Tapping into agglomeration benefits by engaging in a community of practice

Abstract

While a great deal is known in the agglomeration literature regarding the importance of having access to Marshallian externalities for firm performance, less is known about how geographically isolated and remote firms fare with the lack of such access. More recent literature suggests that firms, especially those within geographic proximity, can form a community of practice to facilitate deliberate learning and collectively create a shared repertoire, that is, a set of communal knowledge of procedures, techniques, and standards for best practices. Unlike Marshallian externalities, however, community of practice membership is not necessarily bounded by geography, and as such, isolated firms can also engage in a community of practice and unlock the shared repertoire for their own benefits. The study of the Ontario wine industry (1999–2009) finds that community of practice engagement weakens the detrimental impact of geographic isolation on firm performance, suggesting that isolated firms can tap into agglomeration benefits by engaging in a community of practice.