Operationalizing Interaction between firms and regions

Abstract

Regions are very different as they contain an amalgam of different resources shaped by a diversity of actors. In some extent, they are the result of interactions of different actors that can be located either inside or outside them. Firms are one of the actors that assume more relevance for the regional con- figuration. Indeed firms have a capacity to act beyond any regional boundaries and a successful firm can “infect” positively the regional dynamics. But the opposite influence is also true. The regional configuration may have impact on the strategic action of firms. The interconnection between firms and territories is thus a key issue for the understanding of the development of both businesses and regions. However, the interactions between firms and regions have not been sufficiently explained. In this context, the purpose of this paper is to clarify the bidirectional influence between firms and regions. Taking advantage of the emerging literature of relational geography and industrial network approach, a model aimed at providing a better understanding of this mutual influence was devel- oped. We find that the lack of relational compatibility can limit firms’ effects on the region. Similarly, the influence of the region on firms’ performance also depends on this compatibility and on the spe- cific characteristics of the business actors.