The Competitiveness of Clusters in Globalized Markets

Implications for Regional Development

Mario Davide Parrilli

• Verlag: Routledge
• Jahr: 2016
• ISBN:
  9781317682271
• Auflage: 1
• Thema: Architettura
• Thema: Pianificazione urbana e paesaggistica

The debate on the competitiveness of local and regional clusters in the current globalized markets is a priority as globalization puts pressure on such production systems and forces them to find new ways of competition and sustainability. Many traditional clusters may be constrained by the growth of transnational value chains and production networks that benefit from cheap resources and workforce as well as softer regulations that may be reaped in other parts of the world. This situation is even more palpable with the internationalization of innovation networks that may replace the former relevant regional and national innovation systems. This volume discusses the features of successful clusters and the threats and opportunities they currently face in such globalized environment and offers some perspectives and solutions to sustain the resilience of local and regional production systems.

This book was published as a special issue of European Planning Systems.

Local and Regional Development in Global Value Chains, Production Networks and Innovation Networks: A Comparative Review and the Challenges for Future Research

MARIO DAVIDE PARRILLI*,**, KHALID NADVI† & HENRY WAI-CHUNG YEUNG^‡
*Orkestra-Basque Institute of Competitiveness, San Sebastián, Spain, **Deusto Business School, San Sebastian & Bilbao, Spain, ^†Institute for Development Policy and Management, School of Environment and Development, University of Manchester, Manchester, UK, ^‡Department of Geography, National University of Singapore, Singapore

ABSTRACT Globalization as a process has developed exponentially over the past 20 years, generating multiple and opposite effects for local and regional development (LoRD). This has created both new opportunities as well as raising new threats for local actors, both public and private. This special issue sets out to consider the prospects for LoRD in this context. Our aim in the introductory article is to consider how globalization may bring about LoRD. We do this through a comparative review of three critical analytical frameworks that have been used in recent years to examine the changing dynamics of globalization and their consequences for local production systems, namely global value chains, global production networks and global innovation networks. We provide an overview of these distinct approaches, identifying their strengths and weaknesses. Our argument is not that any one of these approaches is necessarily “better” than the others, but rather that to formulate a more complete and dynamic territorial perspective on regional development in the context of globalization, there needs to be an attempt at (eclectically) integrating the elements of these three distinct frameworks. The article then goes on to show how individual contributions in this special issue push forward this agenda, drawing on these distinct analytical frameworks to consider the transformative prospects for LoRD.

Introduction

The globalization of markets has sharply increased over the past 20 years. This trend has multiple and opposite effects on the prospects for local and regional development (LoRD). It may create new economic opportunities (through, for example, productive investments, research and development (R&D) alliances, knowledge absorption, and the emergence of new consumers) and it may raise new threats (such as the relocation of production activities, firm closures, employment losses, brain drain, among others). In our view, the traditional perspective of regional economists offer rather circumscribed types of analysis on local production systems, small firm clusters and industrial districts. These are no longer sufficient to explain the features, limitations and potentials for the growth of local economies in an increasingly globalized era and need to be substantially revised. This is not a new criticism. Various approaches have emerged in recent years seeking to explore the emergent linkages between the local and global terrains. Our main aim in the introductory article to this special issue is to understand how globalization can bring about LoRD. We do this through a comparative review of three critical analytical frameworks that have been used in recent years to examine the changing dynamics of globalization and their consequences for local production systems, namely global value chains (GVCs), global production networks (GPNs) and global innovation networks (GINs). We provide an overview of these distinct approaches, identifying their strengths and weaknesses. Our argument is not that any one of these approaches is necessarily “better” than the others, but rather, that to formulate a more complete and dynamic territorial perspective on regional development in the context of globalization there needs to be an attempt at (eclectically) integrating the elements of these three distinct frameworks.

A number of sociologists and economists in development studies have sought to explain the nature of globalized linkages between firms and globally dispersed suppliers using the framework of GVCs (Humphrey & Schmitz, 2002; Gereffi et al., 2005). On these bases, they have identified a typology of linkages between lead firms and suppliers in value chains that include hierarchical, captive, relational, modular and market governance patterns. These patterns in turn depend upon three main factors: supplier competences, knowledge codification and transaction complexity. Within this framework, some have argued that local development is linked to the nature of ties developed in GVCs (Humphrey & Schmitz, 2002).

Another group of scholars, from an economic geography perspective, have developed frameworks that help explain the global dynamics of firms and trans-national production systems and the articulation and disarticulation of production networks across different sub-national regions. They do so by taking into account more widely the institutional and cultural features and constraints of different territorial ensembles, as well as the explicit policy approach taken by states and institutions, which seek to develop their own competitive positions (Ernst & Kim, 2002; Yeung, 2007, 2009; Coe et al., 2008).

The current global economic crisis adds complexity to this debate as these frameworks need to be both particularly flexible as well as continuously revised in order to capture the emergence of abrupt changes that modify current production, commercialization and innovation dynamics at the global scale. This editorial article will help the reader in two ways. First, this work (and the special issue as a whole) offers a comparative discussion of the theoretical and methodological instruments through which these key analytical frameworks (GVCs, GPNs and GINs) are adopted as a means to interpret the current dynamics of globalization and its implications for LoRD. We attempt to compare them and, simultaneously, underline advantages and limitations of such theoretical and methodological approaches. Taken together, we hope to set out the analytical challenge that academics and policy experts face vis-à-vis the analysis of regional development processes and prospects. Second, this work seeks to visualize the core features of these three frameworks that are particularly relevant for analysing LoRD within the increasingly competitive international markets in which any firm and local production system can either integrate (e.g. representing new market opportunities) or exit (e.g. as a result of global competition).

In the next section, we briefly introduce the academic evolution of the three conceptual frameworks, and then open the context for a thorough discussion of their critical features. In section 3, we take into consideration a range of relevant criteria in which the three approaches differ, and discuss their strengths, weaknesses and limitations. In section 4, we specify the position of each of these frameworks in the analysis of LoRD in an era of globalization. Moreover, we formulate an integrative framework in order to sketch out the basic features for the analysis of the future prospects of LoRD. The concluding section presents the added value of this contribution and an overview of the articles included in this special issue.

Historical Antecedents of Perspectives on Global Development Dynamics

A first step towards our theoretical synthesis requires a brief discussion of the historic process of internationalization of markets and the creation of frameworks that have set the scene for our current understanding of globalization (see also Hess & Yeung, 2006; Bair, 2009). For decades, many trade theorists, political economists and world-system experts have emphasized the importance of analysing the unequal industrial and market exchanges that led to the creation of core, semi-peripheries and peripheries (Prebisch, 1950; Singer, 1950; Hopkins & Wallerstein, 1977; Frank, 1978). These unequal relationships have either perpetuated themselves despite relevant changes in organizational patterns, or, as some have more recently suggested, are going through structural modifications due to the emergence of new hegemonies (Henderson & Nadvi, 2011). One critical strand in current debates on globalization has been the relationship between local and global actors, the nature of governance within these ties, and their implications for local policy (Held & McGrew, 2002; Henderson et al., 2002; Schmitz, 2004). The creation of the filiere framework by the French school of territorial development (ADEFI, 1985) as well as the Michigan-based subsector approach (Boomgard et al., 1992) explicitly attempted to bring together the understanding of the local development of firms (sometimes even local production systems) and the increasing importance of international markets (including actors managing the final phases of distribution and commercialization). These analytical attempts were the precursors to the GVC and GPN approaches and provide early insights into both a sectoral and an internationally integrated perspective on local industrial development processes.

Later on, in the 1990s, new theoretical frameworks emerged to take academic research several steps further in the understanding of the globalization of local production and innovation dynamics. Gereffiand Korzeniewicz (1994) developed the global commodity chains (GCC) approach which represented the academic evolution of the former concepts and paid special attention to global governance dynamics. They argued that local suppliers within some market chains were controlled or driven by downstream actors (e.g. distribution chains in food or apparel industries), while others were organized by lead manufacturers (and also the technology leaders) who drove production and influenced market dynamics in capital-intensive industries (e.g. pharmaceutical and aircraft companies).

In the early 2000s, new efforts by this group of GCC researchers resulted in an upgrading of their analytical framework with the creation of the GVC concept. The GVC concept explicitly identified the nature of value generation along each step of the chain. It also recognized that such value- creating chains were not restricted solely to commodities but could extend across manufacturing and indeed to services. Gereffi et al. (2005) also underlined that identifying the nature and basis of value creation along each stage of the GVC required a conceptual framework that provided a deeper analysis of the governance dynamics within the chain. This resulted in a shift from the buyer/supplier-led chains in the GCC perspective to the five governance typologies within GVCs (Gereffi et al., 2005). The nature of governance, or power, within the GVC relationship determined not only the process of adding and distributing value along the chain but also the possibilities of upgrading and thus of transformation from one type of GVC to another. As described by Bair (2005, p. 158), this GVC approach moves away from the “developmental disillusion” of many world-system experts who did not see any scope for a change between the centre and the periphery in the global economy without revolutionary upheavals in such ties. Both GCC and GVC suggest that there is both opportunity and possibility for dynamic and positive change once appropriate conditions and measures are put in place. Consequently, Humphrey and Schmitz (2002), and others, developed these frameworks further by applying the value chain concept to local and regional production systems, including local industrial clusters, in both developed and developing countries (see also Nadvi & Halder, 2005; Pietrobelli & Rabellotti, 2007) as a means to identify the potential for growth and development of such local economies, their SMEs and institutions in the context of international markets and global interactions.

A different but related framework was simultaneously developed by Ernst and Kim (2002) and Henderson et al. (2002), and later refined by Coe et al. (2008) and Yeung (2009) from an economic geography perspective. This framework helps to depict the composition of sector and multinational networks and the international economic transformations that occur in such markets in relation to specific national industrial policy approaches that stretch from open market perspectives to inward oriented indigenous/endogenous innovation approaches. More specifically, even though different GPNs are spanning the global economy and drawing different clusters and regions closer together in a new form of international division of labour, we continue to observe spatial differentiation in the location of different firms and their production networks on a global scale. In theoretical terms, there is indeed an intricate link between GPNs and industrial clusters. We can therefore think of GPNs as a globalized/decentralized phenomenon and industrial clusters as a localized/concentrated constellation of different configurations of GPNs. The former operates on a global scale and is constantly searching for better production locations, whereas the latter is developed to “bring down” and “localize” this highly globalized production activity. For GPNs to work and prosper, there must be good “network economies” to be reaped from spatially differentiated production arrangements. For industrial clusters to emerge and sustain, both local and non-local links are highly important. Local links refer to localized assets in specific territories such as institutions, labour, and capital formation. Non-local links point to flows of knowledge, people, and capital exogenous to these industrial clusters. They are critical to the formation of industrial clusters insofar as they bring in new learning, markets and technologies

A third approach that has been more recently developed (Ernst, 2009; Cooke, 2011) emphasizes the emergence of GINs, and their implications for local-global production inter-relationships. This framework stresses the critical relevance of specific high value-added activities including dispersed engineering, product development, and research activities across geographic frontiers. The balance of power in international production and market dynamics depends very much on these activities. In fact, production has become increasingly outsourced, whereas lead firms try to retain and/or control R&D networks and activities that affect their core capabilities, learning and innovation processes on a global scale. Even though this is in line with the literature on transnational corporations, the new emerging powers (mainly Brazil, Russia, India, Mexico and China (BRIMCs)) are increasingly joining R&D activities in the form of specialized R&D departments within multinational groups and/or within their own multinationals that benefit from a thick flow of expert managers and scientists coming back from western countries after an intense period of preparation and research practice. This process implies a catching up in R&D and innovation capabilities that are likely to change the global balance of power even more strongly over the next decade.

For years, these frameworks were mostly rooted in the analysis of regional/local development in developing and/or emerging economies; however, current academic work increasingly tends to abstract from it and focus on firms and their global networks. A substantial part of this literature may reorient its objectives to follow the route of the earlier literature on multinational companies (Dunning, 1988; Cowling & Sugden, 1997; Blomstrom et al., 2000; Dunning & Lundan, 2008; among others). More recently, this literature has focused on the history of large conglomerates that control R&D and innovation processes and the related production networks that determine the growth prospects of specific industries and large trans-border territories.

Overall, the fundamental insights offered by these distinct analytical frameworks might lead to a partial picture of global innovation, production and market dynamics that describe the strategies and the success achieved by an elite class of firms and a small number of lead firms that benefit from being integrated into such privileged chains and networks. Additional thinking is needed to understand the competitive position and prospects of regions within this globalized scenario by identifying the relevance of these key activities and processes (i.e. R&D, innovation, production and market) for regional development. This analysis requires taking a particular geographical approach, in other words viewing regions from a country-specific and localized perspective due to vastly different interpretation of territorial geographies. In countries such as th...

Inhaltsverzeichnis

• Cover
• Title
• Copyright
• Contents
• Citation Information
• 1. Local and Regional Development in Global Value Chains, Production Networks and Innovation Networks: A Comparative Review and the Challenges for Future Research
• 2. The Resilience of Clusters in the Context of Increasing Globalization: The Basque Wind Energy Value Chain
• 3. Competitiveness and Technological Upgrading in Global Value Chains: Evidence from the Indonesian Electronics and Garment Sectors
• 4. The Competitive Position of the Basque Aeroespatial Cluster in Global Value Chains: A Historical Analysis
• 5. From Strategic Coupling to Recoupling and Decoupling: Restructuring Global Production Networks and Regional Evolution in China
• 6. The Economic Geography of the Meso-global Spaces: Integrating Multinationals and Clusters at the Local–Global Level
• 7. Global Production Networks and Global Innovation Networks: Stability Versus Growth
• Index