A comparative study on the interaction of inner-locality networks and inter-locality networks concerning the localization of SMEs.

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Small and medium-sized enterprises (SMEs) create their own inter-firm network respectively and are supported by their social environmental network. These networks consist of various spatial orders ; from locality scale to nation-wide one. SMEs can be innovative through the interaction between themselves and the other actors within these networks. Through the case studies on three industrial areas in Japan, Suwa-Okaya, Kiryuu-Ota and Hamamatsu, it proved that competitive SMEs on the basis of their own competence have their own supra-local inter-firm network of economic transaction as well as their own local inter-firm network of non-economic character. These two kinds of networks interact with each other and strengthen the competence of SMEs. The typical case is New Industrial Okaya Members (NIOM), which was organized in 1990 on the basis of non economic voluntary activities of the then successors of SME-owners.SMEs learn coded knowledge and tacit one from each other through the various networks. Coded knowledge can distribute nation wide without dispute, and tacit knowledge is not restricted within locality, but is transferable from firm to firm, both of which are located at a long distance from each other. Physical proximity is not a necessary condition for the learning of the tacit knowledge. Most of the successful SMEs experienced interaction not only within their own local inter-firm and social environmental networks, but also created their own inter regional transaction with the other firms. The latter is rather more decisive for the innovation than the local interaction. In this sense, the localization of SMEs is not critical as the economic geographers in the European and American countries insist on.