Knowledge networks in the Dutch aviation industry:
the proximity paradox
Tom Broekel and Ron Boschma
1
Department of Economic Geography, Faculty of Geosciences, Utrecht
University, The Netherlands
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The importance of geographical proximity for interaction and knowledge sharing has been
discussed extensively in economic geography. There is increasing consensus that it is one out of
many types of proximities that might be relevant. We argue that proximity may be a crucial
driver for agents to connect and exchange knowledge, but too much proximity between these
agents on any of the dimensions might harm their innovative performance at the same time. In a
study on knowledge networks in the Dutch aviation industry, we test this so-called proximity
paradox empirically. We find evidence that the proximity paradox holds to some degree. Our
study clearly shows that cognitive, social and geographical proximity are crucial for explaining
the knowledge network of the Dutch aviation industry. But while it takes cognitive, social and
geographical proximity to exchange knowledge, we found evidence that proximity lowers firms’
innovative performance, but only in the cognitive dimension.
Keywords: geographical proximity, knowledge networks, proximity paradox, social network
analysis, aviation industry
JEL Codes: R11, R12, O18, O33
1
The authors would like to thank Matté Hartog for his help.
2
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In Economic Geography, few issues have been studied more frequently as the question of what
role geographical proximity plays for knowledge sharing and innovation. Backed by the
argument that the exchange of tacit knowledge requires face-to-face contacts, it has long been
emphasized that knowledge sharing is highly sensitive to geographical distance (Audretsch and
Feldman, 1996; Gertler, 2003). This view on the role of geographical proximity has recently
been challenged theoretically (see e.g., Boschma, 2005; Lagendijk and Oinas, 2005; Broekel and
Binder, 2007). This critical view has been initiated by the French school of proximity dynamics
(Rallet, 1993; Kirat and Lung, 1999; Rallet and Torre, 2005). Their critical voices particularly
emphasize that geographical proximity is just one dimension among a number of other proximity
dimensions that can explain interaction between geographically proximate actors.
Boschma (2005) proposed five dimensions of proximity that impact on the likelihood of
knowledge exchange between actors and their innovative performance. His claim is that
geographical proximity is neither a necessary nor a sufficient condition for inter-organizational
learning and innovation. Boschma (2005) also argued that geographical proximity is more likely
to become effective rather indirectly through the other types of proximity. Breschi and Lissoni
(2003) and Ponds et al. (2007), among others, have confirmed this empirically for social,
institutional and cognitive proximity.
Extending these ideas, in a recent paper, Boschma and Frenken (2009) introduced what
they describe as the so-called proximity paradox. While proximity may be a crucial driver for
agents to connect and exchange knowledge, too much proximity between these agents on any of
the dimensions might harm their innovative performance. So, while a high degree of proximity
may be considered a prerequisite to make agents connected, proximity between agents does not
necessarily increase their innovative performance, and may possibly even harm it. Following
Nooteboom’s work on optimal cognitive distance (Nooteboom, 2000), Boschma and Frenken
(2009) claim it depends on the (optimal) level of proximity whether a connection between agents
will lead to higher innovative performance or not.
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This issue of the proximity paradox is put central in an empirical study on the knowledge
network of the Dutch aviation industry. The Dutch aviation industry is an interesting case,
because it lost its flagship, the Fokker Company, in 1996, after which it went through a major
restructuring and reorientation process. The question then is how the knowledge network looks
like in the post-Fokker period, and what are its main drivers. Among other things, we will test
whether a shared past in the Fokker company (as a proxy for social proximity) increased the
probability of two aviation firms to connect. This study draws on own data that were collected
through semi-structured interviews of 59 profit and non-profit organizations that are active in
manufacturing activities and engineering services in the Dutch aviation sector.
Our paper has two objectives. The first objective is to assess empirically the extent to
which the different forms of proximity affect the technical knowledge network in the Dutch
aviation industry. Employing social network analysis, our study confirms the importance of
cognitive, organizational, and social proximity for the structure of the technical knowledge
network. We also found geographical proximity to be a driver of network formation, even when
controlling for the other proximities. The second objective is to determine which proximities
determine the innovative performance of aviation firms, while controlling for the usual suspects.
Our study provides empirical evidence for the proximity paradox with respect to the cognitive
dimension, not the geographical and social dimension. That is, proximity is required to connect
firms, but it does not necessarily yield above average innovative performance of these firms.
The paper is structured as follows. In Section 1, the different dimensions of proximity are
discussed. We specify how they influence the likelihood that actors are linked and what that
means for their innovative performance. Section 2 provides a short description of the Dutch
aviation industry, the data and the variables we constructed. Section 3 will briefly present the
methodological tools (QAP and network autocorrelation regression) we employed. Results of the
analyses are presented and discussed in Section 5. Section 6 concludes.
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Firms’ embeddedness in knowledge networks has increasingly been recognized as an important
determinant of their economic and innovative performance (see, e.g., Powell et al., 1996). Given
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limited resources firms can invest into research and development, their ability to collaborate and
make use of external knowledge becomes crucial for their success. It is well known that firms
have different absorptive capacities, which matter for their usage of external knowledge (Cohen
and Levinthal, 1990). This determines not only their likelihood to engage in knowledge sharing
but also the likelihood that obtained knowledge can be successfully used and implemented.
It is widely accepted that, in addition to their absorptive capacity, other factors influence
economic actors’ decisions to become engaged into knowledge sharing activities. An argument
frequently put forward in the literature is that geographical proximity facilitates knowledge
transfer (Feldman and Florida, 1994). This view on the role of geography for knowledge
exchanges has recently been challenged with the argument that it is not mere co-location that
matters for knowledge exchanges, but membership in knowledge networks (Castells, 1996). In
this sense “geographical proximity only creates a potential for interaction, without necessarily
leading to dense local relations” (Isaksen, 2001, p. 110).
The French school of proximity dynamics (see e.g. Rallet and Torre, 1999; Rallet and
Torre, 2005) has played a prominent role in this debate. They claim that geographical proximity
is just one among a number of proximity dimensions. In this context, Boschma (2005) claimed
that geographical proximity is neither a necessary nor a sufficient condition for knowledge
sharing and innovation. He proposed five dimensions of proximity (cognitive, social,
organizational, institutional, and geographical) that may impact on the likelihood of knowledge
exchange between actors and their innovative performance. We will briefly discuss each of these
below (for an extensive treatment, see Boschma, 2005), with the exception of institutional
proximity, for which we have no variance in our study.
Cognitive proximity
Cognitive proximity refers to the degree of overlap between two actors concerning their
knowledge bases. Actors need to have a sufficient absorptive capacity to identify, interpret and
exploit knowledge of other actors (Cohen and Levinthal, 1990). However, if two actors’
knowledge bases are too similar, the likelihood of an innovative recombination is lower than
when dissimilar knowledge bases are merged. According to Nooteboom (2000), there exists a
tradeoff “…. between cognitive distance, for the sake of novelty, and cognitive proximity, for the
sake of efficient absorption” (p. 152). The relationship between the cognitive distance between
