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Inter-Firm Knowledge Spillover Failure

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In Simple Words

Think of two competing bakery owners; even if one invents a superior bread-baking workflow, the secret stays behind closed doors because the owners do not share their internal recipe books or allow rival managers into their kitchens to inspect operations.

Observed experimental textile plants

Diagnostics and light advice
2.2% of practices added via other firms
Added implementation help
0.7% of practices added via other firms

Observed reasons, 2011 to 2017. Shares of all practice-by-plant cells, not shares of upgrades. Two experimental groups shown. Both groups received diagnostic consulting and light follow-up advice; implementation help was added for treatment plants.

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Research question

Manufacturing innovations and modern management techniques fail to diffuse spontaneously across competing independent firms within industry clusters.

Participants

28 manufacturing plants across 17 family-owned cotton textile firms near Mumbai, India (averaging 270 workers per firm).

Study Design

Randomized Controlled Trial (RCT) tracking management adoption across experimental and control plants over a 9-year panel (2008–2017).

Results

Spillovers from outside firms accounted for only 2.2% of practice upgrades in control firms and 0.7% in treatment experimental plants between 2011 and 2017, demonstrating minimal organic cross-firm management adoption compared to intra-firm diffusion.

Takeaway

Establish formal industry benchmarking consortiums or structured peer-learning networks to facilitate cross-company observation and management practice transfer.

Source and citation

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Read alongside the research

Plain-English glossary

Original explanations, informed by the references below. Examples are illustrations, not data from the studies above. The research text stays unchanged.

Randomized controlled trial

A study that uses chance, like drawing lots, to decide who receives each option being compared. Researchers compare the groups’ outcomes to estimate the effect of those options.

ExampleA lottery assigns volunteers to a training programme or a comparison group. Researchers then compare their outcomes.

GET-IT glossary · Randomized study ↗Read more about randomized controlled trial →

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