Networked industries: definitions

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Vermelding onderdeel organisatie

September 16, 2013

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SPM9539: Economy, Ecology and Technology of networked

industrial complexes

Week 2 – course 1: Economy of networked industries.

Gerard P.J. Dijkema

Faculty of Systems Engineering, Policy Analysis and Management.

Department of Energy & Industry

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Layout of this lecture

Briefly discuss the assignment from last week:

• Generic cluster properties.

• Cluster definitions

• Cluster typologies and examples

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September 16, 2013 3

Industrial clusters / locales 2013

• Aerospace cluster Sao Paulo, Brazil (1)

• Plastic Packaging, NL (1)

• Offshore industry, Singapore (1)

• Bicycle industry, Taiwan (1)

• Food Industry, Oresund, Denmark/Sweden (1)

• London Financial District, UK (1)

• Maritime / offshore industry, NL(1)

• Horticulture, Westland, NL (1)

• Video game industry, Seattle, US (1)

• Biomass industry, NL (1)

• Beer Industry – NL (1)

• Shipbuilding industry, Ningbo-Shaoshan – China (1)

• Energy innovation cluster, France (1)

• High Tech Campus, Eindhoven, NL (3)

• Silicon Valley, US (2)

• Wind energy, Germany (1)

• Port cluster Rotterdam (1)

• Aerospace, Canada (1)

• Waste management industry, NL (1)

• Electronics industry or e-waste recycling, France (1)

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Networked industries: definitions

Many different names, mostly similar concepts:

• Industrial district or zone

(Marshall: 1890)

.

• (Eco-) industrial park

(Frosch & Gallopoulos: 1989)

.

• Cluster

(Porter: 1990) (Steinle & Schiele: 2001)

• Clear geographic boundary versus “localized”

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Industrial Districts

• Marshall (1890)  Markusen (1996)

• Markusen¹ studied various industrial districts with respect to ‘content’, ‘structure’ and ‘relationships’

• Markusen’s typology of Industrial Districts:

• Marshallian and Italianate Districts

• Hub-and-Spoke Industrial Districts

• Satellite Industrial Platforms

• State-Anchored Industrial District

Markusen, A. (1996), Economic Geography, 72(3), http://dx.doi.org/10.2307/144402

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Marshallian and Italianate Districts

• Marshallian:

• SME’s as ‘socio-economic’ entity

• long term contracts, strong relationship

• limited set of activities per locale

• Common culture and specific services

• Outside world connections limited

• Italianate: special type of Marshallian

• focus on cooperative innovation, risk-sharing

• governments actively reinforce these

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Hub-and-Spoke

• Domination by one or few key-firms or facilities (hubs)

• Suppliers surround them as spokes in a wheel

• High economies-of-scale

• Long-term relationships

• Low diversity, suppliers are replaceable

• Government involvement

• Local cultural identity

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Satellite Industrial Platforms

• Governed by foreign headquarters

• Little intra-district trade

• Focus is economy-of-scale

• Government influences district conditions by infrastructure and financial incentives

• Relatively weak relationships between actors in the district

• Strategic decisions are made outside the region  high vulnerability and risk

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State-anchored Industrial District

• Centered around large government institutions

• military

• R&D

• ministries / decision centres

• Often a hub-and-spoke character

• Creating a hub-and-spoke structure maybe a goal

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Cluster perspective

• Porter (1990): external scale effects by clustering

• “some tend to localize in space”

• Cluster: reinforcing “web” of

• producers in (networked) supply-chains

• service-providers

• design, construct, maintain, operate

• specialized kinds of engineering, financial, consulting services etc.

• infrastructure companies (from energy to ICT)

• knowledge centers

• Best: for each role or activity there exist competitors within the cluster

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Generic properties of clusters

Some generic properties of networked industries:

• Geographical “proximity” with:

• Other companies in same industry;

• Specialised suppliers;

• 3^rd party service providers.

• Proximity or access to / interchange with knowledge centres:

• Universities and Research Institutions;

• Consultants;

• Engineering bureaus.

• Companies are often in similar supply chains or networks

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Definition of a cluster

Depends on the specific industry, the definition will have some or all of the above properties in it.

In this course we will use the term cluster to refer to networked industries, industrial districts etc. etc…

- networked by

- material/energy/resource/products/services/information/

- knowledge/design/engineering service/capital goods etc.

Specific definitions will be provided by you in your final report. These definitions must be specific to the industry you choose.

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Industrial economics

National economic issues

Regional economic issues

Individual firm economics

Macro economic theories:

• Evolution of national economies (Stages of growth).

• De-industrialisation, post-industrial era

Regional economics issues:

• Economic boundaries of clusters?

• Clustering for competitive advantage.

• Individual-firm investment decisions.

• Production design and plant life cycle perspective.

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Stages of national economic growth

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De-industrialisation

“De-industrialisation is the process where the absolute and relative employment in the industrial sector is decreasing.”

Possible problems on regional or national level:

• Less innovation?

• Manufacturing is the engine of growth?

• Do you need industrial output/export to generate income?

Long term mechanisms

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Understanding regional economics

In order to understand regional economics when studying networked industries it is necessary to:

• Know what clusters are present in a region.

• Know what the composition of the cluster is.

• What are it’s members?

• What are the relationships between the members?

• How do they achieve competitive advantage?

• What other advantages does the cluster provide?

Industry specific

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Problems in regional economics

How do you define the boundaries of a cluster?

• By geographical boundaries?

• By employment quotas?

• By input output relationships? (supply chain!)

• By value chain? (value-added criteria)

These issues are not yet solved! Current solutions:

• Look for most competitive industries.

• Use Standard Industrial Classification (SIC) system.

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Value added versus employment

Industry shares as

percentage of total industry

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SIC code example (1)

Source: Feser & Bergman: 2000, p. 10

Vehicle production in North America, identified by SIC code and grouped by their purchase relationships

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SIC code example (2)

Vehicle production in North America, identified by SIC code and grouped by their sales

relationships

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Clusters is not supply chain!

Source: CSC: 2000, p. 3

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Advanced supply chain concepts

Issues with supply chain construction:

• Where does it start / end?

• What skills, processes and products and channels are included?

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Conclusion

Assignment 1  Assignment 2:

• Address economy, ecology, technology

• Material, energy, information, knowledge relationships

• Use a ‘systems approach’ to channel information from the papers This lecture

• Economics of networked industries:

• Economic mechanisms  cluster typologies

• RDA perspective.

• Company perspective.