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Several studies in the social networks literature suggest that more central firms in a given network will be more innovative, but the literature not considered how variation in network density might affect any innovative benefits of centrality. This paper draws from evolutionary economics arguments to suggest that any benefits of centrality will decline as network density increases, because greater density creates tendencies toward local search that in turn limits firms' access to resources that arise outside a network. The authors use patenting data from almost 2,000 affiliates of more than 260 Taiwanese business groups operating from 1980 to 2000 to test the idea the firm operating centrality will have fewer innovative benefits as network operating density increases.
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