cluster internationalization berlin 09 19-14 ck

1 Copyright 2008 © Christian Ketels, Michael E. Porter

Internationalization and Global Value Chains:The Agenda for Cluster Initiatives

Dr. Christian H. M. KetelsInstitute for Strategy and Competitiveness

Harvard Business SchoolPresident, TCI Network

2nd BSR Stars Cluster Conference19 September 2014

Berlin, Germany


Cluster Organizations Looking Outside

INTERNAL

Creating NetworksLaunching Joint Actions

EXTERNAL: Other Locations

TechnologiesGlobal Value Chains

Export Markets

EXTERNAL: Other Sectors

TechnologiesEmerging Industries


Local Buzz and Global Pipelines

Strong internal cluster dynamics

2. More attractive for international

partners

1. Better able to take advantage of own capabilities

3. Better able to benefit from international partnerships


Internationalization: The Case for Joint Action

Barriers for internationalization

• Natural barriers through language and distance

• Knowledge barriers through lack of information

• Behavioral barriers through legacy effects and culture

• Policy-induced barriers through funding rules and market differences

• Barriers through differences between private and public benefits


Types of Linkages between Clusters

Cluster participants Cluster participants

Cluster initiative

Cluster initiative

Commercial collaboration

Policy learning

Joint services


Evolution of Cluster Initiatives’Internationalization Activities

ExportPromotion

Policy Learning

Commercial Collaboration


Some Facts About Internationalization (1)

• Dramatic increase in trade volumes in prior to the global crisis; significantly lower export growth since then

– Possible drivers include a slowdown in the reduction of trade costs and barriers

• Trade remains dominated by goods, but service exports are growing much faster

• Significant increase in the number of locations engaged in global trade



• Trade is dominated by large companies; there is a strong relationship between MNC presence and exports– Only China and Germany are outliers, with much higher exports than predicted

given their number of multinational firms (MNCs)

• The growth in global trade has been driven by trade of intermediate goods within related companies, i.e. international trade between subsidiaries of an MNC– Exports and FDI are different options companies face in there internationalization

strategy– Measures of Value Added incorporated in exports are increasingly used to

analyze bilateral trade balances



• Exports largely take place with neighboring countries

• There is a significant relationship between a country’s stage of economic development and the profile of its exports

• Exporting is risky; a large number of export attempts to new markets is discontinued after a short amount of time


Some Facts About Internationalization:Implications

• Exporting remains a potentially attractive but also risky endeavor

• The market place of locations has become more competitive

• While government agencies tend to separate between export promotion and FDI, for companies the two are integrally connected

• The needs of companies in terms of internationalization differ significantly by their size

Successful internationalization efforts require:• A cluster with a clear positioning/value proposition in its respective

market• A cluster initiative with an internationalization strategy that identifies

objectives, target geographies, and services for specific segments of cluster participants


Value Proposition of your Cluster

• What markets are you serving/competing in?

• What unique value does your location offer?

• What are other locations that you are competing with?

Tools to use for an analysis of your cluster’s positioning

• Five Forces analysis

• Value Chain analysis

• Market segmentation

• Relative cost position

• International cluster mapping tools

12 Copyright 2007 © Dr. Christian H. M. KetelsCAMACOL11-02-07 CK

An Example: Locations’ Positioning in Footwear

Vietnam/Indonesia• OEM Production • Focus on the low cost

segment mainly for the European market

China• OEM Production• Focus on low cost

segment mainly for the US market

Portugal• Production • Focus on short-

production runs in the medium price range

Romania• Production subsidiaries

of Italian companies• Focus on lower to

medium price range

United States• Design and marketing • Focus on specific market

segments like sport and recreational shoes and boots

• Manufacturing only in selected lines such as hand-sewn casual shoes and boots

Source: Research by HBS student teams in 2002 – Van Thi Huynh, Evan Lee, Kevin Newman, Nils Ole Oermann

Italy• Design, marketing,

and production of premium shoes

• Export widely to the world market

Brazil• Low to medium quality finished

shoes, inputs, leather tanning• Shift toward higher quality

products in response to Chinese price competition


Internationalization Strategy of your Cluster Organization (1)

• What are the objectives of your internationalization activities?– Open additional markets for your firms– Strengthen access to critical knowledge or technologies– Collaborate with other locations to provide an integrate offering– Attract activities to strengthen your local cluster– …

Tools to use for a fact-driven definition of objectives

• Performance diagnostics

• Cluster mapping

• …Critical to engage cluster initiative stakeholders in this process; needs to

reflect their needs


Cluster Diagnostics

PerformancePatterns

Profile of the Cluster

Quality of Cluster Participants


Internationalization Strategy of your Clusters Organization (2)

• What services should you offer to whom in order to achieve your objectives?

– Needs-based segmentation of your market

• Within the cluster/outside of the cluster

• SMEs/large companies

• …

– Definition of your product/service portfolio• Information services

• Joint activities

• …

Explore and leverage the offerings of the EU and

national/regional agencies supporting trade and FDI


Internationalization Strategy of your Clusters Organization (3)

• Which locations should you target in your activities?

– Identify geographies based on you objectives

– Look for intermediaries, often cluster organizations, in this location

Tools to use for an identification of target locations

• Company interviews

• Mapping of current international linkages of your cluster

• Cluster mapping

• Networks of cluster organizations

• …


Clusters and Cluster Organizations in Europe

Cluster Collaboration

Platformwww.clustercollaboration.eu

Cluster Observatory:Organisations

www.clusterobservatory.eu


Clusters and Cluster Organizations in the US

Clusters

Regions

Organizations

Project Background - Methodology - Data Sources - Partners

Research - Policy Examples - Case Studies - News


Cluster Organizations Worldwide

www.tci-network.org

Cluster Initiative Database

Sector-Specific Networks of Cluster Organizations:

Aerospace

Chemicals

Clean Tech

Biotechnology

Food

Water

…


A Recap

• You need to know your cluster

• You need to have an internationalization strategy

• You are not alone: draw on the partners and tools available to support you


A Quick Outlook: Relating to other Sectors

INTERNAL

Creating NetworksLaunching Joint Actions

EXTERNAL: Other Locations

TechnologiesGlobal Value Chains

Export Markets

EXTERNAL: Other Sectors

TechnologiesEmerging Industries


• Innovation is often happening at the intersection of technologies and industries; some within clusters, some between them

• Combination with other sectors that are locally strong can provide a unique competitive advantage for your cluster

Adv. Logistics

Creative Economy

Experience Economy

Biopharma

Adv. Packaging

Medical Devices Digital

Environ. Services

MobilityPlastics

Upstr. Metal

Light.

Appl IT

Med Dev

Downst. metal

Transp.

Autom

Aerosp.Comm

Bioph.

Downs. Chem

Tourism

PerfArts

Marke‐tng

Music

Bus Serv

P&P

EnvServ

Video

Oil & Gas

Prod. Tech

Wood Prod

Metalw.

Vulc. Mat.

Agricult.

Blue GrowthElect. Power

Fishing

Upstr. Chem

An Example: Ten Broad Domains of Emerging Industries

More at the European Cluster Conference,

Brussels, 20‐21 October

cluster internationalization berlin 09 19-14 ck

Economy & Finance