. Very minimal social proximity will produce a declining innovation capacity for firms due to low levels of trust and assurance. Excessive social proximity on the other hand can also limit innovativeness due to polarization by circles that are opposed to new ideas. Institutional Proximity Institutional proximity enables interactive learning and innovation because it brings together different agents and encourages collective action by reducing the levels of uncertainty and transaction costs (Boschma 66). Institutional proximity entails formal institutions such as laws and informal institutions such as customs and cultural practices that determine the level and the manner in which agents or firms co-ordinate their activities. Institutional proximity functions as a facilitator mechanism that guarantees stable state for coordination and as a result determines the degree of knowledge transfer between agents as well as the degree of interactive learning (Harorimana and Mathias 177). Institutional proximity factors such as a shared language, habits, laws protecting intellectual property rights and more, all facilitate interactive learning and coordination. Institutional proximity can substitute geographic proximity since formal institutions in the international or state level, such as laws and languages facilitate the interaction between different agents therefore removing the issue of coordination between agents in different geographic locations. However, institutional proximity can also pose disadvantages by inhibiting collective learning and innovation. When this proximity turns into a lock-in situation, it locks out new agents or firms (Kirat and Yannick 33). Additionally, excessive proximity may result in institutional inertia that inhibits the creation of drastic innovations that are only possible through new institutional structures. Institutional rigidity locks out experiments involving new institutions that can facilitate drastic innovations. Conclusion There are five forms of proximity namely geographical, social, cognitive, organizational, and institutional proximity. The relative significance of each form of proximity is determined by the type of knowledge in question. The growth observed in international markets as well as advancements in information and communications technology means that proximity has a key role in facilitating interactive knowledge and innovation. Factors that will influence the form of proximity include industry, size of firm, and location. Geographic proximity may help enhance the efficiency of the other four forms of proximity. In general, proximity helps enhance the process of interactive learning and innovation. All these forms of proximity all help in resolving the coordination problem. Coordination problem is particularly very critical in the processes of interactive learning and innovation. Innovation involves a lot of uncertainty, opportunism, and recombining various bits of knowledge that are owned by the various agents. The five types of proximity can either positively or negatively influence interactive learning and innovation since they act as mechanisms that bridge the knowledge transfer gap between different agents by helping manage opportunism and uncertainty. Works Cited Boschma, Ron. "Proximity and Innovation: A Critical Assessment." Regional Studies, vol 39, no. 1, 2005, pp. 61-74. Informa UK Limited, doi: 10.1080/0034340052000320887. Cohen, Wesley M., and Daniel A. Levinthal. "Absorptive Capacity: A New Perspective on Learning and Innovation." Administrative Science Quarterly, vol 35, no. 1, 1990, p. 128. JSTOR, doi:10.2307/2393553. Fu, Wenying et al. "Strategies of Using Social Proximity and Organizational Proximity in Product Innovation." Zeitschrift Für Wirtschaftsgeographie, vol 56, no. 1-2, 2012, pp. 55-57. Walter De Gruyter Gmbh, doi:10.1515/zfw.2012.0006. Harorimana, Deogratias, and Mathias, Harebamungu. "Innovation, Proximity, and Knowledge Gatekeepers - Is Proximity A Necessity for Learning and Innovation?." International Journal of Innovation and Learning, vol 14, no. 2, 2013, p. 177. Inderscience Publishers, doi:10.1504/ijil.2013.055523. Kirat, Thierry, and Yannick Lung. "Innovation and Proximity." European Urban and Regional Studies, vol 6, no. 1, 1999, pp. 27-38. SAGE Publications, doi:10.1177/096977649900600103. Knoben, J., and L.A.G. Oerlemans. "Proximity and Inter-Organizational Collaboration: A Literature Review." International Journal of Management Reviews, vol 8, no. 2, 2006, pp. 71-89. Wiley-Blackwell, doi:10.1111/j.1468-2370.2006.00121.x. Lesser, Eric L. "Leveraging Social Capital in Organizations." Knowledge and social capital: Foundations and applications 3 (2000): 16. Mascia, Daniele et al. "Don’T Stand So Close To Me: Competitive Pressures, Proximity and Inter-Organizational Collaboration." Regional Studies, vol 51, no. 9, 2016, pp. 1348- 1361. Informa UK Limited, doi:10.1080/00343404.2016.1185517. Rotolo, Daniel. "An Introduction to Social Network Analysis." 2011,. Torre, Andre, and Alain Rallet. "Proximity and Localization." Regional Studies, vol 39, no. 1, 2005, pp. 47-59. Informa UK Limited, doi:10.1080/0034340052000320842. Read More