Does spatial proximity to customers matter for innovative performance?: Evidence from the Dutch software sector

Abstract

User–producer interactions are often assumed to be an important source of innovation. Spatial proximity between organisations would contribute to such interactive learning processes, because it facilitates face-to-face interactions required to exchange knowledge. However, both assumptions are increasingly debated. Therefore, we have empirically examined this using firm-level data on user–producer interactions of Dutch software firms. Indeed spatial proximity facilitates face-to-face interactions, but it does not strengthen the effect of face-to-face interactions on innovative performance. Moreover, regular interactions and collaboration with customers increase the likelihood that software firms bring new products to the market, but do not improve the firm's innovation output.