ABSTRACT
This chapter explores the concept of embeddedness, its theoretical background, and the different interpretations. It introduces the micro-level of embeddedness by indicating what are the main features of embedded inter-firm relationships. The chapter examines the macro-level of embeddedness, in an attempt to specify the impact of the socio-cultural environment on the nature of inter-firm relationships. It focuses on the effects of embedded inter-firm relationships on the innovative performance of firms and the debate that surrounds this issue. Economic geographers have been eager to embrace the notion of embeddedness because it assumes that firms are closely linked to their local production environments in a world of increasing globalisation. In economic geography, Granovetter. M notion of embeddedness has been widely adopted because it revives the idea that firms are firmly linked to their local production environment in a world of increasing globalisation.
