Collaborative customization and innovation in business networks: how does proximity matter?

The success achieved in the past by industrial districts and geographical clusters has shown that spatial proximity matters, especially when referred to subcontracting relationships. However, in the last two decades globalization of production, development and diffusion of ICTs, and growing modularization of products have significantly reduced the traditional advantages of geographical clusters, and, more generally, the importance of spatial proximity to the definition of an efficient and effective management of inter-organizational relationships. It is then appropriate to ask if the geographical proximity can still matter in a globalized world, and the reasons why this happens. The paper analyses the case of a global mid-sized company that has recently activated new relationships with local strategic suppliers at the same time of a growing internationalization. The case study suggests that the choice of increasing spatial proximity derives from a very specific process of customization, which cannot be achieved by adopting the modularity-postponement approach largely analysed in the literature. We propose the concept of collaborative customization to identify a customization process that is based on an intense collaboration between the focal firm and its strategic suppliers.