Vlerick Leuven Gent Working Paper Series 2006/12 ... - Vlerick Public

countries? This, we are convinced, doesn’t always reflect reality. Especially activenetwork players could – and probably should - be located all over the world. The mainquestion here is where interesting sources of knowledge are to be found. Tapping into asource of knowledge, and transferring this knowledge across the network, is the primarytask of an active network player.The story is different for isolated or receiver factories. Although in theory thesefactories can be located anywhere, presence in high wage countries is probably notsustainable. Imagine an isolated factory in an expensive country, in terms of labor cost,such as Japan, Switzerland or Belgium. This factory has a competitive disadvantage visà-visthe other factories in the company’s network. If the company runs intoovercapacity, the decision to reduce capacity may easily turn into a downsizing or evenclosure of this factory. In doing so, the company is simply “cutting out” capacity, withouthurting any of its flows of innovation. The story would have been different if this factorywere a network player. In this case, cutting capacity would also have meant cutting vitalinnovation flows, and therefore hurting the innovative capability and the competitivenessof the network.One of the Belgian factories in our study is a clear example. This factory acted asa receiver: expertise from other factories in the network and from headquarters wastransferred to this factory in order to improve its performance. In reverse, however, thefactory had no innovations or best practices that it could share with the other factories. Ina period of downsizing, this factory was the first “victim” and was closed.Consequently, there is likely to be some self-selection among isolated andreceiver factories in high wage countries. They either struggle for survival, or movetowards lower wage countries.14