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Networks, Clusters, Industrial Districts: Key Issues in Analysis and Promotion. Jörg Meyer-Stamer www.mesopartner.com. Structure of the presentation. Cluster definitions and typologies Obstacles to cluster initiatives -- and how to overcome them. Why cluster promotion?.

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Networks clusters industrial districts key issues in analysis and promotion

Networks, Clusters, Industrial Districts: Key Issues in Analysis and Promotion

Jörg Meyer-Stamerwww.mesopartner.com


Structure of the presentation

Structure of the presentation

  • Cluster definitions and typologies

  • Obstacles to cluster initiatives

  • -- and how to overcome them


Why cluster promotion

Why cluster promotion?

  • generally: to enhance the competitiveness of companies, particularly SMEs

  • specifically:

    • collaboration between companies

      • to create economies of scale

      • to stimulate innovation

      • to create market power

    • more effective government support

      • alignment and coordination among government agencies

      • closing gaps in support structure


Cluster definitions and typologies

Cluster definitions and typologies


What is a cluster

Passive cluster advantages:

Skilled workers

Suppliers of inputs and capital goods

Customers

Low barriers to entry

Active cluster advantages:

Strong, competent business associations

Specialized, high-quality skills development effort.

What is a cluster?

  • A geographical agglomeration of firms in the same or closely related sectors


A highly dynamic cluster ceramic tiles castell n spain

Lucena

del Cid

Villafamés

Alcora

La Pobla Tornesa

Figueroles

San Juan de Moro

Borriol

Ribesables

Castellón de la Plana

Villarreal

Betxi

Almazora

Onda

Vall d’Uixó

Nules

A highly dynamic cluster:Ceramic tiles, Castellón, Spain

CERAMIC

TECHNOLOGY

INSTITUTE

AUTONOMOUS

GOVERNMENT

SUPPORT

LOCAL

GOVERNMENTS

SUPPORT

VERY ACTIVE

BUSINESS

ASSOCIATION

NEW

INFRASTRUCTURES

INVESTMENT

CERAMIC PROMOTION

INSTITUTE

CERAMIC DESIGN

INSTITUTE

SPECIALIZED COURSES

AT HIGH SCHOOLS

UNIVERSITY WITH

SPECIALIZED

COURSES


Inside the castell n cluster

a tile factory

inside a tile factory

clusteredfactory

a glaze manufacturer

Ceramic Industry

Association

Institute for

Ceramics

Technology

Inside the Castellón cluster


Why does a cluster emerge

Due to historical coincidence

Due to the availability of key inputs (e.g. clay)

Due to government interventions (often inadvertently)

An example of historical coincidence:

Somebody starts a textile company

As it grows, some employees quit and start their own textile company

Sons of the owner fight over the inheritance and split the company

As more companies are there, suppliers come in with local production

As more skilled workers become available, new entrepreneurs come in to start their own textile or supply company.

Why does a cluster emerge?


An emerging cluster lingerie production in frecheirinhas cear brazil

Origin of the cluster: Innovative idea of one entrepreneur

getting ideas for fashion lingerie from European fashion journals (1992)

Copied by other local entrepreneurs

Late 2002:

12 formal companies

15 informals

about 500 employees

250,000 pieces / month

An emerging cluster:Lingerie production in Frecheirinhas, Ceará, Brazil


An emerging cluster lingerie production in frecheirinhas cear brazil1

Mostly producing for the regional market (neighbouring provinces)

LED in Frecheirinhas:

impossible until late 2002 -- political rivalry

early 2003: mayor on trip to successful cluster in Minas Gerais

result: local government

facilitates skills development

develops business estate

An emerging cluster:Lingerie production in Frecheirinhas, Ceará, Brazil


Can a cluster be created

No!

Clusters emerge due to the invisible hand of the market

It is hard to conceive how a complex cluster structure might be created from scratch

But:

Private sector actors or government may transform undercomplex agglomerations into clusters, and clusters into industrial districts

There are examples of clusters which are due to government intervention

Aerospace in São Paulo province

Salmon in Chile

Hsinchu high technology cluster in Taiwan

Software in Bangalore / India (originally based on government defense and computer companies).

Can a cluster be created?


Cluster typologies

Cluster typologies

  • Life-cycle typologies

    • Michael Enright

    • Jörg Meyer-Stamer

  • Functional typologies

    • Ann Markusen

    • Altenburg/Meyer-Stamer


Michael enright s typology of clusters

Working cluster

Latent cluster

Potential cluster

Policy-driven

cluster

Wishful-thinking cluster

strong specialization and dense interaction between companies

competitiveness based on interdependence

critical mass of companies, but little interaction

low degree of specialization

agglomeration with little scope in activities

little interaction and specialization

chosen by government for support

often recent industries, start-up companies

policy-driven clusters without any critical mass.

Michael Enright’s typology of clusters


A life cycle typology of clusters j rg meyer stamer

Emerging cluster

Growing cluster

Mature cluster

Declining cluster

Based on historical coincidence

Start-up companies

New entries in main products

New entries in supplies and services

Increasing specialization

Increasing collaboration + strong rivalry

Few entries, consolidation / takeovers

Decreasing collaboration

Outsourcing of non-core activities

Decreasing number of companies

Decreasing number of employees

Fierce rivalry, little collaboration.

A life-cycle typology of clusters (Jörg Meyer-Stamer)


A cluster typology according to ann markusen

Italianate

Industrial

District

Hub-

and-

Spoke

Satellite

State-

Anchored

District

State-

anchored

district

A cluster-typology according toAnn Markusen


Italianate industrial district

Sectoral specialization

Dominance of small- and medium-sized firms

Strong division of labor

A high degree of specialization among firms

Strong competition, especially via innovation

Information network

Highly qualified workers

Socio-cultural basis for trust

Active role of the state.

Italianate Industrial District


Hub and spoke clusters

Presence of large, medium and small-sized firms

Leadership role of large firms

technology and innovation

decision-making in collective action

Many hierarchical relationships inside the cluster

Strong tendency in the recent evolution of many Italian industrial districts.

Hub-and-spoke clusters


Satellite clusters

Reliant on firms elsewhere (contractors, customers, headquarters)

Often result of cost-reduction strategies of firms in leading clusters

Further strong tendency in the recent evolution of many Italian industrial districts

Potential for emancipation (see Taiwan, Korea).

Satellite clusters


State anchored district

Occurs in government-dominated industries, such as armaments

State-anchored district


The altenburg meyer stamer typology clusters in latin america

Survival clusters

Fordist clusters

Transnational clusters

The Altenburg/Meyer-Stamer typology: Clusters in Latin America


Key features of survival clusters passive advantages of clustering

Key Features of “Survival Clusters”: “passive” advantages of clustering

  • information spillovers concerning sourcing, marketing, and product design of competitors

  • the availability of a semi-skilled labor force

  • easy access to raw materials and machinery

  • lower search costs for customers.


Survival clusters the features of world class clusters are absent

Survival clusters: The features of world-class clusters are absent

low degree of specialization

little inter-firm cooperation

limited socioeconomic ties.


Survival clusters why is there little specialization

Survival clusters:Why is there little specialization?

too limited skills to enter forward / backward stages

little capital.


Survival clusters why is there little cooperation 1

Survival clusters:Why is there little cooperation (1)

First, there is little trust:

  • copying is major business strategy

  • predatory behavior often pays off (business as survival activity, short time horizon)

  • little social control in shantytowns with high turnover of inhabitants.


Survival clusters why is there little cooperation 2

Second, there are further reasons:

no legal mechanisms to enforce informal contracts

little available advanced factors / complementary assets

low barriers to entry, thus excess supply and underutilization of capacities, ruinous competition.

Survival clusters:Why is there little cooperation (2)


The vicious cycle of survival clusters

The Vicious Cycle of Survival Clusters

Selection process does not work because exit is no option = negative incentive for firms with potential to survive

Entry

Some success

Competition based on price-cutting

More entrants


Promotion measures for survival clusters

Promotion measures for survival clusters

  • Creating dynamism in the formal sector to stem the inflow into survival clusters

  • Training measures for businesses

  • Food/money-for-education programs.


Key features of fordist clusters

Strong growth in import-substitution era

Hub-and-spoke structure

Deep adjustment crisis after opening of the market

High turbulence (exits and entries).

Key features of Fordist clusters


Promotion measures for fordist clusters

Promotion measures for Fordist clusters

  • Creating active advantages

    • Training

    • Technology

    • Export information

    • Finance

  • Strengthening business associations

  • Overcoming un-cooperative behavior.


Key features of transnational clusters

Key features of Transnational Clusters

  • Multinational firms produce final products

  • First- and second-tier suppliers are also multinationals

  • Little demand for inputs from local producers

    • insufficient quality / quality variance

    • inability to meet scale and flexibility requirements.


Promotion measures for transnational clusters

Promotion measures for Transnational Clusters

  • Attract more, complementary multinationals

  • Upgrading of local suppliers, starting with simple inputs.


Six types of obstacles to cluster initiatives

Six types of obstacles to cluster initiatives


What is the purpose of a cluster initiative

What is the purpose of a cluster initiative?

  • To increase the competitiveness of companies, and thus create income and jobs, by producing

    • the same products more efficiently

    • higher-value products

  • Increased competitiveness can be based on

    • increased specialization and interaction between companies

    • attraction of specialized suppliers

    • collective action

      • visits to international fairs, joint stands

      • skills development and joint learning

      • technology development


Obstacles to cluster initiatives

Obstacles to cluster initiatives

Between firms

Firms xmeso institutions

Private sector x

public sector

  • Prisoners’ dilemma


Understanding relationships between competing firms prisoner s dilemma

Conventional prisoner’s dilemma:

One crime, two prisoners in separate rooms

No clear evidence

No punishment if confession

Result 1: None confesses, no / little punishment = Co-operation

Result 2: Both confess, both get punished = Defection

Repeated prisoner’s dilemma: Co-operation emerges

Prisoner‘s dilemma involving competing firms:

No ex-ante co-operation (joint crime)

Long history of rivalry

Established culture of defection

Path-dependence: Attempt to co-operate fails = reinforces non-cooperative disposition.

Understanding relationships between competing firms: Prisoner’s dilemma


Obstacles to cluster initiatives1

Obstacles to cluster initiatives

Between firms

Firms xmeso institutions

Private sector x

public sector

  • Prisoners’ dilemma

  • loss of secrets

  • costs of cooperation: transaction cost, opportunity cost, investment cost

  • anti-trust risks


If we talk about cooperation

... we (consultants, resear-chers, SME promoters) think of

collective efficiency

learning-by-interacting

joint upgrading efforts

collective action to create locational advantages

... businesspeople think of

joint purchasing

joint sales

= eliminating competition!

= creating market power!

attacking established power structures

challenging powerful actors in the market

powerful actors respond

and kill the cooperation effort.

If we talk about cooperation ...


Obstacles to cluster initiatives2

Obstacles to cluster initiatives

Between firms

Firms xmeso institutions

Private sector x

public sector

  • Prisoners’ dilemma

  • Chambers hate clusterinitiatives because theycome under fire from non-cluster firms

  • Local governance:

  • lack of credibility of cluster concept

  • mistrust between private and public sector

  • political rivalry

  • loss of secrets

  • costs of cooperation: transaction cost, opportunity cost, investment cost

  • anti-trust risks

  • Supporting institutions:the usual problems, i.e.

  • different rationales

  • different goals

  • different cultures

  • different time horizons

  • fuzzy evaluation criteria

  • Global governance:

  • strong position of foreign buyers

  • little commitment of local branch plants


How can the obstacles be overcome

Participatory

approach

Policy problem

Policy problem

Cluster definition

Cluster definition

Participatory analysis of local system

Analysis

Analysis

Findings

Definition of tasks and responsibilities

Findings

Policy implications

Implementation: Cluster plus

Policy design

Policy design

Participatory evaluation

Implementation

Implementation

How can the obstacles be overcome?

Conventional approaches


Key questions at the beginning of a cluster initiative

Key questions at the beginning of a cluster initiative

  • What type of cluster is it?

    • cluster initiatives are difficult in mature or declining clusters, and in satellite clusters

  • Are there obvious gains to be expected from more collaboration among companies?

  • Are there obvious gains to be expected from improved coordination between support agencies?

  • What is the risk/benefit-ratio as perceived by companies?

  • Are there powerful actors who might be interested, or decidedly disinterested, in a cluster initiative?


Possible sequence in a cluster initiative

Possible sequence in a cluster initiative

...

Increased trust

Joint R+D

project

Increased trust

Joint stand at

foreign fair

Increased trust

Joint training

initiative


Criteria for initial activities to overcome a non cooperative culture

they address immediate problems of firms

they offer the potential of savings through economies of scale

they do not touch what firms perceive as their core activities

they open little or no latitude for predatory behavior

cost and benefit

cost and benefit

trust

trust

Criteria for initial activities to overcome a non-cooperative culture


Cluster promotion in the view of systemic competitiveness

Meta-level

Macro-level

Meso-level

Micro-level

understand the logic of non-cooperation

identify the existence of social capital

identify and remedy unfavorable macro-economic conditions which hinder the cluster

restructure and re-orient existing institutions

create new support institutions

attract complementary firms

initiate co-operation initiatives

which address immediate necessities

which have a quick, visible impact

which give little opportunity for opportunistic behavior

which contribute to creating social capital

Cluster promotion in the view of systemic competitiveness


Practical examples

Practical examples


Again what are the objectives cluster promotion

Again: what are the objectives cluster promotion?

  • generally: to enhance the competitiveness of companies, particularly SMEs

  • specifically:

    • collaboration between companies

      • to create economies of scale

      • to stimulate innovation

      • to create market power

    • more effective government support

      • alignment and coordination among government agencies

      • closing gaps in support structure


Create economies of scale

Create economies of scale

Ceramic tile cluster in Santa Catarina, Brazil:

  • jointly maintained technical school

  • lobbying for higher education course in ceramics technology at local university

  • creation of a technology center to provide inputs and materials testing services to all cluster companies

    Ceramic tile cluster in Sassuolo, Italy:

  • joint transport operation within the cluster


Stimulate innovation through re combination the textile industry cluster initiative in nrw germany

Suppliers

Industry/Commerce/

Imports

Raw materials

Services

  • Chemical Industry

  • Man-made fibres

  • Process chemicals

Capital goods industry

R&D / Innovation

Garments

Aerospace

Furniture / interior design

Construction

Environment

Automotive

Customers

Industry/Commerce/

Exports

Medical

Stimulate innovation through re-combination: The textile industry cluster initiative in NRW, Germany

Globalisation

Information Technology

Textiles industry NRW

Garments

Home textiles

Technical textiles

330 Companies

39.000 Employees

Initial and ongoing training


Networks clusters industrial districts key issues in analysis and promotion

SCOTLAND’S CREATIVE MEDIA INDUSTRIES CLUSTER

ENABLING TECHNOLOGIES

Film, TV, Radio & Music Studios

Telecomms

Computing

Electronic, Digital

& Optical Media

Print Media

Internet & Online Systems

IPRCommercialisers

Markets

ContentOriginators

DistributionChannels

Multimedia Distributors

Schools

Education

Multimedia Producers

Consumer Electronics

Games Producers

Game Distributors

Retail Shops

Readers

Authors

Book Publishers

Libraries

TV/Radio Audiences

TV/Radio Channels

Film/TV/Radio Producers

TV/Radio Broadcasts

Music Buyers

Film Distributors

Film Producers

Filmgoers

Utilities/Public Sector

Cinemas

Journalists

Newspapers/Magazines

Edutainment

Internet

Record Labels

Musicians

Business

Designers

Advertising Agencies

Advertising Media

Visitor Attractions

Professional

Services

Promotion &

Review

Marketing

Patent Agents

Media

IPR Lawyers

Critics

Accountants

Talent Agents

UPGRADING & INNOVATIVE BODIES

OTHER CLUSTER PARTNERS

Libraries &

Museums

SAC

Industry Bodies

Government

(SO,DCMS)

Art & Music

Schools

E-commerce

users

Universities

& Colleges

Banks &

Financiers

Industrial

R&D

Education

Authorities

Smart

Cities

Key to shading:

Relative strength

Broadly on par

Relative Weakness

Scottish Enterprise: Creative Media GroupJan. 1999


Create market power

Create market power

  • Ceramic tiles, Santa Catarina, Brazil:

    • joint lobbying for access to natural gas pipeline

  • Ceramic tiles, Castellón, Spain:

    • joint purchasing of telecom service, energy, transport services

  • IT cluster initiative, Scotland:

    • joint purchasing of broadband capacity

  • Food+drink cluster initiative, Scotland:

    • joint acquisition of otherwise prohibitively costly market research reports


A leading edge example cluster promotion in scotland

A leading-edge example:Cluster promotion in Scotland


Key features

Key features

  • linking cluster & value chain promotion

  • limited public support

  • private sector-driven

  • cluster development = community building


The scottish cluster approach

Focusing on Priorities

Engaging Stakeholders*

Learning and leadership

Scoping

Recognising Best Placed Leaders

Picturing

the Cluster

Initiating

Gathering Data

- benchmarking

- global trends

- scenarios

Action Planning

Developing Strategy

Implementing

Assemble Resources

Collaborating with Stakeholders

Securing Resources

Supporting Dialogue & Networking

Assessing Results

Scottish Enterprise

The Scottish Cluster Approach

*Stakeholders include partners in industry, academia, education, research, government and other appropriate institutions


Networks clusters industrial districts key issues in analysis and promotion

Scotland’s Food & Drink Cluster

1999

Fishing Industry

Fish

Breeding Co’s

Poultry

Upgrading & Innovative Institutions

No presence

Research Institutes e.g SABRIs

Weak

Medium

Universities

Training Providers

Strong

Imported Commodities/ Raw Materials

Colleges

Key driver

Rendering/ By Products

Fish Farming

Basic Processing

Customers

Food Brokers

Value Added Processing

Fish Markets

Multiple Retailers

Prepared Meats & Fish

Meal Solutions

Discounters

Gourmet Foods

End Users

Independent/ Speciality Retailers

Red Meat

Auction Marts

Farmers

Abattoirs

Snacks

Consumers

UK Distributors

Bakery & Confectionary

Food Service

Dairy

Feed

Non-Alcoholic Drinks

Further Processing Outwith Scotland

Specialist Growers

Vegetables

Beer

In Mkt Agents/ Distrib’s

Whisky

Overseas Markets

Cereals

Critical linkage - strong

Value Added Components

Critical linkage - medium

Critical linkage - weak

Infrastructure/services

QA and Food Safety

Equipment Suppliers

Marketing/ Design

Market Intelligence

Industry Bodies

Specialist Consultants

Transport and Distribution

Packaging

Legislation


Networks clusters industrial districts key issues in analysis and promotion

Scotland’s Food & Drink Cluster

2010

Fishing Industry

Fish

Breeding Co’s

Poultry

Upgrading & Innovative Institutions

No presence

Research Institutes e.g SABRIs

Weak

Medium

Universities

Training Providers

Strong

Imported Commodities/ Raw Materials

Colleges

Key driver

Rendering/ By Products

Fish Farming

Basic Processing

Customers

Food Brokers

Value Added Processing

Fish Markets

Multiple Retailers

Prepared Meats & Fish

Ready Meals

Discounters

Gourmet Foods

End Users

Independent/ Speciality Retailers

Red Meat

Auction Marts

Farmers

Abattoirs

Snacks

Consumers

Wholesalers Distributors

Bakery & Confectionary

Food Service

Dairy

Feed

Non-Alcoholic Drinks

Further Processing Outwith Scotland

Specialist Growers

Vegetables

Beer

In Mkt Agents/ Distrib’s

Whisky

Overseas Markets

Cereals

Critical linkage - strong

Value Added Ingredients

Critical linkage - medium

Critical linkage - weak

Infrastructure/services

Equipment Suppliers

Marketing/ Design

Market Intelligence

Industry Bodies

Specialist Consultants

Transport and Distribution

Packaging

Legislation


The actions

Scottish Enterprise

The Actions

  • Develop & Grow Leading Suppliers & Processors

  • Exploit Premium Market

  • Advantage Through Innovation

  • Build on Quality Standard

  • Develop Capabilities of People

  • Linkages & Networks


Lessons learned

Scottish Enterprise

Lessons learned

  • No universal model

  • Widest possible ownership is vital


Benefits to the cluster community

Scottish Enterprise

Benefits to the Cluster Community

  • Joint development and ownership of strategy with wide set of partners

  • Increased industry confidence & ambition - encouraging progression of new ideas & spin-out companies

  • Innovative solutions to commercialisation, skills shortages & internationalisation

  • Improved targeting of inward investment activity

  • Higher national & international profiles for the respective industries


Benefits for scottish enterprise

Scottish Enterprise

Benefits for Scottish Enterprise

  • Promotion of Network cohesion & a philosophy of national delivery

  • Dealings with the Scottish Executive are taken forward in a concerted manner

  • Enables the Network to target its resources more effectively at community wide solutions


Scottish enterprise s balanced scorecard to assess cluster initiatives

Scottish Enterprise’s Balanced Scorecard to assess cluster initiatives

  • Economic/Financial

  • Levels of Investment

  • Company performance

  • Market performance - Global, UK, Home

  • Employment levels/no. of Companies

  • Knowledge & Know how

  • R&D and Innovation

  • International awareness/recognition

  • Integration of academia & business

  • Skills

  • Appropriate skills levels and structure

  • Improved value /per employee

  • Continuous learning and development

  • Cluster Process

  • Local connections & networks

  • Appropriate infrastructure

  • International connectedness

  • Industry Leadership


The goal

The goal


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