Effects of Network Closure on Cooperative Innovation: Evidence from Dongying’s Petroleum Equipment Industry in China

Abstract

There are two opposing viewpoints on which kind of network configuration provides a more competitive advantage, namely, network closure or structural holes, with the latter occupying the dominant position in the literature. Using social network analysis and negative binomial regression methods, we graph the co-patent network of Dongying's petroleum equipment industry in China and explore its impact on enterprise innovation. The analysis is based on 17 face-to-face interviews, 31 enterprise questionnaires, and 354 co-patent records from the China State Intellectual Property Office identifying cooperative innovation for the years 1988-2013. We find that this network is closed, controlled by state-owned enterprises, and its closure has positive effects on enterprise innovation performance. This may be related to China's unique industrial development history, state system and policies, regional culture and circumstances, and enterprise characteristics. Therefore, for some industries in specific regions, the advantages usually attributed to structural holes and open innovation may not necessarily apply.

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