Businesses today face particularly intense competitive pressures. The demand for customised solutions, fast delivery and high quality is growing rapidly, and all in a global marketplace which is becoming increasingly sophisticated. Consequently, much attention has been paid to those firms which have succeeded in this environment in order to discover what contributes to their comparatives. One of the ways in which firms can meet the challenges of this new competitive environment is through innovation. In particular, the way in which innovation is organised within the firm has been regarded as important in contributing to competitiveness. It has also been argued that firms may benefit from collaborating with other firms in the innovation process and that a location close to other firms in the same sector and suppliers may help firms to innovate more efficiently, as suggested by the proponents of industrial districts and milieu theories. By using the example of the successful UK high fidelity audio manufacturing sector, this study aims to discover the significance of these different factors.The results of this study suggest that innovation is the most widespread response to the pressures faced by firms and in order to innovate it was found that several factors were of great importance. Firstly, the abilities of certain key individuals and the accumulation of know-how and expertise within the firm wre crucial. This provided firms with the technological expertise necessary to exploit technological and market opportunities. Secondly, certain types of collaboration were important. For example, there was widespread vertical collaboration with suppliers in the innovation process. However, horizontal linkages with other hi-fi firms and vertical collaboration with users, universities and various business services were much less common. Thirdly, it was evident that the location of hi-fi firms was important but in a rather different way and at a different scale to examples of agglomeration elsewhere. It was more useful to view the UK as a whole as being an important place for hi-fi production in the global economy.Finally, these findings have various implications for government support of innovation. In particular it is important that more support is given to innovation projects in single firms and those developing incremental innovations. It is also imperative that there is greater investment in education and training in order that the UK possesses a workforce with the ability to develop new ideas and exploit opportunities for innovation.
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