Knowledge exchange processes in Industrial Districts and the emergence of networks

This paper aims at exploring conditions under which the need for knowledge exchange within a small firms' cluster generates a structure of links between firms. We focus in particular on small firms' clusters called Industrial Districts (IDs). Specifically, we analyze IDs with flexible specialization, in which knowledge exchange is driven by the search for complementary knowledge assets. Previous works of the authors proposed an agent-based model of IDs to explore the properties of networks emerging from the interaction of firms prompted by the search and exchange of complementary specialized knowledge. This model showed that limited relational capability, due to the small size, and an exchange mechanism solely based on the barter of complementary knowledge are structural conditions that limit individual firms' growth in IDs with flexible specialization. This paper presents a new version of this model to analyze the role of embeddedness of relationships among IDs firms in shaping the emergent network structures. The aim of the paper is to answer to the following research questions: Can knowledge complementariness explain the emergence of a stable network of firms within a small firms' cluster? What are the structural properties of these networks? Which role does the embeddedness of relationships among firms play in shaping the structure of emerging networks?