local cluster concepts, facts and theory the topic concepts theory facts thomas brenner dimetic...
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Local ClusterConcepts, Facts and Theory
The Topic Concepts Theory Facts
Thomas Brenner
DIMETIC October 2007
Why Is This Topic Relevant ?
Scientific perspective: Spatial distribution of industries Success of certain regions
Policy perspective: Why are there differences between regions ? How can unsuccessful regions be made
successful ? How can clusters be established ? How can they be made more successful ?
How Is This Topic Treated in the Literature ?
Case studies: Study of emergence Examination of success
Theoretical approach: Mathematical: New Economic Geography Conceptual: Various concepts
Spatial econometrics: Spatial distribution of industries Identification of clusters
New Economic Geography
Mathematical Two- or few-country models of specialisation Stability of local clusters
Simulations Local externalities: centripedal and
centrifugal forces Explanation for existence of agglomerations Spatial distribution
Conceptual Works
Discussion of one or a few important factors
Industrial districts Innovative milieux Local clusters
Various definitions Dominant definition: Porter
Learning regions, regional innovation systems etc.
Discussion of Important Factors
Common labour market, service firms and cooperation (Marshall)
Flexible specialisation (Piore & Sabel) Social networks (Becattini) Diamond model (Porter) Innovative milieux (Camagni) Learning regions (Lundvall) Spin-offs (Klepper)
Industrial Districts
Marshallian: Common labour market Service firms Spillover / Interaction
Italian: Plus: Social network
Characteristics Concentration of small firms Strong interaction Manufacturing industry
Innovative Milieux
Concentration of innovative actors This creates sometimes
Synergies through interaction Innovative atmosphere
Porter’s Diamond Model
Chance
policy
Local factors and resources
Firm strategy and competition
Related and service industries
Demand
Definition: What Are Clusters ?
Scientific: Many different concepts and definitions Common: Agglomeration of firms of one or a
few industries in a region Different additional conditions, industry and
region requirements
Policy: Some regionally interacting firms Sometimes higher requirements
Factors: What Causes/Characterises Clusters ?
Supplier-buyer linkages (ID,IM,LC) Cooperation (ID,IM) and competition (LC) Social contacts (ID) Innovations (IM) Local research (LC) Local policy (LC) Spillover/synergies (IM) Labour market (ID) Demand (LC)
Emergence vs. Success
Success How do firms benefit in clusters ? What are the mechanisms behind local
externalities ? Does not explain existence !
Emergence Why do local clusters exist ? How do they emerge ? What are the mechanisms behind the self-
reinforcement of clusters ?
positive feedback-loops:
example:
Theory: Self-augmenting Processes
Number of firms
Founding situation
Mechanisms (examples):• Accumulation of human capital• Cooperation among firms• Choice of co-location• Spillover• Interaction with public research• Spinoffs• Interaction with local policy
Theoretical Model (Schematic)
External conditions and fixed local factors
Local firm population
Flexible local conditions
Endogenous dynamics
Theoretical Model (Mathematical)
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Two stable states:
Prediction: Static situation
Number of firms
Regions with cluster
Regions without cluster
Critical mass
Number of regions
Prediction: Distribution
Should hold for• Number of firms• Number of employees• Number of patents
Number of regions
Number
critical mass
Example: Printing
0.000 0.005 0.010 0.015 0.020 0.025 0.030 0.035
Anteil an der gesamten Beschäftigtenzahl
0
1
2
3
4
log(
Häu
figke
it)
Number of employees
Log (frequency)
Example: Clothing
0.00 0.01 0.02 0.03 0.04 0.05 0.06
Anteil an der gesamten Beschäftigtenzahl
0
1
2
3
4
5
log(
Häu
figke
it)
Number of employees
Log (frequency)
Example: Glas
0.00 0.02 0.04 0.06 0.08 0.10 0.12
Anteil an der gesamten Beschäftigtenzahl
0
1
2
3
4
5
log(
Häu
figke
it)
Number of employees
Log (frequency)
Emergence of Clusters
What are the relevant dynamics and mechanisms ?
What are the relevant local factors ? How do we study these processes ?
How do local clusters emerge?
1st stage: Emergence of the market
2nd stage: Emergence of cluster
3rd stage: Stability
How do local clusters emerge?
1st stage: Emergence of the market
2nd stage: Emergence of cluster
3rd stage: Stability
4th stage: Disappearance
Necessary conditions II
1st stage: Emergence of the market:II. Sufficiently supportive local conditions
Market and local attractiveness
Necessary conditions III
2nd stage: Emergence of cluster:III. Sufficiently fast development
Market and local attractiveness
Necessary conditions
Substitutes: Different mechanisms creating self-augmenting
dynamics Different aspects of local conditions Different aspects of local developments
Complements: The self-augmenting dynamics have to be strong
enoughand
The local conditions have to be sufficiently good and
The local developments have to be sufficiently fast
Analysis of Factors and Dynamics
Case studies What were the initial conditions ? How did the region develop ?
Meta-study: Van der Linde 2003 (Internet, Diamond
model) Own study: 159 cases Analysis of the literature (222 works)
Meta-study
Factors, dynamics and events analysed 12 self-augmenting processes 17 local factors 6 events
Characterisation: I: is argued to be important and present U: is argued to be unimportant or ot present N: is not mentioned
Self-augmenting Processes
Process I U N
F-HC 116 10 33
COOP 87 22 50
COLOC 83 3 73
INTRA-SPILL 81 14 64
F-EDU/RES 66 19 74
SPIN 60 4 95
F-POL 49 10 100
INTER-SPILL 46 1 112
F-OPIN 44 9 106
F-VC 35 6 118
Local Factors
Factor I U N
LABOUR 105 10 44
NET 78 37 44
UNI/RES 70 22 67
TRAD 66 10 83
IND 61 2 96
LOC-POL 56 18 85
INFRA 52 10 97
CULT 52 14 93
GEOGR 51 2 106
DEMAND 49 20 90
Comparison: Time
Mechanism Post 1950 vs. Ante 1950
Post 1970 vs. Ante 1950
F-EDU/RES >
F-VC >
LOC-POL >
GEOGR <
TECH-PARK > >
IND <
SPEC-POL > >
CHANCE <
Comparison: Industry
Mechanism High tech vs. Low
tech
Know. vs. Non-know.
SPIN, SUPSTART, F-EDU/RES > >
F-HC, F-VC >
COOP < <
NAT-POL, UNI/RES, LABOUR, TECH-PARK, CAPITAL, LIFE
> >
LOC-POL, TYPE >
GEOGR, WAGE < <
SPEC-POL, LEAD-FIRM > >
HIST <
Comparison: Country
Mechanism Developed vs. developing
Anglo-saxion
Asia
F-EDU/RES, SPIN > <
F-POL, F-OPIN <
COOP >
WAGE <
LIFE > <
CULT, UNI/RES <
TYPE, INFRA >
LEAD-FIRM > < <
Measuring Regional Innovation Systems
What is a RIS? Innovativeness of regions Measurement approaches Local factors
Thomas Brenner
DIMETIC October 2007
What is a RIS ?
Two definitions in the literature: Innovative regions
Research infrastructure Innovative firms and industries
Similar to national innovation systems All elements and interactions That contribute to innovation generation In a region
What is a RIS ?
Innovative regions How are they defined?
Case studies Innovation output, but no threshold Innovation inputs, such as R&D expenditures
or public research
What does it mean?
What is a RIS ?
System perspective Number of interacting elements With interactions like
Joint research Cooperation (more general) Flow of knowledge Flow of people Flow of money
Innovativeness of Regions
Regional Innovation Scoreboard Ranking of EU regions according to a number
of variables Human resources in science and technology Participation in life-long learning Public R&D expenditures Business R&D expenditures Employment in medium/high-tech manufacturing Employment in high-tech services European patent applications
Innovativeness of Regions
What is innovativeness of regions? Total innovation output? Innovation output per inhabitant? Innovation output per R&D employee?
What does it mean?
Measurement Approaches
Usual approaches: Innovation scoreboard
Input and output variables
Total innovation output Innovation output per inhabitant Innovation output per R&D employee Knowledge production function and
production frontier Non-parametric frontier approach
Local Factors
What are the local factors that play a role for the innovation output of regions: Regression
Nations Regions Firms
Questionnaire How to frame the questions ?
Case studies How to generalise ?
Local Factors
What are the local factors that play a role for the innovation output of regions
What are the implications for policy? What are the implications for firms?
FE PR HK NW OI CU PO LM KP
Identification of Local Clusterand Policy Issues
Identification of Local Clusters Problems and Local Resources Policy activities Policy recommendations
Thomas Brenner
DIMETIC October 2007
Identification of Local Clustering
Which Industries show clustering ? Ignored in the literature Some discussion about low-tech industries
Where are local clusters ? Italian approach Identification according to specialisation ratio Own approach: Distribution estimation
Italian Approach
Definition of labour market areas Specialisation (share of industry’s workers) Additional conditions
Dominance of manufacturing Dominance of small and medium size firms
Results Identification of industrial districts Repeated
Specialisation ratio
Regions according to statistical office Specialisation (share of industry’s workers)
higher than 3 Sometimes additional conditions
Certain number of related industries
Results Identification of local clusters
Distribution Estimation
Exponential function:P(f) = a1
f
Boltzmann-like distribution:P(f) = f a2
f
Cluster part:P(f) = (f-a4) a5
(f-a4) if f>a4
Industries with Local Clusters
Manufacturing industries: Clustering can be proved for around 50%
For the number of workers and For the number of firm sites
Service industries: Clustering can be proved for around 30% for
each number Approach does not apply for around 20%
Industries with Local Clusters
sub-industries industries with clusters
food 9 3
tabacco 1 -
textile 7 6
clothing 3 2
leather 3 3
wood 5 4
paper 5 -
printing 3 2
petroleum processing 3 1
chemicals 7 1
plastics 2 1
glas, ceramics & stones 8 4
Industries with Local Clusters
sub-industries industries with clusters
metal production 5 5
metal products 7 4
machinery 7 2
office machines 1 -
electronics 6 2
telecommunication 3 2
instruments 5 3
cars 3 -
other transportation 5 3
furniture, toys, ... 6 4
recycling 2 2
Schleswig-Holstein
Hamburg
Niedersachsen
Bremen
Nordrhein-Westfalen
Hessen
Rheinland-Pfalz
Baden-Württemberg
Bayern
Saarland
Berlin
Brandenburg
Mecklenburg-Vorpommern
Sachsen
Sachsen-Anhalt
Thüringen
Problems with Identification
What are the reasons for industrial agglomerations?
Local externalities Local resources History
Approaches Ellison/Glaeser: Dartboard approach Bottazzi et. al.: Model of local externalities Own approach: Model of local externalities
plus local resources
Problems with Location Model
Not all factors can be empirically measured What are the original factors ? What factors develop because of the
agglomeration of the industry ?
Policy approaches
Cluster organisation Network financing and promotion Monetary support for cluster activities Technology parks Improvement of local conditions
What is supported
Coordination Networking Joint innovation and research Subsidising specific locations Public research Education
Basic questions
Should policy be involved ? When should activities been taken ? Where should activities been taken ? What should be done ?
First Stage: Where Do Clusters Emerge?
1st and 2nd stage: Emergence of clusters:Sufficiently supportive local conditions
Market and local attractiveness
Second Stage: Will Potential be Used ?
2st stage:improve local dynamics
Market and local attractiveness
Which is the Right Region ?
Should locations be supported by policy?
Number of regions
Activity
critical mass
• NO
• YES• NO
Knowledge Production Function
Cobb-Douglas function
Inputs are R&D expenditures Universities Local factors (such as population density,
GDP, education, …)
Linear function
i
iiInputaoutputInnovation
i
iiInputaoutputInnovation
Private R&D
Mechanisms Firms’ R&D employees produce most
innovations
Empirical evidence High correlation R&D expenditure is even often used to
measure innovativeness
Implications Innovativeness depends on innovative firms
Public Research
Mechanisms Source of ideas and knowledge Cooperation partner Source of human capital
Empirical evidence Econometric evidence, regionally bound Source of ideas: average importance Cooperation: 13%
Implications Firm location Set-up of research institutes
Education
Mechanisms Availability of highly qualified labour
Empirical evidence Evidence for university graduates Importance for large firms
Implications Firm location Set-up of universities
Education
Small firms
Medium firms
Large firms
With R&D
Without R&D
Qualified labour 2,22 2,52 3,26 3,05 2,18
Ideas for new prod.&proc. 2,53 2,4 2,04 2,19 2,5
Information 2,32 2,24 2,33 2,29 2,31
Direct support 2,08 2,28 2,67 2,37 2,25
New instruments and techniques
2,22 2,20 2,42 2,39 2,17
Results from basic research 2,19 2,04 1,96 2,18 1,98
Consulting 1,86 1,96 2,33 2,02 2,04
Relevance of Universities:
Networks and Cooperation
Mechanisms Most innovations are produced jointly 13% are done allone
Empirical evidence Cooperation is frequent Effect is not proved
Implications ??
Networks and Cooperation
Partner Percentage
Material and component supplier 55,2%
Machinery supplier 54%
Customer 43,7%
Associations 35,1%
Other firm sites of the same company 27,9%
Universities 25,9%
Central lab of the company 24,2%
Public research institutes 21,5%
Consulting firms 19,3%
Competitors 8,5%
Capital market
Mechanisms Financial resources for innovations
Empirical evidence High percentage for start-ups and first
innovation project, than decreasing Local effect ?
Implications Start-up process important
Labour market laws
Mechanisms Flexibility important for innovation projects Innovative employees need liberty and
belongingness
Empirical evidence Innovative firms use more frequent less
flexible rule
Implications Innovative firms have specific requirements
Patent laws
Mechanisms Innovation protection motivates innovation Protection hinders further development
Empirical evidence 30% of innovations are patent protected Case studies Patent changes
Implications Dependent on technological advancement
Culture
Mechanisms Innovation attitude Cooperation attitude
Empirical evidence Different strengths in innovation processes Different institutions and laws Different interaction cultures
Implications Firm organisation and policy has to be
adapted