CRED Seminar Series 20067 REVISITING CLUSTERS: LOCAL BUZZ, GLOBAL PIPELINES AND THE KNOWLEDGE ECONOM

1
CRED Seminar Series 2006-7REVISITING
CLUSTERS LOCAL BUZZ, GLOBAL PIPELINES AND THE
KNOWLEDGE ECONOMY

• Frank Peck
• Research Director
• Centre for Regional Economic Development
• UCLan, Carlisle

2
REVISITING CLUSTERS LOCAL BUZZ, GLOBAL
PIPELINES AND THE KNOWLEDGE ECONOMY

• Theoretical bases of regional clusters
• Cluster into action overview of regional
  strategies
• Evaluation and critique of clusters approaches

3
Definitions of regional clusters

• Regional cluster geographical concentrations
  of economic activities that benefit from
  competitive advantages through co-location
• Key distinction
• Sector firms classified according to
  similarities in products, technologies or markets
• Cluster firms grouped according to association
  and interdependence almost inevitably
  cross-sector
• Key point of argument close proximity of
  producers gives rise to shared advantages that
  can generate or contribute towards global
  competitiveness

4
Theoretical bases of regional clusters
conceptualisations of local buzz

• Agglomeration and external economies of scale
• Networks, mutual trust and social capital
  (Granovetter, Putnam)
• Innovation and learning processes (Lundvall)

5
Schools of thought in clusters literature

• Industrial districts and the California school
  Scott, Storper
• Networked economy and the Scandinavian school of
  Hakansson, Isaksen, Asheim, Malmberg
• Innovative Milieux of Camagni, Maillat, Bergman,
  Todling
• Michael Porters clusters

6
2. Cluster into action overview of regional
strategies
7
Identifying and mapping regional clusters

• Methods
• Industry input-output tables
• Location quotients to show geographic
  concentration
• Surveys and in-depth interviews
• Consultations with regional partners

8
National Comparisons

• Finland inter-industry linkages 9 national
  clusters
• UK Location quotients generate 154
  possibilities winnowed down by regional
  consultation
• Denmark in depth interviews generates 13
  regional clusters
• Norway location quotients and minimum scale
  criteria 62 regional clusters
• Netherlands inter-industry linkages 12 linked
  industry groups
• Italy included high in SMEs in definition
  of industrial districts 199 clusters

9
Examples of regional clusters

• Austria includes biotechnology and medical
  science in Vienna, wood furniture in upper
  Austria
• Belgium - Flanders multimedia, Flemish plastics
• Finland - Shipbuilding in Turku, high technology
  in Oulu
• Germany - Ruhr chemicals and media industries in
  Rhine-Westphalia
• Norway - electronics in Horten Shipbuilding at
  Sunnmore
• Spain Machine tools in Basque Country and shoe
  manufacture in Vinapolo Valley

10
Source Emiliano Duch, Cluster Policies Experience
11
Source Emiliano Duch, Cluster Policies Experience
12
Stages in Development of Cluster Strategies
13
Analysis of Cluster
14

15
Cluster interventions

• Shift in focus away from support for individual
  firms towards systems or networks of linked firms
• Less emphasis on large firms and stress on SMEs
  or firms of all sizes
• Less interest in mobile investment (though this
  is still an element) and shift in focus towards
  indigenous development
• More sophisticated methods for targeting
  assistance on groups of firms with growth
  potential
• Greater emphasis on role of government as
  facilitator of business networks and broker
  between firms and other public and private
  institutions

16
Types of interventions

• New technology (establish centres and institutes
  for technology transfer)
• Firm growth (incubators, assistance to target
  firms)
• Cluster analysis (create observatories, conduct
  audits)
• Labour supply (pump-prime relevant provision of
  management and technical training, skills
  alliances)
• Supply of capital (financing for spin-off
  companies)
• Network improvement (fund activities to extend
  personal and organisational networks)
• Cluster leadership (map competencies and motivate
  regional partnership processes)
• Infrastructure (develop new shared ICT
  infrastructure)
• Marketing (create shared regional cluster brand)

17
Regional variations in cluster interventions

• Belgium - Financial subsidies to encourage SME
  growth Centres of excellence based on emerging
  technologies
• Sweden - RD cooperation development of shared
  research centres
• Switzerland emphasis on ICT integration
• Spain funding for public and private research
  centres and science parks
• Austria emphasis on collaborative arrangements
  between public and private sector including use
  of public procurement

18
Success factors in European Clusters

• Networking and partnership 78
• Innovation technology 75
• Human Capital 73
• Physical infrastructure 42
• Role of lead firms 40
• Enterprise and Entrepreneurship 38
• Access to finance 35
• Specialisation 29
• Access to markets 27
• Access to business support 25
• ECOTEC Survey cited by DTI (2005) identifying
  each factor

19
3. Evaluation and critique of clusters
approaches
20
Clusters issues to resolve

• Understanding change over time the life cycle
  of a cluster and path dependency
• Conceptualising the relationship between local
  buzz and global pipelines
• Relationship between the new and the re-working
  of old knowledge in peripheral economies

21
The life cycle of clusters

• Clusters literature does refer to concept of
  life cycle but fairly rudimentary analysis
• Emerging cluster beginnings of cooperation
• Developing cluster new actors and linkages,
  formal and informal networks
• Mature cluster reach critical mass
• Transformation to avoid stagnation, need to
  introduce new markets, new technologies and
  process changes

22
Sustainability of clusters

• Strategies to support existing clusters makes
  regions vulnerable due to specialisation
• Attempts to build formal networks with
  institutions and key firms as hubs can create
  inflexibility and rigidities (e.g. supply
  rationalisation and de-regionalisation in
  Baden-Wurtemberg Hudson 2003)
• Changes in global competition can de-stabilise
  clusters (Third Italy hollowed out by corporate
  restructuring and relocation of labour intensive
  processes Hudson 2003).
• The same processes that produce competitive
  clusters can also destroy them - history shows
  this
• Local clustering is advantageous other things
  being equal but this is often not the case and
  conditions in one time period are poor predictors
  of subsequent ones

23
Path dependency and lock-in

• Trajectories of regional economies
  arepath-dependent
• Economic trajectories of regions are neither
  pre-determined nor random walks (Hayter 2005)
• Variation can occur in evolution of a development
  path small events at the start, chance,
  randomness
• Over time, an almost irreversible lock-in results
• Lock-in influences all subsequent forms of
  development as history becomes the raw material
  for a new dynamic Boschma Lambooy 1999)
• Ideas reminiscent of Massey (1979) combinations
  of layers of investment ALSO Myrdals (1957)
  cumulative causation model
• Idea of transformation is relevant, but many such
  events are the product of crises with short term
  costs that are not easy to navigate

24
Fixation with the local?

• DTI recently issued its Guide to Clusters
  (2005)
• Clear focus on local connections
• Access to regionally- based expertise
• Enables companies to collaborate locally in
  purchasing, marketing, financing
• Groups of companies can bid for larger contracts
• Small companies can benefit from local external
  economies of scale
• Do not deny any of these BUT not a sufficient
  basis for competitiveness and may in some
  circumstances even be detrimental

25
Conceptualising global pipelines

• Recent research begins to show the significance
  of global networks for sustaining local clusters
  (Bathelt, Malmberg and Maskell 2004)
• Pipelines channels used for distant interaction
• Local buzz frequent, broad, unstructured,
  automatic, free access
• Global pipelines Purposive, conscious effort
  and decision, carefully filtered, requires
  investment
• Indiscriminate local networking initiatives can
  divert attention of key cluster champions away
  from engagement in global networking
• Global pipelines - individual firms with capacity
  to do so access knowledge from elsewhere
• Spill-over effects into the local cluster vital
  means of renewing and reworking local knowledge

26
New and old knowledge in cluster development

• Problem of path-dependency and lock-in
  particularly applies to use of cluster policies
  in less-favoured regions
• Hospers (2005) argues that there is a tendency to
  believe that clusters must be trendy and high
  tech to be credible and worthwhile as investment
• Hospers calls for better understanding of old
  industries and relationships between low and high
  technology
• Danish furniture
• Italian textiles
• Heritage in the Ruhr
• Spa health tourism in Hungary

27
Old and new in Nord Pas de Calais

• Cities of Lille Roubaix in Northern France
• 19th century dominated by cotton textiles
• 1960s/70s crisis of fordist mass production
• Basis for renewed economy laid in 1920s/30s
  Mail order companies set up (La Redoute, Les
  Trois Suisses)
• 1980s specialised service cluster based on mail
  order houses and retail chains almost too much
  of a coincidence that a textiles sales based
  industry could simply and spontaneously emerge in
  the former heartland of the French textile
  sector (Liefooghe 2005)
• Now a major selling cluster with designers,
  printers, photo studios, logistics providers,
  advertising agencies, call centres, accounts
  management software developers
• Major companies engaged in international
  networking

28
Conclusion

• Path dependency and lock-in
• Preoccupation with local and insufficient clarity
  about significance of non-local networks
• Overlook opportunities to re-work old knowledge
  in combinations with new technologies
• Relevance to Cumbria?