Peter Maskell

Localised learning and industrial competitiveness

Localised Learning and Industrial Competitiveness Peter Maskell and Anders Malmberg BRIE Working Paper 80 October 1995 Paper presented at the Regional Studies Association European Conference on Regional Futures Gothenburg, 6. -9. May 1995 Peter Maskell, Copenhagen Business School, Danish Research Unit for Industrial Dynamics (DRUID/2), Nansensgade 19,2, DK-1399 Copenhagen K, Denmark, ( +45 3815 2881, Fax: +45 3929 2226, E-Mail: MASKELL/TTR@CBS.DK Anders Malmberg, Uppsala University, Department of Social and Economic Geography, Norbyvagen 18 B, S-75236 Uppsala, Sweden, ( +46 1818 2534, Fax: +46 1851 4116, E-mail: ANDERS.MALMBERG@KULTGEOG.UU.SE. The paper is based on research by the authors as part of the project Regional Production Systems in the Nordic Countries supported by the Nordic Institute for Regional Research (NordREFO). Table of Contents Abstract Introduction: Towards the knowledge-based economy Knowledge creation Limits to learning Regional capabilities, institutions and localised learning. Enhanced knowledge creation: industrial districts

The Elusive Concept of Localization Economies: Towards a Knowledge-Based Theory of Spatial Clustering:

A number of possible advantages of industry agglomeration—or spatial clustering—have been identified in the research literature, notably those related to shared costs for infrastructure, the build-up of a skilled labour force, transaction efficiency, and knowledge spillovers leading to firm learning and innovation. We identify two shortcomings of existing research on the clustering phenomenon. First, the abundance of theoretical concepts and explanations stands in sharp contrast with the general lack of work aimed at validating these mechanisms empirically and the contradictory evidence found in recent empirical work in the field. Second, there is still a lack of a unified theoretical framework for analyzing spatial clustering. In an attempt to remedy the latter shortcoming, this paper investigates the nature of the cluster from a knowledge-creation or learning perspective. We argue for the need to establish a specific theory of the cluster where learning occupies centre stage. The basic requirements for such a theory of the cluster are discussed. Two main components of such a theory are identified: it must explain the existence of the cluster on the one hand and its internal organization on the other.

Building global knowledge pipelines: The role of temporary clusters

Abstract Business people and professionals come together regularly at trade fairs, exhibitions, conventions, congresses, and conferences. Here, their latest and most advanced findings, inventions and products are on display to be evaluated by customers and suppliers, as well as by peers and competitors. Participation in events like these helps firms to identify the current market frontier, take stock of relative competitive positions and form future plans. Such events exhibit many of the characteristics ascribed to permanent spatial clusters, albeit in a temporary and intensified form. These short-lived hotspots of intense knowledge exchange, network building and idea generation can thus be seen as temporary clusters. This paper compares temporary clusters with permanent clusters and other types of inter-firm interactions. If regular participation in temporary clusters can satisfy a firms need to learn through interaction with suppliers, customers, peers and rivals, why is the phenomenon of permanent spatial clustering of similar and related economic activity so pervasive? The answer, it is claimed, lies in the restrictions imposed upon economic activity when knowledge and ideas are transformed into valuable products and services. The paper sheds new light on how interaction among firms in current clusters coincides with knowledge-intensive pipelines between firms in different regions or clusters. In doing so, it offers a novel way of understanding how inter-firm knowledge relationships are organized spatially and temporally.

The Competitiveness of Firms and Regions ‘Ubiquitification’ and the Importance of Localized Learning

In traditional location theory there is a distinction between factors of production for which the costs differ significantly between locations, on the one hand, and production inputs which are in practice available everywhere at more or less the same cost (i.e. so-called ubiquities) on the other. In this article, we discuss the process whereby some previously important location factors are actively converted into ubiquities. With an admittedly rather horrendous term, we label this process ‘ubi-quitification’. It is argued that ubiquitification is the outcome of the ongoing globalization process as well as of a process whereby former tacit knowledge gradually becomes codified. Ubiquitification tends to undermine the competitiveness of firms in the high-cost areas of the world. When international markets are opened up and when knowledge of the latest production technologies and organizational designs become globally available, firms in low-cost areas become more competitive. In a knowledge-based economy, as a consequence, firms in high-cost areas must either shield some valuable pieces of knowledge from becoming globally accessible, or be able to create, acquire, accumulate and utilize codifiable knowledge a little faster than their cost-wise more favourably located competitors. Focusing on learning processes, the article maintains that most firms learn from close interaction with suppliers, customers and rivals. Furthermore, processes of knowledge creation are strongly influenced by specific localized capabilities such as resources, institutions, social and cultural structures.

Towards an explanation of regional specialization and industry agglomeration

Abstract The main argument advanced in this paper is that proximity matters. Product innovations, new forms of organization or new skills are arrived at in interactive processes within industrial systems. Such systems are embedded in a broader cultural and institutional context. Everything else being equal, interactive collaboration will be less costly and more smooth, the shorter the distance between the participants. The benefits of proximity can be translated into a force of spatial agglomeration in relation to firms engaged in interactive learning. Thus, agglomerations of related economic activity are not just reminiscents of previously cost efficient spatial configurations, but are currently being recreated as a result of an increasing demand for rapid knowledge transfer between firms. In this finding, we argue, lies the foundation for explaining the observed durability in otherwise incomprehensible patterns of specialization and competitiveness between countries and regions.

The Cluster as Market Organisation

This paper views clusters as a specific spatial configuration of the economy suitable for the creation, transfer and usage of knowledge. It investigates how the modern exchange-economy becomes organised as rent-seeking firms build network relations to create knowledge and obtain resource efficiency while keeping transaction costs at bay. It moves on to consider the cluster as an emerging, self-organising, attractive alternative for interfirm relationships in cases where (global) network formation becomes a less feasible strategy. The paper empirically investigates two industries where clustering for different reasons might be considered superior to other forms of market organisation.

Learning Paths to Offshore Outsourcing - From Cost Reduction to Knowledge Seeking

A corporations offshore outsourcing may be seen as the result of a discrete, strategic decision taken in response to an increasing pressure from worldwide competition. However, empirical evidence of a representative cross-sector sample of international Danish firms indicates that offshore sourcing in low-cost countries is best described as a learning-by-doing process in which the offshore outsourcing of a corporation goes through a sequence of stages towards sourcing for innovation. Initially, a corporations outsourcing is driven by a desire for cost minimization. Over a period of time the outsourcing experience lessens the cognitive limitations of decision-makers as to the advantages that can be achieved through outsourcing in low-cost countries: the insourcer/vendor may not only offer cost advantages, but also quality improvement and innovation. The quality improvements that offshore outsourcing may bring about evoke a realization in the corporation that even innovative processes can be outsourced.

The Firm in Economic Geography

Abstract This article is concerned with the alleged absence in economic geography of a particular microtheoretical foundation that spells out precisely what makes the central actor of the subdiscipline, “the firm,” behave and perform the way it does. It especially maintains that economic geography is characterized by the lack of a clear conception and understanding of why this specific form of organizing economic activity exists and prevails in a specialized exchange economy, the factors conditioning its size and boundaries, and the endogenous mechanisms that influence its mode of external interaction. The article proposes that theories developed in neighboring fields—particularly economics—can be identified, selected, and subsequently applied within economic geography by developing a selection mechanism based on a few simple criteria.

Learning in the Village Economy of Denmark. The role of Institutions and Policy in Sustaining Competitiveness

The benefits of an international division of labour is never illustrated more clearly than in small developed nations like Denmark. Without many natural resources such countries can never be self sufficient and they need access to foreign markets in order for their firms to specialise and utilize economics of scale. The specialisation chosen is mainly in low-tech goods, where the risk of sudden domestically damaging changes in technology or demand are relatively small. Besides such general features of small developed nations, the Danish case has some special characteristics, which distinguishes it from many other nations and regions. One important feature is the century-old, deep-rooted egalitarian beliefs of the society which during the last century has intermixed with the growth of the public sector in shaping not only the welfare state, but also a strongly consensus-seeking political system - the negotiated economy - incorporating all major groups in the economy. Recently, the development towards a knowledge based world economy has increased the importance of another feature with an small egalitarian country: the kind of trust-relations, that come into existence, when everyone in an industry has known everybody else through many years. The international industrial competitiveness of the countrys vast majority of small, export oriented firms are not only favoured by a reasonable adequate macro-economic policy but further enhanced by the ease in the exchange of information resulting from established trust-relations.

KNOWLEDGE CREATION AND DIFFUSION IN GEOGRAPHIC CLUSTERS

The established fact that knowledge in society is always distributed and dispersed can be given a dynamic interpretation when perceived as the outcome of an ongoing deepening of the division of labour as suggested by Adam Smith. Individuals specialising on performing certain tasks are motivated to find solutions and notice peculiarities otherwise overlooked. Thus, this gives rise to the suspicion that the process of innovation and learning is fuelled by the development of distinct bodies of knowledge developed in independent organisations pursuing objectives of competitiveness. Specialisation and outsourcing, etc., aim at freeing managerial and other resources within the firm to be relocated in developing core capabilities or competencies and in enhancing the internal learning processes. The boundaries of the firm thus impact directly on the (possible) level of learning in the economy. However, developing distinct bodies of knowledge increases the cognitive distance that firms have to overcome when engaged in inter-organisational learning. This must imply that interorganisational learning is subject to thresholds, before the dispersed knowledge bases of firms have grown sufficiently apart for interacting to imply learning; and ceilings, after which the cognitive distance becomes too great for firms to bridge, and where learning, consequentially, will cease. The paper argues that geographical clusters constitute an unplanned and organically developed mechanism for reducing cognitive distance between firms and thereby the cost of knowledge transfer and utilisation, while at the same time maintaining the specialisation within and between firms necessary for creating new knowledge.