This monthly selection of articles has been carried out by Philippe Gugler and Damiano Lepori, the Center for Competitiveness, University of Fribourg. The entire selection, carried out since 2013, can be consulted on the academic articles page of our web.

Industrial cluster policy and transaction networks: Evidence from firm-level data in Japan

By: T. Okubo, T. Okazaki, E. Tomiura. Institute for Economic Studies, Keio-IES Discussion Paper Series, DP2016-019, 2016.

Abstract: “Cluster policy is designed to facilitate inter-firm networking. We examine industrial clusters in Japan based on firm-level transaction data. Firms in clusters expand transaction networks at a higher speed, but significantly only with firms in the agglomerated core Tokyo, not with local firms within the same region. We confirm the robustness by regional historical background as instruments. By disaggregating firms by their main bank types, we find that cluster firms expanding networks are mainly financed by regional banks, not by banks with nation-wide operations. This suggests the importance of intensive relationship with the main banks for inter-firm network formation.” [ABSTRACT FROM AUTHORS]

Cluster Policy and Firm Performance: a Case study of the French Optic/Photonic Industry

By: A. Ben Abdesslem, R. Chiappini. GREDEG Working Papers Series No. 2016-26, 2016.

Abstract: “This study empirically analyzes the effects of a cluster policy on firms’ productivity, exports, employment and capital in the French optic/photonic industry. Exploiting firm-level data, we first analyze the selection process of the French cluster policy through a logit model, before combining a propensity score matching procedure and a differences-in-differences estimation in order to capture its impact on firms’ performance in the optic/photonic industry. We first show that larger firms are more likely to be selected by the French public policy in the optic/photonic industry. Second, the firms that have received the competitiveness cluster label have become more productive. We also found a positive and significant impact of the public policy on exports, total fixed assets and employment, but no evidence has been found localization economies. Third, when compared to an industrial cluster that only benefits form agglomeration economies, we found that firms from the competitiveness clusters have experienced a labor productivity gain, greater employment and an increase in total fixed assets.” [ABSTRACT FROM AUTHORS]

River deep, mountain high: Of long‐run knowledge trajectories within and between innovation clusters

By: Önder Nomaler, Bart Verspagen. UNU-MERIT Working Papers 2016-048, ISSN 1871-9872, 2016.

Abstract: “We bring together the topics of geographical clusters and technological trajectories, and shift the focus of the analysis of regional innovation to main technological trends rather than firms. We define a number of inventive clusters in the US space and show that long chains of citations mostly take place between these clusters. This is reminiscent of the idea of global pipelines of knowledge transfer that is found in the geographical literature. The deep citations are used to identify technological trajectories, which are the main directions along which incremental technological progress accumulates into larger changes. While the origin and destination of these trajectories are concentrated in space, the intermediate nodes travel long distances and cover many locations across the globe. We conclude by calling for more theoretical and empirical attention to the “deep rivers” that connect the “high mountains” of local knowledge production.” [ABSTRACT FROM AUTHORS]

The impact of urban concentration on countries’ competitiveness and entrepreneurial performance

By: E. Komlosi, B. Pager. MPRA Paper No. 73950, 2016.

Asbtract: “This paper aims to elaborate the role of Jacobs-type of agglomeration effects on countries’ competitiveness and entrepreneurial performance. Our research allows for a better understanding of the relationship that exists between a country’s urban system, characterized by spatial agglomeration (concentration) or deglomeration (deconcentration) processes, and its competitiveness and entrepreneurial performance. Urbanization economies refer to considerable cost savings generated through the locating together of people, firms and organizations across different industries. It has recently become an axiom that the better performance of global cities (as they are important nodes of innovation and creativity) is derived from agglomeration effects. This general assumption follows that the more concentrated an urban system of a country, the more competitive and better its entrepreneurial performance. Even though this notion has gained quick and ardent acceptance from practitioners, the related literature shows contradictory results; this has induced a heated debate in academic circles, because it has raised serious doubts about the “bigger is better” theory. We hope to contribute to this debate with our detailed analysis. To understand the impact of urban concentration, we selected 70 countries and calculated the so-called ROXY Index measuring the degree of agglomeration or deglomeration in their urban systems. To exemplify country-level competitiveness, we applied the Global Competitiveness Index (GCI) while the Global Entrepreneurship and Development Index (GEDI) was used to demonstrate country level entrepreneurial performance. Using these indexes correlation and cluster analysis were designed to obtain understanding of the relationship between them. Our analysis indicates that as urban concentration initially increases competitiveness, entrepreneurial performance also increases, but at a decreasing rate. Both of them eventually reaches a maximum, and then after a certain point decrease with further concentration. Therefore, the curve for this relationship is non-linear and folds back. This indicates that over- or under-concentration of the population within an urban system does not necessarily result in a better outcome. However, we should consider that a high concentration of population is only one important factor for competitiveness and entrepreneurial performance while other effects may exist.  [ABSTRACT FROM AUTHORS]

Knowledge bases, multi-scale interaction and transformation of the Vienna medical cluster

By: F. Tödtling, T. Sinozic, A. Auer. Institute for Technology-Assessment (ITA), Institute for Multilevel Governance and Development, Research Report, Project No. I 582-G11, 2016.

Summary: “The health sector and medical technologies are of an increasing importance in society and for regional and national economies. Much like other life sciences industries, the medical devices sector relies upon specific factors and knowledge processes that shape and support its innovation capabilities and competitiveness. Previous studies have shown that growth and innovation in this sector depend on specific local factors and conditions as well as on markets and knowledge-interdependencies at higher spatial scales. There is still a research gap on the detailed nature of these driving factors and relationships, however. In this research, we have investigated these issues for the Vienna medical devices cluster that is part of the wider life sciences sector in this region. The main aims of the study were to generate insights into how different economic, knowledge- and policy conditions, and their spatial scales, interact to support and hinder development of the medical devices industry in Vienna, and to draw policy conclusions based on these findings. The first stage of the study involved a literature review to factors and processes supporting medical cluster growth, and to medical devices innovation and related knowledge flows. The literature review also included a survey of contextual materials (such as reports and secondary data sources) on the medical devices industry in Vienna and in Austria, focusing on aspects of its history, size, structure and growth. The primary data collection on driving factors, knowledge bases, and policies of the Vienna medical devices cluster was carried out based on interviews with eight industry experts and with an interview survey of 30 firms. This analysis provided novel insights into, first, the importance of local, national and international factors for innovation and competitiveness of this sector in Vienna, second, knowledge processes and –interactions inside and outside the firm, and the policy- and governance environment. The Vienna medical devices cluster is based on a long tradition in Medical science, engineering and precision mechanics in the region. Companies located there have some older roots, but most of them have been set up since the 1970s. One third of all Austrian medical devices firms are nowadays located in this region. R&D performing firms are specialised e.g. in software for medicine, telemedicine and e-health, electromechanical medical devices, dental technology, diagnostic and therapeutic devices, and surgical instruments, but there is a high heterogeneity of firms. In order to take this into account we distinguished between four groups. Group A firms are engaged in non-invasive high-tech medical devices, Group B in invasive high-tech products, Group C in low-tech devices, and Group D only sell and distribute medical devices products to the Austrian and nearby market. Both the high-tech and low-tech firms are highly specialised, and employ highly qualified people. The technology intensive Group A and B firms engage more in R&D and innovation, and they show a more steady growth. They also sell more internationally than the rest, and they are better networked at an international scale. Group C firms are in low-tech medical devices, they tend to be older, and they rely more on regional and national networks for knowledge flows and innovation. These firms face price-based competition from international markets and they show slower growth. Group D firms are sales- and distribution firms, often subsidiaries of global firms, specialised in selling to the Austrian and nearby CEE market. Overall, the main strengths of the sector are incremental innovation, local and national networks, and an understanding of the domestic market. Firms invest many resources also in meeting international regulatory environments for their products, which differ greatly across countries. The sector benefits from a growing domestic and foreign demand, and research collaborations mainly with local and Austrian universities. The medical device sector in Vienna also has some weaknesses and challenges to overcome for maintaining its competitiveness. The R&D that the firms engage in does not yield the growth rates of other technology-based sectors in Austria. International networks are scarce and recent, and often lack a strategic orientation. International competition in the domestic market is rising. A further important challenge is increasing international regulation and marketing, which is becoming more complex to oversee and manage. Policy actors both on local and national levels should address these challenges facing the medical devices sector in Vienna and the country. We arrive at the following policy conclusions for improving the competitiveness and performance of the medical devices cluster in Vienna. The knowledge bases and innovation capabilities of local firms need to be further strengthened. In this context, not just radical but also incremental innovation should be supported and enhanced in the sector and related technology areas. For this purpose, the domestic knowledge- and skills base should be strengthened through investment into schools, colleges and universities, and through recruitment of expertise from abroad. Local connections to hospitals, doctors and the broader healthcare sector in product development and testing, as well as international networks need to be deepened and broadened. Furthermore, a good understanding of and experience in meeting international regulatory settings for medical devices products is crucial.“ [SUMMARY FROM AUTHORS]

Spatial Structures of Manufacturing Clusters in Cambodia, Lao People’s Democratic Republic, and Thailand

By: T. Gokan , I. Kuroiwa, N. Laksanapanyakul, Y Ueki. IDE Discussion Paper No. 617, 2016.

Abstract: “Examining the spatial structure of clusters is essential for deriving regional development policy implications. In this study, we identify the manufacturing clusters in Cambodia, the Lao People’s Democratic Republic, and Thailand, using two indices—global extent (GE) and local density (LD)—as proposed by Mori and Smith (2013). We also analyze four different combinations of these indices to highlight the spatial structures of industrial agglomerations. Since industrial clusters often spread over administrative boundaries, the GE and LD indices―along with cluster mapping―display how the detected clusters fit into specific spatial structures.“ [ABSTRACT FROM AUTHORS]

Spatial patterns of manufacturing clusters in Vietnam

By: T. Gokan, I. Kuroiwa, K. Nakajima, S. Sakata. IDE Discussion Paper No. 616, 2016.

Abstract: “The formation of industrial clusters is critical for sustained economic growth. We identify the manufacturing clusters in Vietnam, using the Mori and Smith (2013) method, which indicates the spatial pattern of industrial agglomerations using the global extent (GE) and local density (LD) indices. Spatial pattern identification is extremely helpful because industrial clusters are often spread over a wide geographical area and the GE and LD indices―along with cluster mapping―display how the respective clusters fit into specific spatial patterns.“ [ABSTRACT FROM AUTHORS]

Localized Knowledge Spillovers: Evidence from the Agglomeration of American R&D Labs and Patent Data

By: K. Buzard, G. A. Carlino, R. M. Hunt, J. K. Carr, T. E. Smith. Federal Reserve Bank of Philadelphia, Working Paper No. 16-25, 2016.

Abstract: “We employ a unique data set to examine the spatial clustering of private R&D labs. Instead of using fixed spatial boundaries, we develop a new procedure for identifying the location and size of specific R&D clusters. Thus, we are better able to identify the spatial locations of clusters at various scales, such as a half mile, 1 mile, 5 miles, and more. Assigning patents and citations to these clusters, we capture the geographic extent of knowledge spillovers within them. Our tests show that the localization of knowledge spillovers, as measured via patent citations, is strongest at small spatial scales and diminishes rapidly with distance.“ [ABSTRACT FROM AUTHORS]

Industry Global Value Chains, Connectivity and Regional Smart Specialisation in Europe. An Overview of Theoretical Approaches and Mapping Methodologies

By: E. Todeva, R. Rakhmatullin. JRC Science for Policy Report, European Union, EUR 28086 EN; doi:10.2791/176781, 2016.

Abstract: “This paper is the second paper in a series of three papers on Global Value Chains (GVCs), developed under the auspices of the Joint Research Centre (JRC) of the European Commission. It provides a clear understanding and comparison of existing theories and methodologies for mapping value chains and offer a demonstration of the use of such methodologies in the context of S3 and strategic interventions at regional, national and cluster level. The paper provides an overview of five distinctive theoretical frameworks to global value chain research, and related to them methodologies for mapping GVCs, and analysis of patterns of industry diversification and integration. The paper highlights that mapping interconnected industry capabilities at a global scale and GVC analysis requires the use of data on the operations of multinational enterprises (MNEs). This discussion is intricately linked to the third paper in the series, which presents a new methodological approach using a bespoke database of the most innovative biopharma MNEs, describing the step-by-step procedure for building the MNE database and mapping the biopharma GVC at country, region and cluster level. Our policy recommendations are co-aligned with the existing framework - EU industrial policy: ‘Towards Industrial Renaissance’, Regional growth through Smart Specialisation Strategy, COSME programme for SME support, building Circular Economy for sustainable and inclusive growth, cluster internationalisation, and other relevant policy initiatives by the European Commission.“ [ABSTRACT FROM AUTHORS]

Determinants of exports: firm heterogeneity and local context

By: P. de Matteis, F. Pietrovito, A. Franco Pozzolo. Banca d’Italia, Occasional Papers No. 352, ISSN 1972-6643, 2016.

Abstract: “It is frequently argued that the geographical context in which firms operate can have a crucial impact on their propensity to internationalize. In this paper, we present the results of an empirical analysis that examines the determinants of export performance for a sample including more than 4,300 Italian manufacturing firms over the period 2000-2013, focusing on the role of provincial context, after controlling for firm-level characteristics. To this end, we first adopt a cluster analysis methodology to classify each Italian province in terms of context variables, such as: the distance to foreign markets, the level of human and social capital and the degree of efficiency of the public administration. Second, we estimate a set of binomial choice and linear models to assess the impact of the economic and social environment on the extensive and intensive margins of trade. The results, after confirming that firm-specific factors (size, experience, productivity, capital intensity, innovation, geographical agglomeration and, to some extent, credit constraints) affect both the intensive and the extensive margins of exports, show that context characteristics at the province level have an additional (statistically and economically) significant impact on the export performances of firms.“ [ABSTRACT FROM AUTHORS]