How network competence and network location influence innovation performance

Abstract Purpose – As developed countries experience a decline of manufacturing industries, national governments increasingly turn to innovation‐based cluster initiatives to secure the long‐term prosperity of a region. However, the mechanisms that help translate cluster membership into higher innovativeness are not well understood. This paper seeks to propose a framework which sees a firm's network competence and network location as being key to superior innovation performance. Design/methodology/approach – The deductive quantitative study applies a combination of statistical tools and tools for social network analysis to test the hypothesized relationships. Findings – The results show that none of the cluster companies has so far been able to operate at the expected level of innovation performance. Findings further support the hypothesis that network competence and central network positions are positively related to innovation performance. Therefore, while innovation performance proves to be unsatisfactory for all cluster companies, those with a higher level of network competence and central network positions perform significantly better in terms of innovation than companies low in network competence and network centrality. Practical implications – In order to succeed in a cluster, companies must focus on enhancing their network competence and strive for more central network positions. Originality/value – The study focuses on the social construction of innovation performance. Cluster firms, their embeddedness in exchange relationships with other firms, as well as their network managerial competence are seen as key factors influencing firm innovation performance. In conclusion, the study offers an alternative view on innovation performance, complementing the traditional explanation approaches in the innovation literature.