Public Policies and Cluster Life Cycles: Insights from the Basque Country Experience

Susana Franco(1), Jesus M. Valdaliso(2), Aitziber Elola(1) and Santiago M. López(3)

(1) Orkestra–Basque Institute of Competitiveness

(2) University of the Basque Country (3) University of Salamanca

SHAREGUNE, Donostia, 21st November 2012

1. Introduction 2. Context about the clusters considered 3. Theoretical background 4. Discussion of results 5. Conclusions

CONTENTS

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• Project to analyse the historical trajectory of Basque industrial clusters

• Policy implications in cluster life cycles scarcely addressed in literature • Relevance of the Basque Country case:

- Old industrialized European region => successful productive structure - One of the first European regions to apply a cluster-based policy - Significant autonomy in the field of industrial policy

1. INTRODUCTION

Completed In progress Planned

Paper-making Machine-tools Automotive industry

Electronics & ICT Energy Domestic Appliances

Shipbuilding Audiovisual

Aeronautics Environmental industries

Port of Bilbao

Mobility and Logistics

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2. CONTEXT

Source: SPRI, Observatorio de Coyuntura Industrial. Figures correspond to 2008.

• Diversity in size, export orientation and R&D investment

Firms Employment Turnover Exports R&D

expenses Exports/ Turnover

R&D/ Turnover

Aeronautics and space 55 9,168 1,235 886 104 71.1% 10.5% Electronics and ICT 330 14,600 4,136 820 137 19.8% 3.3% Maritime industries 405 9,100 1,500 950 n.a. 63.3% n.a. Paper making 15 2,134 839 310 n.a. 34.4% n.a.

Energy* 83 25,000 10,000 2,200 n.a. 22.0% n.a.

Machine tools 74 4.500 800 523 48 65.4% 6.0%

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3. THEORETICAL BACKGROUND

Impact in:

Mature phase for:

Policy measures Initial

phase

Expansion

phase

Avoiding

Decline

Triggering

emergence

Education No Yes No Partly

Public research Yes Yes Yes Yes

Supporting research and

development

Yes No Yes Partly

Supporting start-ups Yes Yes No Partly

Supporting networks Yes No Yes Partly

Other local conditions No Yes No Partly

• Government policies affecting the trajectory of clusters should be adapted to the different stages of such cycles (Maskell and Kebir, 2006; Elola et al., 2012). Van Klink and De Langen (2001) and Shin and Hassink (2011) in the shipbuilding industry .

• Effects of the various policy measures in the different phases of the cluster life cycle according to the theoretical model (Brenner and Schlump, 2011)

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4. DISCUSSION

Source: Authors’ elaboration, following Belussi and Sedita (2009)

• Phases of the clusters’ life cycles

1800-1850 1850-1875 1875-1900 1900-1910 1910-1920 1920-1930 1930-1940 1940-1950 1950-1960 1960-1970 1970-1980 1980-1990 1990-2000 2000-2009

Paper-making

Maritime

industries

Machine

tools

Electronics

and ICTs

Aeronautics

Energy

Formation /

Emergence

Development

Maturity

Decline

Renewal

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4. DISCUSSION Paper-making

Policy type

Origins

(c. 1779-1870s)

Development

(1870s-1930s)

Maturity

(1940s-1970s)

Decline

(1980s-

Education Creation of training centres

promoted by firms, but

supported by public

administration

Creation of the Escuela del papel,

a prívate specialized training

centre that was publicly funded

Escuela del papel becomes a

government school

Public research

Supporting R&D Some collaboration between

firms and technology centres and

access to R&D funds from the

Basque Government

Supporting start-

ups

Support to start-ups through

Tolosaldea Garatzen, the local

development agency that

promotes business

competitiveness

Supporting

networks

Support to cluster association

since 1999

Infrastructures Improvements in transport

infrastructures strengthened

location advantages (better

access to markets and to import

raw materials)

Protectionism /

Openness

Tariffs from 1841 which protect

the domestic market from foreign

competition and encourage the

import of new technology

Sector protected from foreign

competition via tariffs until 1936

Extreme market regulation and

autarky (1940s and 1950s). Tariff

afterwards, but progressive

openness of the domestic market

External openness of the national

market (from 1986 onwards)

Demand stimulus

OTHER Excessive taxes on paper Increasing environmental

requirements 7/12

4. DISCUSSION

Source: Authors’ calculation

• Use of policy measures in different phases of the cluster life cycles

POLICY MEASURES Origins Development Maturity

Education 33% 100% 67%

Public research 17% 33% 33%

Supporting R&D 50% 67% 33%

Supporting start-ups 0% 50% 33%

Supporting networks 17% 67% 0%

Infrastructures 50% 50% 0%

Protectionism /

Openness 83% 50% 67%

Demand stimulus 50% 50% 67%

Other 33% 17% 100%

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4. DISCUSSION

Note: 1. Education; 2. Public research; 3. Supporting R&D; 4. Supporting start-ups; 5. Supporting networks; 6. Infrastructures; 7. Protectionism/Openness; 8. Demand stimulus; 9. Other Source: Authors’ elaboration, following Belussi and Sedita (2009) for the phases

• Policies that have had an impact on cluster over time

1800-1850 1850-1875 1875-1900 1900-1910 1910-1920 1920-1930 1930-1940 1940-1950 1950-1960 1960-1970 1970-1980 1980-1990 1990-2000 2000-2009

Paper-making ______7__ ______7__ 1____67__ 1____67__ 1____67__ 1____67__ 1____67__ 1_____7_9 1_____7_9 1_____7_9 1_____7_9 1_345_7_9 1_345_7_ 1_345_7_

Maritime

industries _____678_ _____678_ _____678_ 1_____78_ 1_____78_ 1_____78_ 1_____78_ ______789 ______789 123_567_9 123_567_9 123_567_9

Machine

tools 1_____7__ 1_____7__ 1_____7__ 1_____7__ 1_3_5_7_9 1_3_5_7_9 1_3_5_7_9 1234___89 1234___89 12345__89 12345__89

Electronics

and ICTs 1_3___7__ 1_3___7__ 1_3___7__ 1_3___7__ 123456_8_ 123456_8_ 123456_8_

Aeronautics _23_56_89 _23_56_89 1_345____

Energy __3__6789 123456_8_ 123456_8_

Formation /

Emergence

Development

Maturity

Decline

Renewal

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4. DISCUSSION

Source: Authors’ elaboration

• Types of policies applied in the last phase of the three oldest clusters

Paper-making Shipbuilding Machine-tools

Decline Decline and

renewal

Maturity and

renewal

Education YES YES YES

Public research YES YES

Supporting R&D YES YES YES

Supporting start-ups YES YES

Supporting networks YES YES YES

Infrastructures YES

Protectionism /

Openness

YES YES

Demand stimulus

Other YES YES YES

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5. CONCLUSIONS

• Secondary, indirect role of public policies (except aeronautics). Path-dependent mechanisms have been more influential.

• History matters

• Phases of cluster life cycles not taken into consideration while designing policies

• Role of different policies in different phases: – protectionist measures during the inception phase

– education during the development phase

– public research for renewal

• Further research: – Links between policies and technological level

– Other clusters in the Basque Country

– Other cases elsewhere 11/12

Thank you!

¡Gracias!

Eskerrik asko!

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