Structural holes and firm innovation in industrial clusters: A dual embeddedness perspective

While geography-related factors are critical to determining the functioning of networks, prior studies have overlooked how they may shape the impact of structural holes on firm innovation. Building on structural hole theory and the industrial cluster literature, we propose that structural holes negatively influence firm innovation in industrial clusters. Such negative impact can be attributed to broker firms’ social and political embeddedness in these clusters, and is thus moderated by social factors (i.e., local information density and intra-cluster partner ratio) and political factors (i.e., local government coordination and political connection importance). Our predictions receive support from a matched sample of on-site survey and secondary data from 221 firms in industrial clusters in China. This study contributes to structural hole theory by incorporating geographic factors and offers important implications for policymakers aiming to promote firm innovation.