Cluster Promotion and Management: The Current Global ...

Cluster Promotion and Management: The Current Global Situation

2015

Title: Cluster Promotion and Management: The Current Global Situation

The scientific monograph was written with the financial support of the Scientific Grant Agency (Vedecká grantová agentúra, VEGA) of the Ministry of Education, Science, Research and Sport of the Slovak Republic, and the Slovak Academy of Science, as part of the scientific project VEGA 1/0506/13 named “The Situation of Financing Clusters in European Countries and Future Possibilities of Bolstering Clusters in Slovakia“.

© Head of the team of authors: Ing. Peter Burger, PhD. Chapters 1, 10, 13,

Preface, Conclusion Authors: Ing. Miriam Brašková, PhD. Chapters 5, 14 Ing. Emília Duľová Spišáková, PhD. Chapters 11, 12 Ing. Slávka Klasová, PhD. Chapters 4, 7 Ing. Iveta Korobaničová, Ph.D. Chapters 3, 6 Ing. Viliam Kováč, PhD. Chapters 2, 15 Ing. Janka Pálfyová Chapters 8, 9

Reviewers: Prof. Ing. Karel Skokan, Ph.D., Silesian University in Opava, School of Business Administration in Karviná Assoc. Prof. Ing. Jan Stejskal, Ph.D., University of Pardubice, Faculty of Economics and Administration Ing. Miroslav Balog, PhD. et PhD., Slovak Innovation and Energy Agency

Translated by: Mgr. Ing. Gabriela Troskóová

Published by: ASERS Publishing, Craiova, Romania, 2015

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, transmitted in any form, or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the copyright holders.

The authors bear all responsibility for the professional and linguistic character of the text.

ISBN-L: 978-606-8689-13-5Print ISBN: 978-606-8689-14-2Online ISBN: 978-606-8689-15-9

Table of Contents

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Table of Contents Preface ....................................................................................................................................... 9

I Introduction to the Theory of Clusters, Cluster Policies and Cluster Funding in the World ......................................................................................................................... 11

1 The Theoretical Framework for Clusters, Cluster Policies and Funding Clusters in the World ..................................................................................................................... 13 1.1 Introduction .............................................................................................................. 15 1.2 Defining Clusters ..................................................................................................... 15 1.3 Defining Cluster Policies ......................................................................................... 19 1.4 Defining Cluster Programmes ................................................................................. 21 1.5 Financing Clusters and Cluster Initiatives from Public and Private Funds ............. 21 1.6 Levels of Funding in Cluster Programmes .............................................................. 23 1.7 Comparing the Degrees of Cluster Policy Centralisation and Decentralisation ...... 27 1.8 Time Scheduling for Cluster Programmes .............................................................. 29 1.9 Conclusion ............................................................................................................... 31

References ................................................................................................................ 32

II Cluster Policies in Europe .............................................................................................. 35

2 Cluster Policy in Austria ................................................................................................ 37 2.1 Introduction .............................................................................................................. 39 2.2 Cluster Policy Legislation ........................................................................................ 40 2.3 Cluster Policy Principles, Areas and Objectives ..................................................... 40 2.4 Cluster Policy and Other Related Policies ............................................................... 42

2.4.1 Cluster Policy and R&D and Innovation Policy .......................................... 43 2.4.2 Cluster Policy and Regional Policy ............................................................. 44 2.4.3 Cluster Policy and Industrial and Enterprise Policy .................................... 44

2.5 Funding Cluster Policy in Austria ........................................................................... 46 2.5.1 Cooperation Promotion Programme of the Austrian Economic Service

(Austria Wirtschaftsservice – AWS) ........................................................... 46 2.5.2 Cooperation Promotion of the Austrian Research Promotion Agency ........ 47

2.6 Cluster Policy Centralisation vs. Decentralisation .................................................. 49 2.7 Conclusion ............................................................................................................... 49

References ................................................................................................................ 51

3 Cluster Policy in Denmark ............................................................................................. 53 3.1 Introduction .............................................................................................................. 55 3.2 Cluster Policy Legislation ........................................................................................ 55

3.2.1 Cluster Policy at the National Level ............................................................ 56 3.2.2 Cluster Policy at Regional Levels ................................................................ 57


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3.3 Cluster Policy Principles, Areas and Objectives ..................................................... 59 3.4 Cluster Policy and Other Related Policies ............................................................... 66

3.4.1 Cluster Policy and R&D and Innovation Policy .......................................... 66 3.4.2 Cluster Policy and Regional Policy ............................................................. 67 3.4.3 Cluster Policy and Industrial and Enterprise Policy .................................... 69

3.5 Funding Cluster Policy in Denmark ........................................................................ 70 3.6 Cluster Policy Centralisation vs. Decentralisation .................................................. 71 3.7 Conclusion ............................................................................................................... 72

References ................................................................................................................ 73

4 Cluster Policy in France ................................................................................................. 75 4.1 Introduction .............................................................................................................. 77 4.2 Cluster Policy Legislation ........................................................................................ 78 4.3 Cluster Policy Principles, Areas and Objectives ..................................................... 79 4.4 Cluster Policy and Other Related Policies ............................................................... 84 4.5 Funding Clusters in France ...................................................................................... 85

4.5.1 National Research Agency (Agence nationale de la recherché, ANR) ....... 85 4.5.2 Agency for Industrial Innovations (Agence de l'innovation industrielle -

AII) ............................................................................................................... 86 4.5.3 OSEO (Nátional Agency for Innovation) .................................................... 87 4.5.4 Single Interministerial Fund (Fonds Unique Interministériel, FUI) ............ 87

4.6 Cluster Policy Centralisation vs. Decentralisation .................................................. 88 4.7 Conclusion ............................................................................................................... 89

References ................................................................................................................ 91

5 Cluster Policy in Germany ............................................................................................. 93 5.1 Introduction .............................................................................................................. 95 5.2 Cluster Policy Legislation ........................................................................................ 96

5.2.1 Tools and Measures for the Policy Implementation at the National Level .. 96 5.2.2 Tools and Measures for the Policy Implementation at Regional Levels ..... 99

5.3 Cluster Policy Principles, Areas and Objectives ................................................... 101 5.4 Cluster Policy and Other Related Policies ............................................................. 102

5.4.1 Cluster Policy and R&D and Innovation Policy ........................................ 102 5.4.2 Cluster Policy and Regional Policy ........................................................... 103 5.4.3 Cluster Policy and Industrial and Enterprise Policy .................................. 103

5.5 Funding Clusters in Germany ................................................................................ 104 5.6 Cluster Policy Centralisation vs. Decentralisation ................................................ 107 5.7 Conclusion ............................................................................................................. 109

References .............................................................................................................. 110

6 Cluster Policy in the Netherlands ................................................................................ 113 6.1 Introduction ............................................................................................................ 115 6.2 Cluster Policy Legislation ...................................................................................... 115

6.2.1 Cluster Policy Implementation at the National Level ................................ 115

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6.2.2 Cluster Policy Implementation at Regional Levels ................................... 117 6.3 Cluster Policy Principles, Areas and Objectives ................................................... 118 6.4 Cluster Programmes ............................................................................................... 124

6.4.1 Cluster Programmes at the National Level ................................................ 125 6.4.2 Cluster Programmes at Regional Levels .................................................... 126

6.5 Cluster Policy and Other Related Policies ............................................................. 128 6.5.1 Cluster Policy and R&D and Innovation Policy ........................................ 128 6.5.2 Cluster Policy and Regional Policy ........................................................... 129

6.6 Funding Clusters in the Netherlands ...................................................................... 130 6.7 Cluster Policy Centralisation vs. Decentralisation ................................................ 132 6.8 Conclusion ............................................................................................................. 133

References .............................................................................................................. 135

7 Cluster Policy in Norway .............................................................................................. 137 7.1 Introduction ............................................................................................................ 139 7.2 Cluster Policy Legislation ...................................................................................... 140 7.3 Cluster Policy Principles, Areas and Objectives ................................................... 140

7.3.1 ARENA Programme .................................................................................. 141 7.3.2 Norwegian Centres of Expertise (NCE) .................................................... 143 7.3.3 Global Centres of Expertise (GCE) ........................................................... 144

7.4 Cluster Policy and Related Policies ....................................................................... 145 7.4.1 Cluster Policy and R&D and Innovation Policy ........................................ 145 7.4.2 Cluster Policy and Regional Policy ........................................................... 146 7.4.3 Cluster Policy and Industrial and Enterprise Policy .................................. 148

7.5 Funding Clusters in Norway .................................................................................. 149 7.5.1 Innovation Norway (Innovasjon Norge – INVANOR) ............................. 149 7.5.2 The Research Council of Norway (Norges Forskningsråd – RCN) .......... 150 7.5.3 The Industrial Development Corporation of Norway (Selskapet for

industrivekst – SIVA) ................................................................................ 150 7.6 Cluster Policy Centralisation vs. Decentralisation ................................................ 151 7.7 Conclusion ............................................................................................................. 152

References .............................................................................................................. 154

8 Cluster Policy in Slovenia ............................................................................................. 157 8.1 Introduction ............................................................................................................ 159 8.2 Cluster Policy Legislation ...................................................................................... 160

8.2.1 Cluster Policy Instruments and Measures at the National Level ............... 160 8.2.2 Framework Cluster Policy Instruments at Regional Levels ...................... 160



8.5 Funding Clusters in Slovenia ................................................................................. 168


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8.5.1 Funding Cluster Programmes at National and Regional Levels ................ 168 8.5.2 Funding Cluster-Related Programmes at National and Regional Levels .. 169 8.5.3 Centres of Excellence ................................................................................ 170 8.5.4 Competence Centres .................................................................................. 171 8.5.5 International Project of Cluster Cooperation (ClusterCOOP) ................... 172

8.6 Cluster Policy Centralisation vs. Decentralisation ................................................ 172 8.7 Conclusion ............................................................................................................. 173

References .............................................................................................................. 174

9 Cluster Policy in Spain .................................................................................................. 177 9.1 Introduction ............................................................................................................ 179 9.2 Cluster Policy Legislation ...................................................................................... 179

9.2.1 Cluster Policy Instruments and Measures at the National Level ............... 180 9.2.2 Cluster Policy Instruments at Regional Levels .......................................... 180



9.5 Funding Cluster Policy in Spain ............................................................................ 189 9.5.1 Cluster Mapping Programmes at National and Regional Levels ............... 189 9.5.2 Funding Cluster Programmes at the National Level .................................. 190 9.5.3 Funding Cluster Programmes at the Regional Level ................................. 191 9.5.4 The Basque Competitiveness Programme ................................................. 192


References .............................................................................................................. 195

10 Cluster Policy in Sweden .............................................................................................. 199 10.1 Introduction ............................................................................................................ 201 10.2 Cluster Policy Legislation and Organisational Support for Clusters in Sweden ... 202 10.3 Cluster Policy Principles, Areas and Objectives ................................................... 203 10.4 Cluster Policy and Other Related Policies ............................................................. 205

10.4.1 Cluster Policy and R&D and Innovation Policy ........................................ 205 10.4.2 Cluster Policy, Regional Policy, and Industrial and Enterprise Policy ...... 206

10.5 Funding Cluster Policy in Sweden ........................................................................ 208 10.5.1 Funding R&D and Innovation from Public and Private Funds.................. 209 10.5.2 National Cluster Programmes .................................................................... 209 10.5.3 Regional Cluster Programmes ................................................................... 210

10.6 Cluster Policy Centralisation vs. Decentralisation ................................................ 212 10.6.1 Regional Approach to Cluster Policy Formation - The “Triple Helix”

Model ......................................................................................................... 213 10.7 Conclusion ............................................................................................................. 215

References .............................................................................................................. 216

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11 Cluster Policy in Switzerland ....................................................................................... 219 11.1 Introduction ............................................................................................................ 221 11.2 Cluster Policy Legislation ...................................................................................... 222 11.3 Cluster Policy Principles, Areas and Objectives ................................................... 223

11.3.1 Cluster Policy Principles ............................................................................ 223 11.3.2 Cluster Policy Areas .................................................................................. 224 11.3.3 Cluster Policy Objectives ........................................................................... 230

11.4 Cluster Policy and Other Related Policies ............................................................. 231 11.5 Funding Clusters in Switzerland ............................................................................ 232

11.5.1 Regional Cluster Programmes ................................................................... 232 11.6 Cluster Policy Centralisation vs. Decentralisation ................................................ 235

11.6.1 Cluster Policy Implementation Agencies at National and Regional Levels ......................................................................................................... 235

11.7 Conclusion ............................................................................................................. 236 References .............................................................................................................. 238

12 Cluster Policy in the United Kingdom ........................................................................ 241 12.1 Introduction ............................................................................................................ 243 12.2 Cluster Policy Legislation ...................................................................................... 244 12.3 Cluster Policy Principles, Areas and Objectives ................................................... 245

12.3.1 Cluster Policy Principles ............................................................................ 245 12.3.2 Cluster Policy Areas .................................................................................. 246 12.3.3 Cluster Policy Objectives ........................................................................... 249

12.4 Cluster Policy and Other Related Policies ............................................................. 250 12.4.1 Cluster Policy and R&D and Innovation Policy ........................................ 250 12.4.2 Cluster Policy and Regional Policy ........................................................... 251 12.4.3 Cluster Policy and Industrial and Enterprise Policy .................................. 254

12.5 Funding Clusters in Great Britain .......................................................................... 255 12.5.1 National Cluster Programmes .................................................................... 255 12.5.2 Regional Cluster Programmes ................................................................... 256


References .............................................................................................................. 263

III Cluster Policies in North America ............................................................................... 265

13 Cluster Policy in the United States of America .......................................................... 267 13.1 Introduction ............................................................................................................ 269 13.2 Cluster Policy Legislation ...................................................................................... 269 13.3 Cluster Policy Principles and Basic Areas ............................................................. 270 13.4 Cluster Policy and Other Related Policies ............................................................. 272

13.4.1 Cluster Policy and R&D and Innovation Policy ........................................ 272 13.4.2 Cluster Policy, Regional Policy and Industrial and Enterprise Policy ....... 273

13.5 Funding Cluster Policy in the United States .......................................................... 276


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13.6 Cluster Policy Centralisation vs. Decentralisation ................................................ 277 13.6.1 Federal Support for Clusters ...................................................................... 278 13.6.2 State Support for Clusters .......................................................................... 279


IV Cluster Policy in Australia and Oceania ..................................................................... 287

14 Cluster Policy in Australia ........................................................................................... 289 14.1 Introduction ............................................................................................................ 291 14.2 Cluster Policy Legislation ...................................................................................... 292 14.3 Cluster Policy Tools and Measures at National and Regional Levels ................... 292 14.4 Cluster Policy Principles, Areas and Objectives ................................................... 295 14.5 Cluster Policy and Other Related Policies ............................................................. 299


14.6 Funding Cluster Policy in Australia ...................................................................... 302 14.7 Cluster Policy Centralisation vs. Decentralisation ................................................ 304 14.8 Conclusion ............................................................................................................. 305

References .............................................................................................................. 307

15 Cluster Policy in New Zealand ..................................................................................... 309 15.1 Introduction ............................................................................................................ 311 15.2 Cluster Policy Legislation ...................................................................................... 311 15.3 Cluster Policy Principles, Areas and Objectives ................................................... 313

15.3.1 Cluster Programme Design ........................................................................ 313 15.3.2 Cluster Programme Implementation Issues ............................................... 314

15.4 Cluster Policy and Other Related Policies ............................................................. 315 15.4.1 Cluster Policy and R&D and Innovation Policy ........................................ 316 15.4.2 Cluster Policy and Regional Policy ........................................................... 318 15.4.3 Cluster Policy and Industry and Enterprise Policy .................................... 319

15.5 Funding Cluster Policy in New Zealand ................................................................ 320 15.6 Cluster Policy Centralisation vs. Decentralisation ................................................ 321

15.6.1 National, Regional and Commercial Clusters ............................................ 321 15.6.2 Regional Innovation System ...................................................................... 323


Conclusion ............................................................................................................................. 327

About the Authors ................................................................................................................ 329

Preface

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Preface

Over the previous two decades, the promotion of clusters as a means of support for business development has become a very effective and commonly-used tool to enhance the competitiveness of countries and regions. Successful clusters most frequently occur in countries and regions where support for scientific research, development and innovation is quite high. Alongside this, the promotion of clusters leads to the improvement in relationships between key players in business within regions, and the mobilisation of local government agencies, companies and academic institutions in finding ways of active cooperation of the subjects with different interests.

The support given to clusters tends to vary slightly from country to country. Slovakia, despite having enjoyed a slight recent improvement in this area, still suffers from a relatively lower level of publicly-funded cluster funding in comparison with the majority of the European Union member states.

This publication seeks to analyse countries with a high level of financial support provided to clusters from within the European Union (Denmark, France, the Netherlands, Germany, Austria, Slovenia, Spain, Sweden and the Great Britain) and within the European Free Trade Association countries (Norway and Switzerland), where the cluster support is equally high, but somewhat different. The following three chapters focus on financing clusters outside Europe, in North America (the United States of America) and in Australia and Oceania (Australia and New Zealand), where the approach to cluster financing from public funds differs remarkably from that in the European Union. All the above-mentioned countries were carefully selected with the aim of introducing a variety of successful cluster funding methods in different parts of the world.

The scientific monograph is divided into fifteen chapters. The majority of its authors and their supporting team members work at the Faculty of Economics of the Technical University in Košice. Each chapter, with the exception of the introduction, has the same structure. The introductory chapter deals with the definition of a cluster, of a cluster policy, and a cluster programme, and analyses the possibilities of cluster funding and financial resources currently available to them. Subsequent sections of the work bring a short analysis of the present situation and cluster policy in a particular country at the time of their initial implementation, explain when and why the policy in the country was established, and describe the relevant legislation and legislative procedures governing the process of its policy application. One subchapter presents the principles (pillars) holding up the cluster policy in a particular country, the main areas it covers, and the objectives which are to be achieved. Another relates the cluster policy in a particular country to its other policies, such as research and development (R&D) and innovation, regional, and industrial and enterprise policies. The authors made a great effort to answer a number of questions on cluster funding, namely: how do public and private sectors participate in the managing and financing of clusters? How are cluster programmes as the key tools for cluster financing set? How and in which proportion are public and private funds combined together in the financing of clusters in a specific country? The final subchapter


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discusses the related topic of centralisation and decentralisation of cluster policies in the country, namely, focusing on whether the cluster policy in a specific country is financed more from national, regional or local levels, or, in the case of European countries, from the European Union funds.

The presented monograph of »Cluster Promotion and Management: The Current Global Situation« is mainly intended for research and academic workers and for a wider professional audience. The book may provide explanations and valuable information to uninitiated university students of economics, regional development and management, and individuals interested in clusters and working in the field of regional development.

At the end i wish to express my thanks and indebtedness to all the reviewers to this scientific monograph, Prof. Ing. Karel Skokan, Ph.D., Assoc. Prof. Ing. Jan Stejskal, Ph.D., and Ing. Miroslav Balog, PhD. et PhD. Their useful advice, thoughtful comments and valuable suggestions were of great help in preparing the final version of the text.

Košice, October 2015

Peter Burger

I. Introduction to the Theory of Clusters, Cluster Policies and Cluster Funding in the World

Chapter 1 Peter Burger

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Chapter 1

The Theoretical Framework for Clusters, Cluster Policies and Funding Clusters in the World

by Peter Burger Technical University of Košice, Faculty of Economics, Slovak Republic [email protected]

1.1 Introduction 1.2 Defining Clusters 1.3 Defining Cluster Policies 1.4 Defining Cluster Programmes 1.5 Financing Clusters and Cluster Initiatives from Public and Private Funds 1.6 Levels of Funding in Cluster Programmes 1.7 Comparing the Degrees of Cluster Policy Centralisation and Decentralisation 1.8 Time Scheduling for Cluster Programmes 1.9 Conclusion

References


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1.1 Introduction

In the last few decades, clustering has become a very powerful, commonly-used tool in a number of countries to enhance their competitiveness. It is because participation in a cluster frequently brings advantages to all its active members. Participating in a cluster may mean achieving great economies of scale for companies, allowing them to gain easier access to information and specialised inputs, share costs and investments, pool labour, find new customers, penetrate new markets, increase exports, win goodwill and, eventually, develop their innovation potential. From the point of view of the public sector, the supporting of regional clusters has become a principal and reliable means for the acceleration of economic development in regions. In regional policies, clusters are increasingly used as a tool to put together and activate key business players. By using clusters, the public sector can provide its support at lower costs, as several, similar cluster member companies do business in the same industrial area. This is an effective method for how to offer companies a competitive advantage, which may lead, for instance, to the increase of job opportunities in the area. Clusters have a positive impact on performance of universities. The benefits for those universities include an increase of their knowledge of specific industrial needs, the ability to tailor educational courses to their students’ needs, and being given possibilities to work on applied research or real projects with immediate technological transfer to practice.

Well-functioning clusters are an important element of innovation strategies in a country, which are aimed at stimulating the national economic development by increasing the competitiveness and level of performance of domestically-based companies, and at promoting innovation and R&D, providing that a high level of geographical concentration of industries and strong linkages between individual cluster members exist; this closeness brings the cluster members economic benefits in the form of various types of positive externalities (Ketels, 2003).

Cluster support varies in all developed countries. In the majority of them, however, a great deal of attention is put into the issue of clusters and clustering, and budgets of many of these programmes are quite generous. Several cluster programmes can serve as examples, such as those which are currently popular in Sweden, Finland, France, Germany, the Netherlands, Canada, Japan and South Korea (Burger, 2011).

1.2 Defining Clusters

In 1890, one of the most influential British economists, Alfred Marshall, started to investigate spatial concentrations of industries. In his work »Principles of Economics« (1890), he argued that industries frequently concentrate in one location, thereby gaining a number of benefits, such as economies of scale, and that the concentration and aggregation of such companies make major location economies. Marshall did not use the term “clusters” but the term “industrial districts”, the definition of which are strongly reminiscent of present-day clusters. Marshall identified three areas where costs could be reduced. He mentioned the utilisation of certain common resources as the first area, such as specialised infrastructure. As


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a rule, companies competing in a particular location are mostly those which are interested in the development and maintenance of this infrastructure and, if the costs of building and maintaining the infrastructure are shared, the overall costs are greatly reduced for each of the participants. The local labour market is regarded as the second area, characterised by its high specialisation of workforce and work positions. Spatial decisions of firms may be affected by local pools of specialised skills, and consequently the selection of the right location for a firm enables it to save costs for education and/or requalification of workers. The third area concerns the reduction of costs of international transactions and sales due to the minimum, negligible geographical distance between firms. In general, firms enter into contracts with partners located in their proximity and thus provide specialised services and subdeliveries more easily.

The publication of Michael Porter’s work entitled »The Competitive Advantage of Nations« (1990) played a pivotal role in the theory of clusters. Porter defined clusters as “geographically proximate groups of interconnected companies, specialised suppliers, service providers, firms in related industries and associated institutions (such as universities or chambers of commerce) that compete with one another on the one hand and cooperate on the other”. In 1998, Porter reworked this definition in his article »Clusters and New Competition Economics«. “Clusters are local concentrations of interconnected firms and institutions in a particular field. Clusters include a group of related industries and other agents important to economic competition. They may contain suppliers of specialised inputs; for instance, parts, machines and services of specialised infrastructure providers. Clusters frequently expand downward to market channels and customers and sideward to producers of complementary products and companies in industries related in terms of their capabilities, technologies or joint inputs. Clusters also include public bodies or other institutions, such as universities, standard setting agencies, research teams or trade associations providing vocational training, education, information, research and technical support.”

Consistent with Porter, Ketels (2003) points to two key characteristics clusters possess: the first, a geographical concentration of industries and, the second, the existence of linkages among individual actors. Their proximity in terms of location and structure of activities brings economic benefits to the cluster actors in the form of various types of positive externalities. These externalities may include, for instance, access to specialised human resources and suppliers, knowledge transfer, pressures on higher performance thanks to fierce competition, and new knowledge creation resulting from the close operation of specialised customers and suppliers.

Drawing from Porter’s definition of clusters, the European Commission (2005) stated that “clusters are groups of independent firms and associated institutions that cooperate and compete at the same time, which are locally concentrated in one or several regions, or, may operate on a global scale. Clusters specialise in a particular industry with common technologies and capabilities and are either knowledge-based or traditional”.

A common problem in the theory of clusters is the confusion and/or incorrect definition of concepts. The three basic terms, clusters, cluster initiatives and cluster organisations, are most frequently confused by the authors, or viewed as concepts with the same meaning. Nevertheless,


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the majority of authors, for example, TACTICS (2012) [Transnational Alliance of Clusters towards Improved Cooperation Support], incline to the following classification of the terms:

• Clusters are geographically proximate groups of interconnected firms and associatedinstitutions in a particular field of business linked by certain common characteristics orfeatures and various types of externalities (Porter, 1998).

• Cluster initiatives make organised efforts to increase the growth and competitiveness ofclusters within a region, including cluster firms, government and self-governmentauthorities (national, regional and local) and/or universities and research andeducational institutions, i.e. the research community (Sölvell et al., 2003).

• Cluster organisations are specialised institutions responsible for managing clusters andcluster initiatives. These institutions may have various legal forms, from non-profitassociations, through public agencies, to various businesses (The Commission of theEuropean Communities, 2008).

• Cluster policies are programmes or other organised governmental (national, regional orlocal) efforts to increase the growth and competitiveness of clusters within their area ofadministration.

In their attempt to define clusters comprehensively and faithfully, many authors face various problems, particularly concerning cluster foci of interest, diversification in specific regions, industries, and also cluster-specific activities. Therefore, it is sometimes better to see a cluster as a broad “umbrella” concept rather than a precisely-defined term. Andersson et al. (2004) define clusters by means of key elements.

Table 1.1 Key elements of clusters

Key elements Characteristics

Geographical concentration

Firms are located in their proximity. Closely-cooperating specialised labour markets may result in physical concentrations of firms in a region. Companies can satisfy their requirements more easily, even those which would usually be beyond their capacities, thereby satisfying their very important customers. The proximity of firms creates numerous opportunities for more effective cooperation. It increases cooperation in the areas of staff training, development of new technologies, marketing, export and distribution.

Specialisation

Clusters are traditionally understood to be specialised in the sense of interconnection among the cluster actors through their main activity focusing on the same markets and processes. Various studies have proved that, as a rule, transaction possibilities between the individual participants within a cluster are limited, especially in the field of customer-supplier relationships. The individual firms working in the same or related areas of business tend to share their experience with other actors.

Participants/ Actors

Firms are not the only possible cluster participants. Intense relationships and cooperation may occur with various institutions within a cluster, such as universities, research institutes and governmental agencies. Four main categories of cluster actors – companies, government, research organisations and financial institutions – are of fundamental importance and are commonly and actively presented in cluster initiatives. So-called Institutions for Cooperation (IFCs) are also important to cluster initiatives. They can be defined as formal and information agents that support cluster initiatives.

Rivalry and cooperation

A distinctive feature of rivalry between firms is the pressure to implement innovations. Depending on market characteristics, participants in the market may gain a competitive advantage by reducing costs or prices, increasing the quality of their products or services,


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entering new markets, etc. Competition amongst firms is also important within a cluster. On the other hand, cluster actors take part in the main activity of a cluster and complement one another. By cooperating more closely, the cluster actors have a better opportunity to obtain the resources that they would not able to in isolation.

Critical mass of actors

In order for a cluster to achieve inner dynamics, it needs to engage numerous actors and reach some sort of critical mass. Linkages formed between firms are important and depend upon abilities and skills that vary with each certain minimum concentration of workers, managers, experts and financiers. Critical mass may also serve as a “buffer” and protect a cluster against exogenous shocks or other sorts of pressures which may lead to bankruptcy of a single and independent firm.

Cluster life cycles

Clusters and cluster initiatives do not present temporary short-term solutions; they have long-term prospects. Every cluster experiences certain development stages. However, these depend upon specific circumstances during the life cycle of a cluster. Despite this, a certain order of how clusters develop and which stages they follow exists.

Innovations Firms participate in the process of technological, commercial and organisational change. Generally put, innovation is an effort to commercialise new ideas. Innovations are frequently defined as processes in which firms make unique/novel products.

Source: T. Andersson et al. (2004)

According to Roelandt and Hertog (1999), clusters are manufacturing networks of mutually dependent companies, including suppliers interconnected within a manufacturing chain, making added-value. In some cases, clusters include a strategic partnership with universities, research institutes, knowledge-intensive services, dealers, consultants and customers.

Bergman and Feser (1999) argue that clusters are made of manufacturing and trading companies and of non-trading organisations where membership in a group presents a significant element of competitiveness for each of its members.

As Sölvell, Lindqvist and Ketels (2003) have it; clusters consist of jointly located and interconnected industries, public bodies, the academia, financial institutions and institutions for cooperation (IFCs).

Cortright (2006) defines clusters with the help of dimensions of relationships. These may include geographical locations, social distances, technologies and production flows. The most distinct dimension to clusters is a physical distance between companies. There exist several other distance dimensions, for instance, a technological distance, professional/skill distance, market distance and a social distance. The technological distance means the similarity among technology companies within a cluster use. The professional/skill distance concerns the level of similarity between the skills of employees of various companies within the cluster. The market distance gives an answer to the question of whether different actors in a cluster may have similar or interconnected groups of customers. The social distance means the level and type of relationships between managers and workers in different companies within a cluster. Another cluster dimension seen from the regional development perspective is a possibility of providing some basic organisational framework towards the understanding of regional economics and development of economic strategies. Public sector representatives and professionals in the field of clusters may contribute to the economic success of their own region, by way of understanding the competitive advantages and opportunities clusters offer.

Porter’s conception of clusters has been criticised several times. His critics point to the fact that he generalises the concept of cluster which is frequently perceived as a wide spectrum of


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various groups of industries and specialisations, customer-supplier relationships, or even the organisation of industrial production as such. The very loose concept of clusters has been an impediment to constructing a uniform cluster model or theory. The concept of clusters has even been regarded as chaotic (Martin and Sunley, 2003).

Maier and Trippl (2012) also take quite a critical position on the issue of cluster policies. Theoretically, problems of clusters and cluster policies are justified first and foremost from the views of neoclassical economics and economies of agglomeration. Nevertheless, Maier and Trippl note that from the viewpoint of neoclassical economics, there are no reasons to implement cluster policy. On the contrary, the agglomeration perspective offers conceptual ground for the implementation of economic policy through clusters and cluster initiatives. Simultaneously, the authors warn of three basic problems related to the cluster approach: appropriate targeting, proportioning and timing of cluster policy, and funding from public resources.

1.3 Defining Cluster Policies

Maier and Trippl (2012) define cluster policy in general as “a policy that invests resources in the formation, support and development of one or more industrial clusters, with the intention of reinforcing the economic position of the target area in the long run”.

In nature, cluster policy may be a microeconomic policy affecting clusters in a general way, or a set of specific policies focusing directly on cluster problems. Both types of policies defined in this way play an important part in building clusters and are of great significance for their development. The first type contains more traditional policies supporting the development of clusters.

Table 1.2 Policies supporting the development of clusters

Policy area Implications for clusters

Science and innovation Science and research-driven clusters are sensitive to investments in scientific and technological development.

Competition Rivalry is one of the key elements of dynamic clusters.

Trade Export and linkages to world markets are a critical factor to the dynamism of clusters.

Integration

In Europe, the European Union is working towards one centralised system where resources can flow more freely, where some clusters will receive more resources, while others receive fewer resources, and consequently regions will specialise in specific areas.

Regional policy Clusters can benefit from regional programmes, for example, the promoting of infrastructure or improving the personal skills of workers.

Social policy Access to superior public services enhances the attractiveness of clusters, bringing in new resources from outside.

Source: Sölvell (2009)

This type of development policy is very closely associated with other policies. Innovation policies, regional policies, and investment policies, in addition to support provided for small


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and medium-sized enterprises, are used today and may as a consequence significantly encourage the growth of clusters. Dynamically developing clusters frequently appear in such economies where science, research and innovation are strongly supported, and where regional government actively participates in such development. Support offered to cluster initiatives improves relationships among the economic agents in the region, the level of knowledge spillovers, encourages common activities and increases public awareness of cluster activities. Funds are to be channelled into productivity, innovation and increased specialisation of clusters, resulting in positive change within the economic environment for a greater number of small and medium-sized enterprises. The development of a particular cluster is the result of interventions at various levels (national, regional and local) and each of these levels bears its own responsibility, while regional level seems to be of considerable importance.

The increasing evidence of the important role clusters play in explaining regional and national prosperity differences, and in the disparities in the living standard of nations, has raised the interest of policy-makers. Many are now seeking the most suitable ways in which policy interventions could lead to the emergence of new clusters, or could help existing clusters grow and prosper. Economists are attempting to prove a rationale for clusters to be one of the possible solutions to market failures. Networking failures arise from the fact that individual actors in the cluster fail to realise the spillovers of knowledge and information (what they create and what could be a competitive advantage for other actors) and thus there is too little activity or investment in the cluster. Cluster policy can be used to bridge the gap between the private and public sectors and bring back such activities into a cluster portfolio. Information asymmetries can materialise even if incentives within a cluster are aligned, as the necessary information about how to derive maximum overall value in the cluster is dispersed across many different actors. Cluster policy can be used to overcome these information asymmetries by supporting dialogue and communication within the cluster (Sölvell, 2009).

The public sector should implement cluster policy for a number of reasons. Supporting regional clusters is becoming a principal and successful instrument for the economic development of regions. Another reason is the significance of involvement of small and medium-sized enterprises, local universities and research institutes in mutual cooperation. Unlike large firms, small and medium-sized enterprises are connected with a particular region and are increasingly more capable of competing worldwide. Cluster policy is implemented by the public sector in order to increase social-economic benefits, thanks to the emergence and development of clusters. Other policies have an indirect impact on the existence of clusters. The public sector may strongly support the emergence and development of clusters by means of knowledge exchange fostered by its policies and programmes, reducing information and coordination failures, and strengthening cooperation among companies alone, and companies and research institutes. Within the framework of regional policy, clusters tend to be very instrumental in the gathering and activating of key agents in a region (Pavelková et al., 2009).

In many countries, cluster support is a useful and frequently used tool to boost competitiveness of regional policy. Therefore, in a number of countries in the European Union, programmes addressing clusters and cluster policies are also implemented directly from a regional level.


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1.4 Defining Cluster Programmes

Cluster programmes are currently the most frequently used tools to support clusters in the world. a cluster programme is a programme at a national, regional or local level that allocates finance, provides organisational support and defines rules on the withdrawals of funds for cluster support. a cluster programme is an organised set of organisational, financial and human interventions. These interventions are made in order to achieve predetermined goals within a set period. a cluster programme is implemented in three stages:

• Programme proposal.• Programme implementation.• Programme evaluation.

The programme is implemented by means of projects (events concerning cluster development), whilst each programme is always governed by a specific authority.

The programme is usually divided into: • Priority areas.• Measures.• Projects.

Cluster programmes are implemented by agencies. Agencies are created to correspond to the cluster policy focus in a particular country, at national or regional level. Cluster programmes present a significant component of a national cluster policy. In programmes, financial resources are redistributed to previously-set priority areas and specific measures. Clusters competing for funds must implement a specific measure and meet cluster objectives in the given priority area. Policy focus plays an important role in the determination of a cluster programme. However, some cluster programmes join two or all three elements, namely the regional policy, science, research and development, and industrial development and enterprise promotion (Pavelková et al., 2009).

1.5 Financing Clusters and Cluster Initiatives from Public and Private Funds

Apart from other factors, in their worldwide survey into clusters and cluster initiatives, Sölvell, Lindqvist a Ketels (2003) examined cluster funding aspects. Out of two hundred and thirty-eight completed questionnaires which dealt with cluster funding, it was concluded that the public sector was the main source of funds in 54% of clusters. In 25% of the clusters examined, the funds were combined from both public and private sectors, whereas in 18% of the clusters their activities were financed predominantly from the private sector. Only 1% of the clusters were financed by universities. International organisations acted as the major funds provider in 2% of the clusters examined.


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Figure 1.1 Classification of clusters and cluster initiatives by the major source of funds in 2003

Source: Author’s interpretation based on Sölvell et al. (2003)

Ten years later, in 2013, the same authors, Lindqvist, Ketels and Sölvell, carried out a similar yet more precise worldwide survey that examined three hundred and fifty-six clusters and cluster initiatives. The following figure shows the division of cluster incomes. 34% of funds were provided to cluster initiatives from private resources, such as membership fees and sales of services. 54% of financial resources came from public funds, i.e. from national, regional, local and international organisations. It can be said that despite the slightly different categorisation of financial resources, which was narrower and more specific in 2013 than in 2003, there still have not been big changes in cluster funding over the last ten years. It continues to hold true that the public sector and public funds are extremely important for clusters and cluster initiatives.

Figure 1.2 Classification of clusters and cluster initiatives by the major source of funds in 2013

Source: Lindqvist et al. (2013)


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Public funding is often considered to be desirable in the first phase of cluster development. Lindqvist, Ketels and Sölvell (2013) expected that with the growing age of a cluster or cluster initiative, the proportion of private funding would increase and become more dominant; nevertheless, the survey results did not confirm this expectation. The figure below shows a decrease in the proportion of membership fees in aging clusters that is partially compensated by a gradual increase in their sales of services. On the side of cluster revenues from the public sector, there is a drop in public funds provided from the national level over the years, unlike international funding, which tends to grow as clusters mature.

Figure 1.3 Division of financial resources by the age of a cluster or cluster initiative in %

Source: Lindqvist et al. (2013)

1.6 Levels of Funding in Cluster Programmes

The trend in funding clusters has not changed since 2003 and instead has continued using public funding through clusters programmes, particularly in the European countries. Apart from several exceptions, the level of funding for cluster programmes, when compared to some other significant initiatives within the scope of regional, industrial or R&D policies, is generally low. South Korea and France present two exceptions where cluster programmes are a crucial part of political agenda. In the American state of Georgia, for example, the programme entitled »Georgia Research Alliance« serves as a channel for most investments in research anddevelopment in the field. The programme »Finland’s National Cluster« is to direct part of theFinnish financial resources towards providing research and development to be available forrelevant industrial ministries for spending within a short as possible time period. Otherprogrammes in other countries have annual budgets of only a few million euros, which, in sharpcontrast to hundreds of millions or billions of euros spent in other – even related – public areas,represent very little money in comparison. The truth is, however, that programmes which aimto engage key agents, build networks and partnerships, will never have the budgets similar tothose capital-demanding programmes in the research and development field. Despite this, thepresent situation in financing clusters in most countries does not reflect the overall financial


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needs of the cluster programmes of various subjects in the public and private sectors. Nevertheless, it seems that such programmes are only some of many of their kind in every policy area and do not necessarily require a substantial amount of finance. According to the purpose of funding, individual activities can be classified into the following three groups: 1. Building partnerships and networks. This mainly concerns the funding of cluster and

cluster initiative emergence. Annual funds to support one cluster are usually lower than€100,000, frequently even lower than €50,000, and in most cases funding lasts for less thanthree years. »Local Production Systems« (SPL) in France (with an annual cluster budget ofless than €40,000), the Czech programme »Clusters. Phase I. – Searching for Partners andMapping the Potential« (€7,000 to €35,000) or the »Visanu Programme« in Sweden (withan annual budget of approximately €30,000 per cluster) are vivid examples of that kind offunding.

2. “Light” investment in R&D and provision of joint services. Annual budgets varybetween €100,000 and €1,000,000. Some specific instances of such funding are »TheBasque Country’s Competitiveness Program« (with an annual allocation of approximately€180,000 to €400,000 per cluster), the Czech programme »Clusters. Phase II. – ClusterDevelopment, Cluster Activities« (with a budget of €100,000 to €1.6 million per cluster),the German programme »InnoRegio« or »Centres of Expertise« in Finland (an average totalof about €400,000 per cluster) and Norway (approximately €600,000 to €700,000).

3. “Heavy” investment in R&D. Individual projects receive funds higher than €1,000,000.a clear example is the »National Cluster Programme« in Finland, where each clusterreceives on average €4-6 million for innovation and/or R&D cooperation, but only fora period of two to three years. The programme »BioRegio« in Germany and the programme»Vinnväxt« in Sweden show examples of long-term funding in an amount of €2,000,000(BioRegio) or €800,000 (Vinnväxt) per year in the duration of ten years for one cluster. Ina similar fashion, the French programme »Pôles de Compétitivité« offers ample funds ofaverage €26.7 million to international clusters and €1.9 million to regional clusters. SouthKorea is within the same category, where the support per cluster amounts to roughly €3.6million in the first year and increases to €6.3 million in the later periods. By comparisonwith other Korean programmes, these are very large amounts; however, this is because theyare frequently invested in infrastructure.

Finance used in the majority of national cluster programmes fulfils a number of principal objectives. Any demands of the private sector for cluster support from public funds are satisfied only when industry participants are willing to contribute from their own resources. Frequently, there is a requirement at a national level to co-finance a cluster from regional or local financial resources, which promotes cohesion. For instance, the R&D cluster programme »Georgia Research Alliance« in the USA provided $400 million, which, subsequently, initiated the federal government to offer a $1 billion for research and development, and private businesses offered an additional $1 billion. Programmes to support clusters usually have no other forms of finance to draw from. France is one illuminating instance of combining funds from the start of the programme. In addition to funds received from a cluster programme, an additional several hundred million euros is available in the form of loans, guarantees from the OSEO agency


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(which finances small and medium-sized enterprises and innovation), or from the CDC organisation (which is a bank that provides finance within programmes of public interest). At the same time, clusters make all efforts to raise funds from private resources beyond the rules specified by the basic programme.

The level of co-financing cluster programmes varies from cluster to cluster, and so does the burden of responsibility for co-financing carried by the public and private sectors in various countries. Within the scope of the »Centres of Expertise« programme in Finland, a condition of 50% co-financing at regional level is mandatory. In Germany, in the »InnoRegio« programme, 40% of the overall spending must come from private businesses, whereas in the GA-network initiative programme, the co-financed part is up to 70% of legitimate costs spent from public funds. In Norway, in the »Centres of Expertise« (NCE) programme, the private sector must contribute a minimum of 25% of resources and equally, a minimum of 25% must be provided by local or regional government. Also in Spain (in the Basque region), the »Basque Country’s Competitiveness Program« relies on 40-50% of its funds from the private sector. In Sweden, participation in cluster support programmes, such as »Vinnväxt«, »Visanu« and »Regional Cluster Programme«, requires 50% of their budgets to come from regional co-financing. Private sector contributions in cluster programmes are required also in Italy by its »Technological Districts«, in the Netherlands by its »Key Innovation Areas«, and in GreatBritain in its DTI/RDA/DA regional cluster initiatives (OECD, 2007).

A comparative study by Lämmer-Gamp, Meier zu Köcker and Christensen (2011) also pertains to cluster funding. It explored one hundred and forty-three cluster organisations (where a cluster organisation is a managing and executive cluster unit, and all cluster representatives are not necessarily its members) in eight countries. The number of cluster organisations that participated in the primary research varied from country to country. Fifty-five cluster organisations came from Germany, twenty-six from Denmark, twenty from Poland, sixteen from Norway, eleven from Sweden, ten from Finland, four from Iceland, and one from Austria. As has been shown, many of these organisations depend upon public finance, which they use to cover the wages and salaries of their employees, and the expenditures on their offices and equipment. The proportion of public funds in the overall cluster budget is to a great extent influenced by the representatives of cluster organisations and their individual personal preferences, as well as by the opportunity for cluster programmes to win support from the public sector in single countries. Clusters can be financed from various regional, national, or European funding programmes.

The majority of cluster organisations (seventy-seven out of one hundred and forty-three participating in the study) are at least 60% funded from public resources, the budgets in forty-three clusters are more than 80%-dependent on public funds, and 19% of the cluster organisations’ funds come from public finance in only in twenty-nine clusters.

Table 1.3 Shares of public funds in the overall budget of a cluster organisation Share of public funds in the overall budget of a cluster organisation 0-19% 20-39% 40-59% 60-79% > 80%

Number of clusters 29 11 26 34 43 Source: Lämmer-Gamp et al. (2011)


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The comparison of medians in the shares of public funds in overall cluster budgets in various countries clearly showed the greatest share of public funds in the overall cluster budget in Finland, followed by Norway, Sweden, Denmark, Iceland and Germany. The lowest share of public finance was detected in Poland. The very low share of public funds in the budgets of Polish cluster organisations (when compared to other respondent countries) was due to the fact that several clusters in Poland are not currently entitled to appeal for public funds, as they do not have the legal form/status required in compliance with specific cluster programmes.

The above-mentioned comparative study also investigated the behaviour of cluster organisations with more than 75% of private funds in their budgets and compared it to cluster organisations with more than 75% of public funds in their budgets. Although the results are quite similar, some differences between the two types of clusters were observed:

• Clusters financed with more than 75% of their funding from the private sector showspecific management characteristics more frequently than those whose finance comesprevalently from public resources. From the legal point of view, they are usuallyvolunteer civil associations or limited companies, tend to have a centralisedorganisational structure, and managerial posts, responsibilities and tasks within thecluster are clearly and effectively delegated. Therefore, clusters with a great share ofprivate funds are more institutionalised than those with a high share of public funds.

• In the following three years of existence, the financial situation in cluster organisationsfinanced prevalently from private resources is not as stable and sufficient as in thosefinanced mainly from the public sector.

• Cluster organisations financed mostly by the private sector are usually older.

As a rule, performance in cluster organisations with a high share of private funds is better than outputs of cluster organisations financed prevalently from public resources. a cluster organisation where private funding dominates has more influence on the R&D, entrepreneurial and international activities of small and medium-sized enterprises within the cluster it governs, compared to an organisation which depends greatly on public funds.

The reason behind this is that private capital providers have higher expectations for a good return of their investment. Cluster organisations with dominant public financing also expect a return of their investment, but exert less intense pressure on the recipients, especially when the funds are in the form of government grants. Private companies can stop financing a cluster more easily in the event it does not meet its set objectives than the authorities controlling a cluster to do the same. Support by private entities is usually provided upon a contract which stipulates the required outcomes and outputs, in addition to penalties imposed for any breaches. On the contrary, most grant programmes define the expected outcomes and outputs; however, frequently there is no threat of sanctions placed upon recipients.

Another study (Oxford Research AS, 2008) also deals with a number of aspects of cluster existence, including its financing. The study maps the status quo of cluster policies in the European Union countries, with the exception of Hungary, along with Norway, Switzerland, Iceland, Turkey, and Israel. It regards national and regional cluster programmes as key forms of financing clusters. The study identified sixty-nine national cluster programmes and eighty-


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eight regional cluster programmes. Despite this, twenty-six out of thirty-one investigated countries implement at least one national cluster programme, whereas only seventeen countries implement at least one regional cluster programme. Out of eighty-eight regional cluster programmes, 60.23% are implemented in the three countries of Poland, Great Britain and Spain. Most national cluster programmes are carried out in Austria, Germany and the Netherlands. According to the study, the greatest overall number of cluster programmes (both national and regional) is in Poland (twenty-six), Great Britain (twenty-three), the Netherlands (fourteen), Spain (twelve), Austria (nine), and in Germany (eight) respectively. However, there is only one or two cluster programmes in the majority of European countries. The only country with no cluster programme at all is Ireland (Oxford Research AS, 2008). Nevertheless, it is essential to take into account that the actual number of programmes, whether at national or regional level, may not correspond to the overall resources allocated for clusters from national or regional levels (Urbančíková and Burger, 2010).

1.7 Comparing the Degrees of Cluster Policy Centralisation and Decentralisation

The attitude of European countries to cluster support is different as is their perception over whether the funds are to be directed to clusters from national, regional, local level, or even from the Structural Funds and/or community programmes of the European Union. Based on a number of recent studies, public funds have been a significant financial source for clusters in the last decade, especially in Europe, yet similarly in Japan, South Korea, or the United States (Barsoumian et al., 2011; Meier zu Köcker 2009; Oxford Research AS, 2008; Borrás and Tsagdis, 2008; OECD, 2007).

As Borrás and Tsagdis (2008) have it, there are two parallel processes in progress in Europe at this moment which determine the degree of regionalisation of cluster policies: the former downward process of decentralisation, and the latter upward process of greater internationalisation and international collaboration. Borrás and Tsagdis (2008) name three reasons why the setting of an appropriate degree of regionalisation of cluster policies is a crucial aspect for the existence of clusters. The first reason is that the majority of clusters that came into existence after 1990 are now beginning to make a return on investment, the second reason is the serious commitment of European countries (at all EU, national, regional and local levels) to a more effective coordination of cluster policies of the individual member states, and, finally, the third reason is that there are very noticeable effects of globalisation, which clusters are affected by more than ever before.

Raines (2001) divided cluster policy with respect to national or regional competitive advantage into three types: centralised cluster policy, decentralised cluster policy and feedback cluster policy. a centralised cluster policy is marked by the effort to acquire a competitive advantage at a local or regional level, yet with central coordination of processes at a national level. Funds are allocated almost entirely from a national level. Examples of the centralised cluster policy in Europe are found in France and Norway. a decentralised cluster policy is


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typical of countries with stronger regional government and greater regional awareness (among both the regional government and the citizens of specific regions). Such cluster policy then becomes part of the process of decentralisation in the economic development of regional policy. The Basque region, or Baden-Württemberg, serve as typical examples of decentralised policies. In both regions the cluster policies are more strongly related to a regional level than a national level. Besides, decentralised cluster policies are also typical of some regions in Austria and Italy. a feedback cluster policy rests on the policy implemented across various levels of state government. Mostly, it is the national level that creates some fundamental framework conditions for the cluster policy in a country that further enables lower levels to initiate, create and implement their individual cluster policies. Successfully-implemented feedback cluster policies are in Sweden and Great Britain (Raines, 2001).

A number of empirical research studies (Barsoumian et al., 2011; Meier zu Köcker, 2009; Oxford Research AS, 2008; OECD, 2007) have focused on the degree of regionalisation of cluster policies in the last five years. The Oxford Research AS (2008) study suggests that a close relationship in the perception of equal importance between national and regional cluster policies exists in the majority of the countries under observation. The study is based on views of experts on the importance of cluster policy at national and regional levels. Again, in the majority of the countries (eighteen out of thirty-one) there were no differences in the perceived importance of national and regional cluster policies. In nine countries, one of the levels was regarded as more important, and in four countries the experts did not respond to the question, or responded inadequately. The importance of national and regional cluster policy is compared in the following table.

Table 1.4 Comparing the importance of national and regional cluster policies in some selected countries

Classification of countries List of countries

Countries that regard both national and regional cluster policies as equally important

Bulgaria, the Czech Republic, Estonia, France, Germany, Island, Lithuania, Latvia, Malta, the Netherlands, Poland, Romania, Slovakia, Slovenia, Sweden, Switzerland, Turkey, Great Britain

Countries that consider national cluster policies more important than regional cluster policies Ireland, Israel, Norway, Portugal

Countries that consider regional cluster policies more important than national cluster policies Austria, Belgium, Denmark, Italy, Spain

Countries that did not respond to this question in the questionnaire (or did not respond adequately) Cyprus, Finland, Greece, Luxemburg

Source: Author’s interpretation based on OXFORD RESEARCH AS (2008)

In their research study in 2011, Barsoumian et al. divided the EU countries into four groups, by the levels from which they support their cluster policies. The country with the most decentralised cluster policy in Europe is Belgium, where each of the three regions implements their own individual cluster policies, and there is no national cluster policy at all. On the contrary, France has highly centralised national cluster policy. In Spain, a regional cluster policy was introduced at the beginning of the 1990s, and a national cluster policy was established later, in 2006. Some countries, such as the Netherlands, formulate cluster policy


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objectives at a national level; however, the policy is implemented partially with the help of regional authorities.

Table 1.5 Division of EU Member States in respect to the level at which they implement their cluster policies

Level at which a cluster policy is implemented in Member States List of States

National and regional levels Germany, Italy, Poland, Spain, Sweden, Great Britain

Predominantly national level

Bulgaria, the Czech Republic, Estonia, Finland, France, Greece, Hungary, Ireland, Lithuania, Latvia, Luxemburg, Malta, the Netherlands, Portugal, Romania, Slovenia

Predominantly regional level Austria, Belgium, Denmark Neither level, there is no cluster policy (or it is minimally implemented) Cyprus, Slovakia

Source: Author’s material elaborated according to Barsoumian et al. (2011)

In the countries with a lower level of innovation performance (Poland, Hungary, and Bulgaria), the EU Structural Funds are frequently mentioned as one of the major sources of funds for clusters (Charles et al., 2009; Bialic-Davendra and Pavelková, 2011). Similarly, they play a significant role in funding clusters in the Czech Republic (Ministry of Industry and Commerce of the Czech Republic, 2008).

1.8 Time Scheduling for Cluster Programmes

This subchapter describes the current trends in establishing timetables in various cluster programmes and models of their funding, including the financing and co-financing of individual measures.

The United Nations Industrial Development Organisation, UNIDO (2004), argues that cluster support is a time-consuming process, and that it rarely produces visible outcomes/results in the first year of public funding. UNIDO, illustrating the point using an example of developing countries, points out to the fact that within their first three to five years of existence, clusters must learn to sort out internal conflicts, set up a system of rules, build up trust among key cluster actors, and create local capacities for providing and developing joint services. Some clusters even need to change their way of thinking to a certain extent. Although the process seems to be too lengthy, it is unreasonable to provide a cluster financial support for an indefinite period, as this would set a bad precedence of cluster dependence on public funding. Pavelková (2009) also argues that supporting clusters without any time limitations may lead to ineffectiveness in cluster management. a non-formal alliance of European clusters, »CLOE – Clusters Linked over Europe« (2006), states that support for clusters is frequently planned and co-financed from national and regional levels during the period of the first eighteen months, with the probability of prolongation for another eighteen months. After the total period of thirty-six months is over, a cluster should be self-sufficient, and no more national or regional subsidies should be necessary.


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OECD (2007) points out that cluster programmes which focus on the engaging of key actors, networking and building partnerships, last approximately from three to five years. Some programmes go through a so-called “initial/introductory” programme stage, followed by other programme stages. Although very limited feedback on the effectiveness of such programmes is given, research findings and evidence have so far indicated that a three-year period is scarcely sufficient for a programme to meet its objectives and expectations. a period shorter than three years is too short for a cluster to become independent. It seems that four years should be the minimum duration of any programme supporting clusters (OECD, 2007).

Cluster programmes differ considerably, not only in the maximum financial support they receive, but also in their length (Lämmer-Gamp et al., 2011).

OECD (2007); Lämmer-Gamp et al. (2011) and Longhi (2008) have investigated the implementation of cluster policies and the duration of cluster programmes in a number of countries. The Korean programme »Innovative Cluster Cities« was established for five years. The Swedish programme »Vinnväxt« offered financing for a period longer than a decade. The Norwegian »Centres of Expertise Programme« has been scheduled for a ten-year cycle, although the time frame is divided into three stages with formal milestones, the fulfilment of which is a precondition for further funding. The programme »BioRegio« in Germany lasted eight years in total. Japanese cluster programmes »MEXT Knowledge Clusters« and »METI Industrial Clusters« were set up for a five-year period. The purpose of the French »Pôles de compétitivité« programme is to invest in the best international clusters with French participation. However, the time span of this programme is set for only three years, including the selection process and, regarding the size of the projects (all of them being large and demanding R&D projects); this constitutes a serious impediment for cluster members.

Table 1.6 Cluster funding in some selected countries

Country Programme/Policy Year of emergence

Length of the cycle Total budget

Canada NRC Technology Cluster Initiatives 2000 5 years €342 mil. France Pôles de compétitivité 2005 3 years over €1.5 bil.

Germany

BioRegio 1995 8 years €95 mil. InnoRegio 1999 7 years €110 mil. Zentrales Innovationsprogramm Mittelstand – Fördermodul Netzwerkprojekte (ZIM NEMO) 2008 4 years €52.5 mil.

Italy Technological Districts 2003 4 years Data not available

Japan MEXT Knowledge Clusters 2001 5 years Data not available METI Industrial Clusters 2001 5 years Data not available

South Korea Innovative Cluster Cities 2004 5 years cca €150 mil. Denmark Innovation Networks Denmark 2005 4 years €10 mil. p.a.

Norway Norwegian Centres of Expertise 2006 10 years €8.3 mil. p.a. Arena Programme 2002 5 years €5 mil. p.a.

Sweden Vinnväxt 2002 10 years €8.8 mil. p.a. Regional Cluster Program 2005 5 years €6.8 mil.

Finland Strategic Centres for Science, Technology and Innovation 2006 5 years €180 mil.

Iceland Strategic Research Program for Centres of Excellence and Research Clusters 2009 7 years €6.8 mil.

Source: Author’s interpretation according to OECD (2007) and Lämmer-Gamp et al. (2011)


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In contrast, several cluster programmes (»Polish Cluster Support Schemes: Support for the Development of Supra-Regional Clusters and Cluster Creation« in Eastern Poland; »Regional Growth Agreements« in Iceland; »Cluster Offensive Bayern« in Germany and »Corallia Cluster Initiative: Semiconductor-Nano/Microelectronics-Embedded Systems in Greece« in Greece) do not have any specific deadline (Lämmer-Gamp et al.).

1.9 Conclusion

Numerous research studies have recently been published on the significance of the establishment and development of strong clusters, and of the implementation of cluster policies aiming to increase the competitiveness and innovation potential of regions and countries (several of them being part of this chapter). It is generally agreed that clusters are a very effective means for the increase of competitiveness and innovation potential in regions. Successful clusters typically occur in the regions where science, research and innovation are highly supported and where regional government leads regional development. Supporting clusters means better relationships among key business actors in a region and activation of regional and local governments, companies and academic institutions, and creates conditions for these actors with different interests to seek effective methods of collaboration.

Support for innovation and clustering is one of the essential items on the agenda of the European Commission over the pursuit of the Europe 2020 strategy. The usage of public funds for cluster support is controlled by the regional EU policy, which aims to support the economic and regional development of under-developed regions in the European Union. Slovakia is one of very few EU countries that has no cluster strategy. If it wishes to join the ranks of the above-average competitive countries in the EU and for its innovation performance to grow along with the innovation performance of those successful regions, the adoption of an autonomous national cluster policy and more generous financial support for clusters could considerably help in the achievement of the above goals.

Slovakia has an important advantage as many countries both inside and outside Europe have already gained knowledge and experience in the field and know how to successfully implement cluster policy and cluster programmes today. The following chapters in the monograph deal with those countries that put a greater emphasis on cluster policy implementation than the Slovak Republic, and describe their policies and sets of applied instruments in detail. Although the systems of supporting clusters vary from country to country, by analysing these systems, interesting information can be obtained and thus potentially be used in the formation of a national cluster strategy in Slovakia.


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[19] MEIER zu KÖCKER, G. 2009. Clusters in Germany - An Empirical Based Insight Viewon Emergence, Financing, Management and Competitiveness of the Most InnovativeClusters in Germany. Institute for Innovation and Technology, Berlin, pp. 15-17.

[20] MINISTRY OF INDUSTRY AND TRADE OF THE CZECH REPUBLIC. 2008.Operational Programme Enterprise and Innovation (OPEI).

[21] OECD. 2007. Competitive Regional Clusters - National Policy approaches. ISBN 978-92-64-03182-1.

[22] OXFORD RESEARCH AS, 2008. Cluster Policy in Europe. a brief summary of clusterpolicies in 31 European countries, Europe Innova Cluster Mapping Project.

[23] PAVELKOVÁ, D. et al. 2009. Klastry a jejich vlyv na výkonnost firem. Prague. ISBN978-80-247-2689-2.

[24] PORTER, M. E. 1990. The Competitive Advantage of Nations, New York: Free Press,ISBN 0-684-84147-9.

[25] PORTER, M. E. 1998. On Competition. Boston: Harvard Business School Press.[26] RAINES, P. 2001. Local or National Competitive Advantage? The Tensions in Cluster

Development Policy, Glasgow, UK. European Policies Research Centre, University ofStrathclyde.

[27] ROELANDT, T., den HERTOG P. 1999. Cluster Analysis and Cluster-based PolicyMaking in OECD Countries: An Introduction and Theme. In: Boosting Innovation: TheCluster Approach, OECD Publications, Paris, France.

[28] SÖLVELL, Ö. 2009. Clusters – Balancing Evolutionary and Constructive Forces. IvoryTower Publishers, Stockholm, ISBN 978-91-974783-3-5.

[29] SÖLVELL, Ö., KETELS, C., LINDQVIST, G. 2003. The Cluster Initiative Greenbook,Stockholm: Ivory Tower AB, ISBN 91-974783-1-8.

[30] UNIDO. 2004. Supporting Underperforming SME Clusters in Developing Countries:Lessons and Policy Recommendations from the UNIDO Cluster Programme in India.Paper prepared for the Second OECD Ministerial Conference on Small and MediumEnterprises. March 2004, Vienna.


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[31] URBANČÍKOVÁ, N., BURGER, P. 2010. Miera regionalizácie inovačných politík a jejvplyv na inovačnú výkonnosť regiónov. E+M Ekonomie a Management 01/2010. ISSN1212-3609.

[32] WISE, E., JOHANSSON, C. 2012. Where the cluster winds are blowing in Europe.TACTICS. VINNOVA. PRO INNO Europe initiative.

II. Cluster Policies in Europe

Chapter 2 Viliam Kováč

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Chapter 2

Cluster Policy in Austria

by Viliam Kováč Technical University of Košice, Faculty of Economics, Slovak Republic [email protected]

2.1 Introduction 2.2 Cluster Policy Legislation 2.3 Cluster Policy Principles, Areas and Objectives 2.4 Cluster Policy and Other Related Policies 2.5 Funding Cluster Policy in Austria 2.6 Cluster Policy Centralisation vs. Decentralisation 2.7 Conclusion

References


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2.1 Introduction

The first cluster initiatives appeared in Austria at the beginning of the 1990s. Although Austrian clusters belong to the oldest clusters in the whole of Europe, until recently the conditions for their existence within the Austrian national economy have not been ideal.

In 2008, the »National Cluster Platform« was established by the state institution of the Federal Ministry of Science, Research and Economy of the Republic of Austria (Bundesministerium für Wissenschaft, Forschung und Wirtschaft). This platform provides information services and facilitates cooperation among cluster initiatives and other subjects at national, regional and local levels (Cluster Platform Austria, 2014).

The National Cluster Platform is an organisation that assists in the creation of an environment suitable for the implementation of cluster policy – by both initiating legislation to support clusters and putting the legislation into force, in the sense of the practical implementation of cluster programmes in the country’s economy.

The cluster policy in Austria is very closely linked to related policies. There is no autonomous cluster policy in the hierarchy of thematic policies. In fact, this is why the Austrian cluster policy is cross-sectional, includes a number of directions, and is based on their integration and the association of linked initiatives.

Nowadays there are seventeen programmes in operation in Austria which link industries and research organisations, most commonly academic institutions.

The cluster policy in Austria is managed by the decision-making of so-called “working groups” that were formed in order to coordinate all the activities carried out under the umbrella of the cluster policy more effectively, and to further develop this policy in practice. There are six working groups at the moment, with the agenda set according to their specialisation: a group focusing on clusters in the national innovation system as a driving force within the system, a group practically applying the R&D knowledge of cluster initiatives, a group promoting the developments in technology and innovation of technology-oriented clusters, a group concentrating on the internationalisation of clusters, a group specialising in production technologies and knowledge-intensive services of knowledge clusters, and finally a working group focusing on regional cluster policy. Despite working individually, with no governing body supervising their activities, the activities of these working groups are mutually coordinated. The absence of the central governing body is intentional, providing that the relevant outputs are possible without any administration directives of separate groups and their agendas.

Clusters in Austria are administered through a network of sixteen national programmes which aim at the direct support of cluster initiatives. All these programmes are focused on specific issues closely related to the practical application of the knowledge gained in practice.

A huge advantage of the Austrian cluster programmes is their generous funding, which is provided at several levels. On the one hand, the federal government directs funds to cluster initiatives, and on the other, individual federal states and regions have their own financial plans to support them, although such funds are mainly directed to smaller local cluster programmes.


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2.2 Cluster Policy Legislation

Although the first cluster initiatives in Austria are quite old within Europe, cluster-related legislation has not been expended and clarified so as to cover all the relevant areas so far. No explicit legal term of “cluster” is used in the Austrian legislation, hence the concept of cluster is vaguely defined and no statutory regulations for cluster initiatives, including their initiation, activities or termination have been introduced.

The Austrian cluster and innovation policy is influenced by the country’s territorial and administrative division. Regional dimensions play an important role. Each federal state has its specific access to innovations. As legislative initiatives can be made at various levels in Austria and implemented in the form of a variety of legal instruments, it is very difficult to regard “cluster” and related terms contained in the national standards in general as legal terms.

In the view of cluster policy, the Lisbon Treaty is a significant part of the Austrian strategy, particularly the »European Research Area« and »European Space Policy«, which fall into the third section of scope of operation under the name of European Policies. The level of success of the Lisbon Process can already be evaluated: most of the objectives had not been fulfilled by the end of 2010. The »Europe 2020 Strategy« has been developed to continue in the previous trend in the following decade. The aim of the European Research Area is to set up a free movement of researchers, scientific knowledge and technologies. It is generally aimed to remove legal constraints in research. The European Space Policy programme exists to promote scientific and technological progress and industrial competition. Moreover, this programme is closely linked to the activities of the European Space Agency (Europa – Summaries of EU Legislation, 2014 a). The Lisbon Treaty was reviewed in 2004 (Blanke and Lopez-Carlos, 2004).

2.3 Cluster Policy Principles, Areas and Objectives

At the First Austrian Cluster Conference, six working groups were defined to divide individual areas as follows: • Clusters in the National Innovation System.• Cluster Practice in Research, Innovation and Qualification.• Cluster Relevant Developments in Technology and Innovation a European Level.• Internationalisation of Clusters.• Knowledge-Intensive Services and Clusters.• Clusters and Regional Policy.

Clusters play an important role in the situation in regions. They are also gaining more importance in the cohesion policy of the European Union. Their growing significance can be seen in successfully-implemented innovation projects. The Structural Funds of the European Union are lavishly employed for financing ideas and raising further funds for small and


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medium-sized enterprises which want to carry out their business plans. The European Regional Development Fund and the European Social Fund are most commonly used for these purposes (Europa – Summaries of EU Legislation, 2014 b; European Commission, 2014; European Commission, 2010). The European Regional Development Fund, Regio in short, is the EU fund providing non-repayable subsidies. For the programme period 2007-2013 the ERDF contributed towards the financing of the following measures: Objective Convergence, Regional Competition and Employment, and Territorial Cooperation. The main ERDF strategy supports regional cluster initiatives indirectly for it aims to revive competition in the individual regions of the European Union (European Communities, 2007). The consultancy firm Research Technological Development and Innovation (RTDI) is very important for the economic development of regions as it builds awareness about and provides services in relation to obtaining financial aids for projects from the EU funds (Andrés et al., 2005).

In the current professional literature on clusters there are also some dissenting opinions regarding the function of cluster programmes. Their degradation is frequently given by the fact that cluster initiatives are presented only in the form of small or medium-sized enterprises. Nevertheless, their significance is still enormous in the national economy, which is shown by the proportion of the employees of cluster member firms taking part in cluster programmes.

Table 2.1 Employment in cluster-member firms

Federal State Number of Employees

Burgenland 14,590 Carinthia 65,188

Lower Austria 102,853 Upper Austria 172,492

Salzburg 71,741 Styria 139,956 Tyrol 92,939

Vorarlberg 48,789 Vienna 249,176 Total 957,724

Source: Author’s elaboration according to the Centre for Strategy and Competitiveness (2011)

As can be seen in the table above, the total number of Austrian employees working in firms participating in any kind of cluster initiative is 957,724, which is a great proportion of the total workforce and therefore strong evidence of the validity of cluster policy orientation.


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Figure 2.1 Number of employees working in cluster-member firms

Source: Author’s elaboration according to the Centre for Strategy and Competitiveness (2011)

One of the documents that links the Austrian cluster policy to practice is »Strategy 2020–Research, Technology and Innovation for Austria«, which focuses on the seven strategic elements as follows: • People and human capital.• Society.• Input/output.• Infrastructure.• Instruments.• Governance.• Internationalisation (Erawatch, 2011).

Another national economic document, the »National Research and Innovation Plan«, is very closely related to the above document. It is based on the original relevant recommendations made in Strategy 2010. The goal of »Strategy for Excellence« is to raise Austria’s quality and attractiveness as a centre of research, its technology and innovation at all levels and in all performance sectors, and improve its international competitiveness in science and industry (Rat für Forschung und Technologieentwicklung, 2014).

2.4 Cluster Policy and Other Related Policies

The development of Austria’s cluster policy is directly linked to other related policies. The cluster policy itself is not a separate or independent level in the hierarchy of thematic policies; it is cross-sectionally spread across other directions and based on the cooperation and association of similar or related initiatives.


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2.4.1 Cluster Policy and R&D and Innovation Policy

International integration of stakeholder institutions is very important for more effective research and development. Two Austrian institutions are members of the European Science Foundation, one of which is the Austrian Academy of Sciences (Österreichische Akademie der Wissenschaften).

There are currently seventeen programmes in Austria which join industries and research organisations, most commonly academic institutions. They can apply to and demand financial support within the following programmes:

• AplusB Business Incubator Programme.• Austrian Nano Initiative.• Austrian Space Applications Programme.• Bridge Programme.• Christian Doppler Laboratories Programme.• Cooperation and Innovation (COIN).• Collective Research Programme.• Research Competences for Industry (Forschungskompetenzen für die Wirtschaft).• Genome Research Programme.• ICT of the Future Programme.• Intelligent Production Programme.• IV2S Plus Programme.• Josef Ressel Centres – Research Laboratory for Universities of Applied Sciences.• Laura Bassi Centres of Expertise.• Take-Off Initiative.• Young Experts Programme.

The »ICT of the Future Programme« is one of the most significant funding programmes of the Austrian Federal Ministry for Transport, Innovation and Technology designed for the promotion of technological development and innovation in information and communication technology. It aims to create a group of domestic scientific institutions that could contribute to the goal of the federal government to lead Austria from the group of so-called “innovation followers” to the group of “innovation leaders”. The European Research Area (ERA) community provides a frame of reference for this national programme, which even exaggerates its international significance. The target group for programme participation is small and medium-sized enterprises, universities, research and scientific centres, start-up projects, non-profit organisations, and regional and local authorities. All areas are specified by four ICT research topics: rigorous systems engineering; safety and dependability, security and protection of personal data and privacy and information security; search and analytics, semantic processing and cognitive systems; and interface concepts, compatibility, and technologies and tools for interfaces. There are also two horizontal objectives for the future: human-centred computing and responsible use of resources (Erawatch, 2012). a number of successful cluster


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initiatives came to existence during this programme, for instance, »Research, Innovation, Technology for Information Technology« (Forschung, Innovation und Technologie für Informationstechnologien) known under its FIT-IT acronym, »Artemis« (Affenzeller and Pree, 2011), »Eureka« (Hartmann, 2014; Neto, 2014), »Eniac« (Towards European Clusters of Design Centres for Embedded ICT, 2013), »Catrene« (Catrene, 2014), »ITEA2 – Information Technology for European Advancement« (Publications Office of the European Union, 2006), »ITEA3 – Information Technology for European Advancement 3« (ITEA Office Association,2014), and the »European Research Area Net« known as ERA-Net (Hübner and Prüggler,2011).

2.4.2 Cluster Policy and Regional Policy

The development of cluster policy is related to the development of other policies, one of these being regional policy. Only two of the federal states in Austria have drawn up their own regional innovation strategy. Lower Austria (Niederösterreich) and Upper Austria (Oberösterreich) have elaborated a plan that identifies strengths and weaknesses of the regions. Although the implementation of these strategies could have brought a number of benefits, it has never taken place. Besides this, the two federal states have registered their plans on the »Smart Specialization Platform«, an international European platform which evaluates regional policies and regional performance. It is known as the »S3 Platform« (Institute for Prospective Technological Studies, 2014). At the moment there is no plan for such strategy to be introduced in another region of Austria. Nonetheless, the implementation of similar plans under the supervision of regional authority is a necessity.

In respect of the non-existence of a planned regional cluster policy, the Federal Ministry of Science, Research and Economy in cooperation with the Joanneum Research Institute have undertaken their own initiatives in this direction. Joanneum Research, the Joanneum Research Forschungsgesellschaft in full, is a research institute that focuses its activities in five research areas such as materials, health, ICT development, renewable energy resources, and economic research including innovation strategies. Recently, it has become a leading coordinator in the field of strategy development, which has facilitated the development of regional cluster strategies in other federal states with the exception of Vorarlberg, where no plan has yet been proposed or adopted. Although the other six federal states have their strategies, none of them has been registered with the Smart Specialization Platform, which complicates potential collaboration of cluster initiatives at regional levels (Cultz, 2014).

There are tendencies in Austria to closely link regional and national cluster policies. All measures taken at a regional level that are successful and working well in the expected direction should be modified appropriately and subsequently integrated into the national cluster policy.

2.4.3 Cluster Policy and Industrial and Enterprise Policy

Industrial and enterprise policy in Austria is very strongly related to research and development, especially to the development of new technologies for manufacturing processes.


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In this respect, the above mentioned National Cluster Platform can be regarded as the most significant organisation in Austria.

The majority of listed cluster programmes are industry-related, which is a smart approach for the successful application of specific knowledge gained in R&D in the national economy.

Table 2.2 Overview of Austrian industry-related cluster programmes

Cluster programme Industry Objective

AplusB Business Incubator Programme General support

Strengthening the support for the pre-incubation phase, setting structural innovation, expansion of the programme to the group of university graduates

Austrian Nano Initiative General support, nanotechnologies

Strengthening research competence, technology and cooperation by establishing strategically important projects

Austrian Space Applications Programme Space projects Bottom-up approach to space projects

Bridge Programme General support Funding well-established cluster initiatives Christian Doppler Laboratories Programme General support Application-oriented fundamental research

projects Cooperation and Innovation Transport Research and university sector linkages

Collective Research Programme

Human science orientation Support to university projects in life sciences

Research Competences for Industry

General industrial support

Cooperation between companies and tertiary education and research institutions in addition to support to industrial research fields

Genome Research Programme Biology Association of biological research centres

ICT of the Future Programme

Information and communication technologies

Complex ICT solutions, safe and secure systems, conquering data using intelligent systems

Intelligent Production Programme Knowledge industries

Core issues relevant to the manufacturing industry with the goal of increasing innovation capacity in the production of goods and utilisation of skills

IV2S Plus Programme Aviation industry Alternative propulsion systems and fuels, carrier routes, electric mobility, interconnection of transit corridors

Josef Ressel Centres – Research Laboratory for Universities of Applied Sciences

General support Experimental work

Laura Bassi Centres of Expertise General support General orientation – for female scientists only

Take-Off Initiative Aeronautics Increasing the effectiveness of air services, turnover of the aeronautical sector and general comfort of passengers

Young Experts Programme General support General orientation – for young scientists only Source: Author’s interpretation (2015)

The National Cluster Platform facilitates cooperation between cluster organisations and programmes, and public institutions supporting R&D and its industrial application within the


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national economy. Similarly, it fosters collaboration with members of cluster initiatives at national, regional and local levels. At present, it cooperates with sixty-four cluster initiatives, twelve cluster organisations, and seven cluster-oriented public institutions and agencies.

2.5 Funding Cluster Policy in Austria

For the first time ever, a comprehensive overview of all cluster-specific funding programmes for cluster cooperation and relevant national programmes has been compiled with the National Cluster Platform.

Cluster initiatives in Austria are financed from two levels: • National level.• Regional level.

Funding at the national/federal level takes place predominantly from funds provided by the federal government. Apart from these resources, provincial governments can decide on the allocation of funds from their own resources.

There are two possibilities to apply for financial aid at the national level: • »Cooperation Promotion Programme« of the Austrian Economic Service

(Kooperation Förderprogramme der Austria Wirtschaftsservice).• »Cooperation Promotion« of the Austrian Research Promotion Agency

(Kooperationsförderungen in der Österreichische Forschungsförderungsgesellschaft).

2.5.1 Cooperation Promotion Programme of the Austrian Economic Service (Austria Wirtschaftsservice – AWS)

The first possibility, the »Cooperation Promotion Programmes« of the Austrian Economic Service is in funds provided by a state organisation directly to cluster initiatives; hence, there is no other institution that acts as an intermediary and enters the process of decision-making and funds allocation. AWS, Austria Wirtschaftsservice, or the Austrian Economic Service, assists companies in their implementation of innovative projects by granting loans, awarding subsidies and issuing guarantees at favourable interest rates, particularly in cases in which it is not possible for these companies to obtain the necessary funds in a sufficient amount from other sources of financing. In addition to financial aid, it provides support in a non-financial form, i.e. in the form of specific information, advisory and other services to prospective, establishedand expanding companies (Austria Wirtschaftsservice, 2014).

The latest project within the framework of the Austrian Economic Service has been »ProTrans«. The programme focuses on special research and development. It is the only projectcurrently in progress that is available to applicants appealing for funds within the framework ofthe Austrian Economic Service.


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The objectives of the »ProTrans Programme« are set as follows: • Reinforcing the innovation performance of research and development in small and

medium-sized enterprises.• Fostering innovation and collaboration culture of small and medium-sized enterprises.• Improving access to a variety of methods and professional knowledge of research

institutions and the know-how of big firms, i.e. practical knowledge to be used in theachievement of the set objectives.

• Optimising business strategies of small and medium-sized enterprises with the goal ofimproving their product portfolio.

• Developing new markets.• Stimulating strategic partnerships.• Transferring knowledge into other industries.

2.5.2 Cooperation Promotion of the Austrian Research Promotion Agency

The other possibility of raising funds for cluster initiatives at the national level is through the »Cooperation Promotion« of the Austrian Research Promotion Agency. This is a national funding institution for applied research and development in Austria. It strictly supports Austrian enterprises, research institutions and individual researchers from the applicant organisations, offering them a comprehensive range of grants and services in order to promote Austria’s interests at a European and international level. Cooperation in the field of knowledge and technology helps enterprises to consistently acquire technological know-how, thus enhancing their chances of succeeding and winning advantages in the fierce competition within their industries. The programme was primarily aimed at projects in applied research to support them at the comparatively same level as fundamental research projects, and at less attractive projects from the marketing point of view, i.e. those having very low market potential. The funding under this programme is controlled by the previously- placed limitations on specific projects related to their implementation phases (Binder, 2014).

The cooperation promotion under this programme takes place at three levels: • Basic programmes.• Innovation book.• Third level.

2.5.2.1 Basic Programmes

The first level carries the same name as the basic programme. Its purpose is to add financial value to the outputs produced by several companies working collaboratively within a particular cluster initiative. In general, the added value is estimated at 15%. One of the basic programmes is »BRIDGE«, which is run in collaboration with the Austrian Science Fund (Fonds zur Förderung der wissenschaftlichen Forschung, FWF) and aims to close the funding gap between basic and applied research. The programme acts as an umbrella structure for projects which


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have a predominant basic research portion and hold a realistic potential for commercial exploitation. It is open to all fields of technology and operated in two different programme lines: »BRIDGE 1« and »BRIDGE Early Stage«. The implementation agency is referred to as FWF – Scientific Funds (FWF – der Wissenschaftsfonds). It was established in 1968 with the aim of supporting basic research. Its focus is not only on cluster initiatives but on all scientific agencies. Although the institution is a separate, fully autonomous legal entity, it is financed by the Austrian federal government. For better coordination of international activities, it became a member of the European Scientific Foundation.

The main objectives of FWF are as follows: • To strengthen Austria’s international performance and capabilities in science and

research, as well as the country’s attractiveness as a location for high-level scientificactivities, primarily by funding top-quality research projects for individual researchersand/or research teams, and by enhancing the competitiveness of Austria’s innovationsystem and its research facilities.

• To develop Austria’s human resources for science and research in both qualitative andquantitative terms, based on the principle of research-driven education.

• To emphasise and enhance the interactive effects of science and research with all otherareas of culture, economy and society, and in particular to increase the acceptance ofscience and research through concerted public relations activities, so that ordinarypeople understand that research and science exist to help the quality of their lives(Richtlinien zur Abwicklung von FWF-Projekten, 2011).

2.5.2.2 Innovation Book

»Innovation Book« is the second-level cooperation programme which is targeted specificallyat guiding the efforts of small and medium-sized enterprises towards continuous innovation in their business processes, by promoting information and knowledge transfer from scientific and research centres to these enterprises. In order to guarantee the high-quality information services for the business sector, such information transfer must be automated.

Amongst the processes included in the Innovation Book is the alleviation of business-related fear, therefore, the owners of small and medium-sized enterprises are supported in raising self-confidence and overcoming the fear of competition and market failure.

2.5.2.3 Third Level

The so-called “third level” presents a variety of projects falling within the frame of reference of the Cooperation Promotion Programme of the Austrian Research Promotion Agency (FFG). As a rule, these are purposeful programmes targeted at specific areas.

The »Competence Centres for Excellent Technologies« (COMET) programme was launched in 2006 and is still fully operational. The competence centres programmes are internationally recognised as the best-practice model and have been among the most successful technology


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policy initiatives in Austria. The initial phase was sponsored by the Ministry for Transport, Innovation and Technology (BMVIT) and the Ministry of Science, Research and Economy (BMWFW) in an amount of €130 million.

All projects subsidised by the Competence Centres for Excellent Technologies can be categorised into three programme lines:

• K1 Centres.• K2 Centres.• K-Projects (Polt et al., 2014).

2.6 Cluster Policy Centralisation vs. Decentralisation

As many cluster initiatives in Austria were self-sufficient and no demands had been made for the centralisation of control, cluster policy centralisation in Austria had not become a real issue until 2013, when the idea of central coordination of cluster initiatives and cluster programmes was presented at the 16th TCI Annual Global Conference in Kolding, Denmark (The Competitiveness Institute, 2013). The conference was organised by the Competitiveness Institute, a Spanish non-profit third-sector organisation that controls a global network of institutions which implement cluster programmes and deals with competition in individual industries (The Competitiveness Institute, 2014).

It is worth mentioning that cluster programmes in Austria are linked-up today and are centrally managed by the National Cluster Platform, facilitating the application of legislative provisions in the practical life of clusters.

Moreover, centralisation means the existence of six working groups with divided scopes of operation. On the one hand, these groups are quite independent and their operation is decentralised; on the other, they are interlinked with each other and their activities coordinated.

2.7 Conclusion

Austria is a modern country with a highly developed economy. Undoubtedly, great credit should be given to the Austrian network of small and medium-sized enterprises at which cluster programmes are predominantly aimed. Collaboration with large corporations is not eliminated either. Given the fact that almost one million Austrians work for a company that participates in any form of cluster, almost one in eight Austrians therefore depends on the future development of cluster programmes. In the last twenty years, since the first attempts to interlink firms, organisations, institutions and other stakeholders, the Austrian cluster policy has progressed rapidly and attained a strategic position in the development of economic and regional policy.

Even though it seems at first sight that the cluster policy in Austria has not undergone any dramatic shifts, it has progressively been changing over the years. Clustering has facilitated the development of all the industries where outputs of activities of cluster initiatives have been used.


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A distinctive characteristic of the Austrian cluster policy system is the existence of working groups that guide the development of cluster initiatives and lay down the fundamental principles of cluster policy. They do not aim to control clusters directly, but to guide cluster programmes in an economically desirable direction. All working groups are mutually coordinated. The first of them, »Clusters in the National Innovation System« tackles the key issues of national and regional cluster policies. The second working group, »Cluster Practice in Research, Innovation and Qualification«, stimulates innovation culture and manages direct collaboration between firms and research laboratories and development centres. Legal issues, including international cooperation, are the domain of another working group, »Cluster Relevant Developments in Technology and Innovation on the European Level«. The fourth working group, »Internationalisation of Clusters«, addresses the agenda of increasing the importance of cluster policy in foreign trade strategies of Austrian enterprises. The fifth working group, »Knowledge-Intensive Services and Clusters«, facilitates the establishment of linkages between well-working cluster initiatives and knowledge bases that are subsequently linked to knowledge systems, whereby developing the practical application of such services through the activities of cluster initiatives.

In terms of cluster funding, Austrian cluster policy is rather specific. Two types of cooperation programmes are provided, either by the Austrian Economic Service or by the Austrian Research Promotion Agency. While the former group of programmes is financed directly by a government agency, the latter is financed by a non-governmental organisation. As far as the Austrian Economic Service programmes are concerned, the approval process is directly in the hands of the subsidiser. In contrast, the Austrian Research Promotion Agency allocates funds to individual cluster initiatives, yet, the financial aid does not come directly from the agency. It should be noted that the general direction of both alternatives is not always for the sake of clusters. If a certain form of specialisation were given to both types of cooperation programmes, funds could be spent more effectively. Obviously, grant schemes would have to be classified so as it is clear which grant scheme falls within the decision-making power of which agency.


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[22] POLT, W. et al. 2014. Österreichischer Forschungs- und Technologiebericht 2014. Wien,Austria: Peter Sachartschenko & Mag Susanne Spreitzer OEG.

[23] PUBLICATIONS OFFICE OF THE EUROPEAN UNION. 2006. ITEA2 clusterpublishes first call for projects. Belgium: Publications Office of the European Union.Available from: http://cordis.europa.eu/news/rcn/25176_en.html.

[24] RAT FÜR FORSCHUNG UND TECHNOLOGIEENTWICKLUNG. 2014. Strategy2020 - Research, Technology and Innovation for Austria. Wien, Austria: Rat fürForschung und Technologieentwicklung. Available from: http://www.rat-fte.at/strategy-documents.html.

[25] RICHTLINIEN ZUR ABWICKLUNG VON FWF-PROJEKTEN. 2011. Richtlinien zurAbwicklung von FWF-Projekten. Wien, Austria: Richtlinien zur Abwicklung von FWF-Projekten. Available from: http://www.tuwien.ac.at/fileadmin/t/quaest/doc/FWF-Richtlinie_Gesamt.pdf.

[26] THE COMPETITIVENESS INSTITUTE. 2013. Programme. Barcelona, Spain: TheCompetitiveness Institute. Available from: https://tci2013.com/programme-overview-with-signup.

[27] THE COMPETITIVENESS INSTITUTE. 2014. What is TCI. Barcelona, Spain: TheCompetitiveness Institute. Available from: http://tci-network.org/page/about_us.

[28] TOWARDS EUROPEAN CLUSTERS OF DESIGN CENTRES FOR EMBEDDEDICT. 2013. Towards European Clusters of Design Centres for Embedded ICT -Brainstorming Workshop. Graz, Austria.

Chapter 3 Iveta Korobaničová

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Chapter 3

Cluster Policy in Denmark

by Iveta Korobaničová Technical University of Košice, Faculty of Economics, Slovak Republic [email protected]

3.1 Introduction 3.2 Cluster Policy Legislation 3.3 Cluster Policy Principles, Areas and Objectives 3.4 Cluster Policy and Other Related Policies 3.5 Funding Cluster Policy in Denmark 3.6 Cluster Policy Centralisation vs. Decentralisation 3.7 Conclusion

References


55

3.1 Introduction

In Denmark, the concept of “cluster” is defined in several ways (Schou, 2007): • The term of “cluster” (or “klynger” in Danish) has not been historically used so

frequently at a policy level. Nowadays, the term is becoming more and more recognised,yet it is not used at an official national political level. At a regional level, however, theterm “cluster” is widely used in the formation of regional policies and regionalstrategies.

• The concept of “competence cluster” (or so-called “kompetenceklynger” in Danish) wasused in the 1990s at both national and regional levels. This term is not used veryfrequently today, and has been replaced by the term “cluster”. This causes a generalconfusion in many areas as some authors, when using the term, refer to a slightlydifferent area closer to what, in the Porter theories, are called “clusters ofcompetitiveness” instead of “clusters” in general. The term “clusters” is dominant in thefield today, and covers a broad aspect of regional industrial networks.

• With reference to so-called “resource areas” (i.e. national clusters based on selectedNACE-codes), the National Statistical Department and the National Agency forEnterprise and Construction used the term “resource areas” in the 1990s. It was anattempt to start the building of a national based cluster policy in Denmark orientedtowards eight overarching national clusters. Each of the eight clusters or resource areaswas analysed at both national and regional levels. The outcome of the analysis was verybroad research studies; and partly because of this very broad approach to clusters, theresource-area approach is no longer used in Denmark.

The objective of this chapter is to shed some light on the Danish cluster policy, state its basic objectives, and explain its legislative instruments and methods of funding.


The most significant political documents in the country include: the »Danish Growth Strategy« (May 2002), »Danish Knowledge-Based Strategy« (January 2003), and the »Danish Strategy for Public-Private Partnerships in Innovations« (September 2003) (Serger, Hansson, 2004).

The »Danish Strategy for Public-Private Partnerships in Innovations« continued by forming an action plan for the four-year period between 2004 and 2007, and supported over twenty initiatives. At present, one of the high priorities is to improve cooperation and interaction between educational institutions and enterprises. By comparing the institutional structures in northern regions and other developing countries, Denmark has a unique opportunity to learn from such experience (Serger, Hansson, 2004).


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3.2.1 Cluster Policy at the National Level

Cluster policy in Denmark is partly implemented by the Danish Council for Technology and Innovation by means of a national programme entitled the »Innovation Network Denmark Programme« and partly by the Ministry of Research, Innovation and Education and DASTI, the Danish Agency for Science, Technology and Innovation, while considering the fact that Denmark has an area equal to the area of one region within the concept of the European Union (Vinnova, 2012).

Coulander (2010) states that many ministries support clusters by their targeted policies, mainly the Ministry of Economic and Business Affairs and the National Agency for Enterprise and Construction on its behalf, and the Ministry of Science, Technology and Innovation that has replaced the former Danish Agency for Science, Technology and Innovation. Other tasks are additionally delegated to the Ministry of the Environment’s subdepartment which is responsible for spatial planning. The Spatial Planning Department is responsible for the National Planning Report, which is published every three years and outlines the government’s vision for the country.

In June 2002, the Danish Parliament passed the Act on Technologies and Innovations with the main goal to strengthen the development of technologies and innovations in commerce and industry. The act served as a frame for numerous initiatives (including, for example, technological incubators, regional growth centres, technological prognostic programmes). To facilitate the enactment of new legislation, the Council for Technology and Innovation was founded with a mandate to advise the Ministry of Science, Technology and Innovation on a number of priority areas.

Another key institution is the Agency for Scientific Technologies and Innovations, which published its action plan in 2007 to promote innovation and change in thinking, »Innovation Denmark 2007–2010«. This plan has been designed to support R&D, the development of innovation centres, and to facilitate knowledge exchange between firms and institutions. The programme contains eleven high-tech networks, thirteen regional technological centres, and four regional ICT knowledge centres (Coulander, 2010).

The approach towards cluster policy in the last decade has emphasised the formation of national infrastructure of strong innovation networks covering the most significant and growth-focused business sectors, research and technological institutions. In 2008, a decision was made to merge small region-oriented network programmes into one programme for national networks. And additionally, it was decided that the overall number of clusters and networks would be reduced to thirty-seven in 2007 and further to twenty-two in 2010, while overarching areas should be avoided. The »Innovation Network Denmark« and its twenty-two existing innovation networks have performed excellently, having increased the innovation capacity of SMEs and fostered cooperation between research institutions and related industries. In 2010, »NetMatch« was established to accelerate the excellence development in cluster management.


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3.2.1.1 National Strategic Documents

One of the main strategic documents is the »Globalisation Strategy« of the Danish government that constitutes the national strategy to meet the challenges arising in the country from global competition and Denmark’s demographic development. Despite its position as the central strategy in Denmark, it has no explicit cluster elements; nevertheless, some elements of the strategy do have some cluster characteristics, such as the strengthening of the cooperation between research institutions and the business sector. The Globalisation Strategy is implemented through partnerships between the government and the regional growth forums.

In 1990, the National Agency for Enterprise and Construction (NAEC) started up a range of analyses and strategies for eight resource areas, but this work never developed into real programmes and has since been terminated.

For the purposes of this chapter, a new cluster programme under an umbrella of the Council for Technology and Innovation which can be termed as a cluster programme is mentioned. This programme is called »Regional Centres of Technology« (RCT) and it is a follow-up programme to the earlier »Regional Growth Environment« programme. The Council for Technology and Innovation administers numerous other initiatives which facilitate innovation and dissemination of knowledge, but only RCT can be classified as a cluster programme. The Regional Centres of Technology is a national funding programme that facilitates support to as many as thirteen regional technological centres. RCT is based on the collaboration of various players, for example, educational institutions, knowledge mediators, firms and other relevant actors within specifically defined geographical and professional areas. The objectives of this programme are as follows:

• To promote cooperation with research and knowledge institutions.• To establish permanent cooperation between industrial corporations and research

and knowledge institutions.• To participate in innovation and growth of regional enterprises, and others.

The target group is small and medium-sized enterprises and R&D institutions. Knowledge transfer becomes a very important part of the programme as well.

3.2.2 Cluster Policy at Regional Levels

The whole institutional set-up at a regional level in Denmark can be regarded as fairly innovative. a huge structural reform took place during 2006 and 2007. The newly-established »Regional Growth Forums« present an essential element of the regional development strategy.They were quite a revolutionary idea that emerged in 2006. While the national cluster policiesin Denmark seem to be rather weak, the new regional cluster tendencies are at a strongadvantage.

At regional level regions have formulated their own cluster programmes similar to those in the Central Denmark region. Upon the reorganization of administration in 2007, a regional


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growth forum was established in the region where cluster development became part of the regional development strategy. The tasks of the forum include: the development of regional development strategy for businesses based on their strengths and weaknesses, the monitoring of regional development strength so as to adopt the strategy modifications in practice, and the promotion of initiatives to increase local strength until recommendations are made for the utilisation of available funds (including the EU funds). The growth forums consist of up to twenty representatives coming from the region, local trade and industry, and knowledge institutions. It is crucial that the local trade and industry, as well as the knowledge institutions, are strongly represented in the groups. The regions have the right to establish several growth forums within the same region. The growth forums must prepare a regional business development strategy based on the strengths and weaknesses of the region in relation to the business structure and the central growth environment.

One of the regional growth forums is known under the name »Central Jutland Cluster Programme«. This programme stands on both large and small enterprises, but chiefly on building knowledge networks between enterprises and institutions. Simultaneously, it focuses on funding new clusters.

Another regional organisation is »Business Link Central Denmark«, partially subsidised by regional and national public authorities where thirty firm consultants assist to strengthen the performance of enterprises in the region.

In reality, Denmark has no national cluster programme, whereas the »Innovation Network Denmark Programme« makes use of clusters to encourage innovation in Denmark and the »Central Denmark Regional Cluster Programme« well suits the achievement of regionaleconomic growth. In both programmes – the Innovation Denmark and the Regional ClusterProgramme – cooperation between enterprises and technological institutions must be ensured.

The following figure, based on a benchmark study of 2011, shows the participation of clusters at regional level. It presents the share of cluster members within a distance of 150 kilometres from the cluster organisation management office. All clusters compared to the reference value show a high regional density with a mean value of at least 75%. In this specific case, the working conditions within a cluster organisation are favourable.

Figure 3.1 Participation of clusters at regional levels in Denmark

Source: Lämmer-Gamp et al. (2011)


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According to OECD (2007), Denmark was ranked among the first countries that promoted and supported various forms of cluster policy in the way which is known in other countries today. Despite this, the country has not formulated its own national policy up to present. The development of cluster policy in Denmark since 1989 is shown in the following table.

Table 3.1 Cluster policy development in Denmark since 1989

1989-1992 Cooperation between firms and networking

The Ministry of Industry and Commerce financed joint projects in the fields of science and research, marketing or production.

1994 Megaclusters Eight most significant areas covering more than 90% of industries in Denmark were identified. The government provided funds for 170 new cluster initiatives.

1999-2002 Competence-based clusters

29 clusters were identified. The Ministry was criticised for the preferences given to specific industries in the process of clusters selection.

2001

Governmental changes

Denmark changed it strategy from the national level of cluster funding towards the improvement of entrepreneurial conditions and the strengthening of the regional development and cooperation.

Some selected programmes: Regional Growth Centres Action Plan for Public-Private Partnerships in Innovation Action Plan for Regional High-Tech Development

Source: Pavelková et al. (2009)

Denmark belongs to the set of countries which place greater importance on regional cluster policy than on national cluster policy. The cluster policy in Denmark was emphasised by the government at the beginning of the 1990s. In the Danish cluster policy, a slow transition occurred from the clustering policy in the main industry towards the policy of greater responsibility of regions. Today, national cluster policies can be found, although to a lesser extent, in industry and innovation. In the recent programming period, the government has diverted attention away from the national policy and a number of policies and initiatives have been introduced at regional levels, along with the establishment of several new programmes (Coulander, 2010).

The figures below illustrate typical cluster composition and employment proportion based on the European Cluster Observatory database, which is divided into four basic areas: standard sectors, creative and cultural industries, knowledge-intensive commercial services, and life sciences.

In Denmark, like in other countries with the only exception of Iceland, the dominant actor is industry:


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Figure 3.2 Composition of clusters in Denmark


As has been mentioned above, cluster policy at national level is not really carried out in Denmark. Clusters are viewed as a means to develop and promote innovation in different regions and sectors. At the beginning of the 1990s, the creators of industrial policy in Denmark employed a framework-oriented approach to regional development which had been inspired by Michael Porter’s theories. Since then, clusters have continuously played a certain role in the regional development of Denmark.

The table below indicates the number of employees in standard sectors such as the construction industry, financial services, etc.

Table 3.2 Employment in the standard sectors in Denmark

Sectors Employees Construction 47 371 Business services 57 166 Financial services 77 590 Tourism and hospitality 21 774 Transportation and logistics 664 862 Distribution 33 938 Processed food 45 523 Farming and animal husbandry 22 006 Education and knowledge creation 46 273 Metal manufacturing 24 417 Agricultural products 8 905 Building fixtures, equipment and services 29 382 Media and publishing 22 804 Automotive 5 772 Entertainment 13 103 Paper products 12 807 Maritime 5 789

59%

5%

4%

8%

14%

2%2%

4%

2%SME

Others

Universities

Consultants

Non-SME

Training and educationprovidersR&D institutions

Governmental agencies


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IT 25 117 Telecom 20 709 Furniture 6 645 Apparel 1 449 Production technology 16 176 Construction materials 1 561 Plastics 8 485 Chemical products 9 269 Textiles 3 478 Pharmaceuticals 17 843 Heavy Machinery 10 266 Tobacco 0 Footwear 89 Lighting and electrical equipment 3 455 Power generation and transmission 2 782 Medical devices 7 167 Aerospace 16 981 Stone quarries 108 Instruments 6 626 Sporting, recreational and children´s goods 712 Jewellery and precious metals 948 Leather products 182 Oil and gas 4 558 Biotechnology 1 844

Source: Cluster Observatory (2011)

As can be seen from the table above and the figure below, the highest level of employment is in the commercial and financial services, construction and IT sectors, distribution, and transport.


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Figure 3.3 The most important clusters in the standard sectors in Denmark


In addition, the greatest participation of clusters in various sectors and highest employment are observed in three regions: the Region of Southern Denmark (Næsby), the Central Denmark Region (Midtjylland–Aarhus), and the Capital Region of Denmark (Hovedstaden–Copenhagen).

The following figure shows the participation of clusters in the life science industries in Denmark.


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Figure 3.4 The most important clusters in the life science industries in Denmark


As shown in the figure, geographically, the greatest participation of clusters in life science industries in Denmark is in Copenhagen, in the Capital Region of Denmark (Hovedstaden), while the highest level of employment is in pharmaceuticals (16,500) and medical devices (4,973), and the lowest level of employment is in the Biotech sector. The second area with a relatively smaller number of employees in all three sectors is the Region of Southern Denmark, while employment in the city of Odense is highest in the medical devices sector.

The following figure points to the situation in creative and cultural industries in the individual Danish regions.


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Figure 3.5 The most important clusters in the creative and cultural industries in Denmark


From the regional point of view, the greatest participation of clusters in the creative and cultural industries in Denmark concentrates around the Capital Region of Denmark (Hovedstaden–Copenhagen). The biggest numbers of employees work in the sector of software services (14,982), publishing houses (8,979), and radio and television (6,829). The second most significant region is the Central Denmark Region (Midtjylland–Aarhus) where the highest employment is in the printing sector (5,210), software (3,862), and artistic work and literature (3,144). Employment in the Region of Southern Denmark is lower by half.

The figure below reveals the most significant clusters in the knowledge-intensive commercial services. Sectors such as business services, education, knowledge development, financial services and IT are included. In Copenhagen, the Capital Region of Denmark


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(Hovedstaden), the highest employment is in the financial services (53,351), commercial services (38,295), and educational services (25,315) followed by the Central Denmark Region (Midtjylland) with the highest employment in the financial services (8,842), educational services (8,432) and commercial services (7,846).

Figure 3.6 The most important clusters in the knowledge-intensive commercial services in Denmark


Innovation and technology policy at the national level is shaped by two agencies under the roof of the Ministry of Science, Technology and Innovation:

1. The Danish Agency for Science, Technology and Innovation (DASTI).2. The Danish Council for Technology and Innovation, which is a part of DASTI.

The policy orientation is the partly new approach towards the financing of collaborative research, involving networks with industry and links with commercialisation, and partly the cluster programme approach which is focused on high-technologies, taking advantage of and


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reinforcing the spatial impacts of R&D investment, promoting collaborative R&D instruments to support the commercialisation of new research and technology, the inclusion of small and medium-sized enterprises, and on funding spin-off and start-up companies. The nature of the so-called “new political approach” is very much seen in the main programme, »Innovation Milieus« (DK- Innovationsmiljøerne), which was previously called »Regional Growth Environment«. Very often, the innovation centres are associated with the universities in this programme. The seven innovation centres aim at commercialising research and development. The Innovation Milieus Programme offers firms capital, advice, knowledge and counselling.

Innovation and technology policy at the regional levels is dealt with by six regional growth forums.

The policy that promotes entrepreneurship and SMEs is pursued by the National Agency for Enterprise and Construction (NAEC) under the Danish Ministry of Economic and Business Affairs.

In 2007, each of the five Danish regions started up what is called a »Regional Growth House«, co-funded by the NAEC and the relevant region.

Since cluster policies became part of the political agenda, each policy has defined different areas on its own. The list of sectors is quite exhaustive and varies greatly region by region. Based on the study of literature, it can be stated that no reference is made to clusters in the strategic document »Business Innovation Strategy in the Cleantech Area«. Nevertheless, a large number of clusters have naturally come into existence in Denmark within green sectors, since ecological aspects and so-called eco-innovations appeared in the business sector. They address issues such as climate, energy and the environment, which are also the issues tackled in the latest research strategy documents published by the Danish government.


According to Pavelková et al. (2009), a national cluster policy is implemented by public bodies for the purpose of supporting the establishment or the development of clusters and maximising the social and economic benefits arising from their operation. Other policies affect clusters indirectly. The ideas for the definition of cluster funding programmes stem from one of the three major groups of policies: regional policy; science, research and technology development policy; and industry and entrepreneurship development policy.


A country’s cluster policy is closely related to its innovation policy. The cluster policy in Denmark is included, although to a lesser extent, in industrial and innovation policy. In the recent programming periods the cluster policy and initiatives at the national level have been reduced, while the regional policies and initiatives have been strengthened and new programmes have appeared. According to Innofun (2013), the Danish model of innovation


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centres, the »Innovation Centres Denmark«, serves as an example of an innovative tool for the funding and development of innovative entrepreneurship, innovation, research and development. The centres concentrate mainly on ICT, CleanTech and life sciences. The core element of these innovation centres is building cooperation with prestigious universities. The centres are regarded as very innovative means of funding innovations and enterprises in Denmark, which is the result of the previously-mentioned Globalisation Strategy of the Danish government, which had an ambition to become one of the leading knowledge-based nations in the world by 2020. The mission of these centres is to link up research institutions, firms and capital in both Denmark and other selected innovative destinations in the world, facilitate cooperation in research and offer other services to Danish start-up companies. Denmark’s first comprehensive innovation strategy is based on collaborative efforts between the involved ministries, such as the Ministry of Science, Innovation and Higher Education and the Ministry of Foreign Affairs.


In 2007, Denmark changed its administrative structure; five administrative regions were created to replace the sixteen former counties. The new administration of the country became responsible for health care, regional development and potential growth opportunities.

The Region of Southern Denmark was one of the first regions in Denmark that adopted the conceptual scheme of clusters as a tool to foster the growth within its own regional economy. Nowadays, the regional authorities are soundly pro-active in their approach to cluster development in the region and they view clusters as a strategic tool for innovation, productivity and economic growth management.

Historically, the first-generation regional development strategy in the Region of Southern Denmark goes back to 2007, and has promoted the development of regional clusters and networks ever since. a total of seventeen priority areas were included in the first strategy; among others, there were foodstuffs, steel, robotics, mechatronics and tourism. Funding was directed mainly to cluster and network management, network activities, knowledge share, and to innovation and research to a lesser extent. The projects were financed for a period of three years.

At the beginning of 2009, a number of factors led to the formulation of a new targeted long-term strategy where regional authorities were to take an active part.

»Business Development Strategy 2012-2020« for the Region of Southern Denmarkchannelled the business development effort into three priority areas or clusters: Sustainable Energy, Social Technologies (Telemedicine and Robotics), and Experience Economy. Subsequently, changes in the funding strategy were introduced, geared towards more concentrated funding with a wider programme, and longer funding period for over five years. The financial resources were to be invested more strategically and, if possible, in compliance with the national strategic priorities with the aim to establish a critical R&D cluster in the region.


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In the following, the issue of industrial clusters in regions will be addressed. The table below displays an overview of clusters and their industrial specialisation in some selected Danish regions in 2000 (Manu, 2006).

Table 3.3 Industrial specialisation and clusters in some selected Danish regions in 2000

Regions Industrial specialisation and clusters

Jutland- Funen Food industry Metal-

production technologies

Furniture &Textile Energetics Environmental

services

South Jutland Mechatronics Steel machinery

for dairy products

Transport Aluminium

Mid Jutland Furniture Textile Electronics IT software Wind energy

North Jutland Mobile communications

Manufacturing technologies

Funen Horticulture Metal industry Transport Robotics Source: Elaborated according to Manu (2006)

The institutional framework for the above-mentioned clusters is provided by cluster-specific institutions in the individual regions. Some of the key players are listed in the table below.

Table 3.4 Key institutions in clusters

Industry Educational institution Network organisation

Textile Herning Textile School (1960s),

and Clothing Technology Institute (1980s)

Danish Association of Textile Producers

Furniture Skive Technical School (1970s) National Guild of Cabinet-Makers

Mobile communications

NOVI Science Park (1998) Aalborg University NorCom

Steel machinery for dairy production

Centre for Steel (2002) with the direct participation of the

Danish Technological Institute

Robotics

RoboCluster (2002) with the direct participation of the

Institute Mads Clausen (Danfoss-Southern Denmark

University) (Danfoss) Horticulture Aarslev Development Centre Mechatronics Cluster for Software Innovation

Aluminium AluCluster Centre for

Aluminium Consultancy and Training (1999)

Wind energy Knowledge Centre for Wind Energy Danish Wind Energy Association

Source: Elaborated according to Manu (2006)


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The Danish Business Development Council, which advises the Danish government on commercial issues, has adopted the idea of “clusters” as a new perspective in commercial policy, and initiated the analysis of clusters defined as “resource areas” in Denmark. The concept has been a cornerstone in the technology and industrial policies laid out from the Danish Ministry of Business and Industry, since 1993.

A “resource area” is understood as “a broad range of products or services, which is relatively stable over time and has a considerable weight or size in the economy. a resource area is made of sectors that are mutually interdependent or are in a common relation due to the requirements to produce the final product or service in cooperation. The firms in a resource area have the same needs in terms of factor conditions. There is one or more positions of strength measured by trade performance in a resource area.”

In 1992, the Ministry of Finance identified four areas essential for the Danish economy’s prosperity, so-called “blocks”, which produced 60% of exports. They included food, shipping, machinery, and health care. In its enterprise policy, the Ministry of Business and Industry (1997) registered several initiatives as a result of ongoing analyses in the resource areas. These initiatives concerned, for instance, legislative changes in the regulation framework, the standardisation process in the field of information technologies, telecommunications and electro-technical industry, medical research centres, IT research centres, multimedia centres, and the educational field. Later, in 1998, innovation policy was identified in the Danish enterprise and trade policy as one of the principal means to promote welfare in the long run. This systematic innovation approach brought the issue of innovation clusters to the forefront with the emphasis on networking and interaction between actors in clusters (Brandt, 2001).

According to Brandt (2001), there were five primary enterprise policy issues determined for the period between 1989 and 1999: public regulations, knowledge access, capital access, public-private partnerships, and international competitiveness. The Danish government declared in 1997 that seventy-seven new initiatives had been implemented within the five specified policy areas in order to improve framework conditions. The activities and initiatives in these regulatory areas included, among others, a new competition law (at the beginning of 1998) that introduced the EU-compliant regulations.

Another policy related to cluster policy is the policy of direct foreign investment. »Invest in Denmark« is part of the agenda of the Danish Trade Council within the Ministry of Foreign Affairs of Denmark. It is a global governmental export and investment promotion organisation, comprising all governmental activities designed to promote Danish export, and attract direct foreign investment in Denmark in an effort to enhance competitiveness for the Danish business community, and contribute to the creation of attractive job opportunities. Invest in Denmark concentrates its efforts within three focus areas where Denmark has proven global strengths: ICT, Renewable Energy, and Life Sciences. Each of these focus areas is based on internationally-competitive clusters, e.g. »Danish MedTech Cluster«, »The ICT Cluster«, and »Wind Energy« (Brandt, 2001).


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3.5 Funding Cluster Policy in Denmark

When looking at cluster programmes that started in 2007 or later, it can be stated that they are better coordinated with business development programmes and other infrastructural programmes in the country than those that started before 2007. It might be due to the fact that funding business networks and clusters has become one of the objectives within the European Regional Development Fund (ERDF) to ensure regional competitiveness and employment. a number of cluster programmes that emerged after 2007 are funded or co-funded by the ERDF.

It is fairly complicated to compare various cluster programme budgets as each of the programmes pursues different objectives; for example, some cluster programmes lavishly support investment in science and research, others support cluster organisations. Finance for clusters in Denmark comes from the existing governmental innovation network programmes such as the Innovation Network Denmark Programme mentioned above. Similarly, Danish regions are allocated funds through the so-called “growth forums”. The share of public funds in the total budget of cluster organisations in Denmark is approximately 60%. The figure was compiled on the basis of a comparative study »Clusters are individuals« carried out in one hundred and forty-three cluster organisations (Lämmer-Gamp, 2011).

Figure 3.7 Share of public funds in the total management budget of cluster organisations


Because of the existence of the Ministry for Science, Technology and Innovation, Denmark can greatly facilitate the whole process from research and development to innovation in terms of both administration and finance. The concept of platforms in Denmark is disseminated through the »Strategic Platforms for Innovation and Research« (SPIR) initiative. The initiative has been introduced to make it more attractive for businesses to participate in research and development activities with Danish universities, technological service institutes, other enterprises and innovation agents. The Danish Council for Strategic Research, in collaboration with the Danish Council for Technology and Innovation, has decided to provide funds for one specific research area. The project has been granted DKK 70 million and will be 40% co-financed as well, so the overall expenditure to complete the project should reach approximately DKK 120 million. The budget is divided into research activities (DKK 45 million) and innovation activities (DKK 25 million), and the applicant organisations will co-finance the project as well. The grant was provided for a period from five to seven years. The idea is to strengthen links between strategic research topics and innovations. a general impact of the SPIR initiative should be in the more effective targeting of public funds on strategic areas (DCSR, 2011).


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The programme of the »Regional Centres of Technology« (RCT) is financed from the Ministry for Science, Technology and Innovation, covering 60% of expenditures for two to four years of the programme. The remaining 40% is co-funded under the agreement with local industrial actors and the RTC bodies. The total budget for the programme was DKK74 million. (Schou, 2007).

The »Innovation Network Denmark Programme« is funded jointly by the national government (max. 50 %), private sector (min. 40 %) and by other public resources (the remaining 10%). Apart from the grants provided for the purpose of establishment and management of innovation networks, the Danish Agency for Science, Technology and Innovation founded a specialised agency, »NetMatch«, which is to further develop individual innovation networks.

Funding clusters in single regions varies and depends upon a specific programme. In the region of Central Jutland, for example, the cluster programme consists of two major initiatives: the »Advanced Manufacturing Cluster Project« and support for the defence industry cluster »CENTEC«. The programme is co-funded: 30% by the government, 30% by the region, 20%by the European Union (from its Structural Funds), and 20% by the private sector.


The country of Denmark consists of the Jutland peninsula and about four hundred islands in the Baltic Sea, which are referred to as the Danish Archipelago. Danish local governments and municipalities are highly autonomous regarding their financial issues and discretion policies (Blom-Hansen & Pallesen, 2001; Dafflon, 1999; Lidström, 2001; Wälti, 1996).

Denmark, according to Santisteban (2006), belongs to the so-called “Nordic” variety of capitalism or business system, which in their two-model typology Hall and Soscike (2001) include within the Coordinated Market Economy type. Furthermore, Denmark has historically been one of clear examples of centralised democratic corporatism, where strong labour and employer organisations have developed a system of consensus-building and policy negotiation (Campbell, Hall and Pedersen, 2006; in Santisteban, 2006).

In many European economies, cluster development has become an obligation of the national economic policy. Exceptionally-successful clusters can be found in Denmark in its Jutland Region. Historically, there has not been general industrial cooperation in Denmark. First and foremost, prejudices had to be challenged and a new form of network defined that was adjusted to Danish enterprises so that they could pursue their own interests within the new network. The Danish government financed cluster establishment projects with the assistance of workers from networking agencies to find partners and encourage cooperation. The outcome of this cluster establishment policy was about one thousand networks (with an average of five to ten firms within a single network) and the rapid development of the peninsula started. The experiences gained confirmed that the primary goals of the successful cooperation come from the penetration into new and specialised markets. Only then other services and purchases can be financed (Dahl, Dalum, 2001).


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Based on the comparative study »Combining Federalism and Decentralisation. Comparative Case Studies on Regional and Transport Policies in Switzerland, Austria, Denmark, and Ireland« (Biela et al., 2012), the Danish national policy is to a great degree determined by the government and ministerial bureaucracy (Nannestad, 2008; Saalfeld, 2008).

3.7 Conclusion

At the European Cluster Conference in 2010, one of the key development elements was emphasised – so-called “clusters of excellence”. Clusters, in order to become world-class clusters, need professional management and “excellent“ cluster organisations. These organisations would offer advice and top-quality services to firms and institutions participating in clusters, and would support synergy among institutions that could be very productive. The »European Cluster Excellence Initiative« (ECEI) is currently looking at how to better promotecluster excellence in Europe.

The main goal of the Danish cluster policy is to initiate and develop cluster organisations in Denmark that will, through innovation, innovative solutions to societal problems, and research and competence development, increase the competitiveness of businesses, promote export, investment, employment, and raise productivity in the Danish entrepreneurship.

An essential tool for the achievement of this goal is the establishment and development of excellent cluster organisations. The goal can be achieved by the implementation of a number of specific initiatives and measures which will strengthen clusters and networks up until 2020. The recommendations for Denmark and Danish clusters for the future are as follows:

1. To set up closer links between the Danish cluster policy and other policy areas importantfor the development of world-class clusters, e.g. research, innovation, and educationalpolicies and programmes.

2. To continue in building the cluster management mechanism for clusters to achieveexcellence in cluster management, in the areas such as strategy and brandingdevelopment, and high quality services provision (including internationalisation).

3. To maintain strong focus on mutual cooperation between clusters and networks so thatnew innovation areas and emerging clusters are supported as well, i.e. the reinforcementof cooperation and knowledge dissemination among clusters.

4. To ensure a sustainable funding model for clusters: to seek balance between the privateand public funding and identify alternative financial resources, while the uniqueflexibility of public funding is sustained with the aim to address specific individualcluster needs.

5. To follow the strong internationalisation approach; in the last two years the Danishinnovation networks have seen a strong growth in international activity, and theycurrently all have their own international strategies.


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References

[1] BIELA, J., HENNL, A., KAISER, A. 2012. Combining Federalism and Decentralization.Comparative Case Studies on Regional and Transport Policies in Switzerland, Austria,Denmark, and Ireland.

[2] BRANDT, M. 2001. Nordic Clusters and Cluster Policies. Cluster Policies – ClusterDevelopment. Edited by Age Marriussen, Stockholm.

[3] BLOM-HANSEN, J., SERRITZLEW, S. 2001. The fiscal manipulation of decentralizedpublic sector: macroeconomic policy in Denmark. Environment and Planning:Government and Policy 19, pp. 607-23.

[4] COULANDER, V. de L. 2010. The role of public authorities in clusters: a study of clusterpolicy in European regions. Available from: http://eb.wewi.eldoc.ub.rug.nl/FILES/2_Weusthuis_Procesregie.pdf.

[5] CLUSTER OBSERVATORY, 2011. Available from: http://www.clusterobservatory.eu/index.html#!view=regionalmapping;i=V16140;y=2011;r=NC10-DK;rsl=2;rp=NC10;s=CC20-KIBS;sp=CC20-8612.143243;z=7.

[6] THE DANISH MINISTRY OF SCIENCE, INNOVATION AND HIGHEREDUCATION. 2013. Strategy for Denmark´s Cluster Policy. ISBN 87-92572-40-5.

[7] DAHL, M. S., DALUM, B. 2002. The Construction Cluster in Denmark. In: OECD 2001.Innovative Clusters: Drivers of National Innovation Systems. Enterprise, Industry andServices. Available from: http://www.nist.gov/public_affairs/releases/upload/spi-the-plastics-industry-trade-association-attachment.pdf.

[8] CHRISTOFFERSEN, H., BEYELER, M., EICHENBERGER, R., NANNESTAD, P.,PALDAM, M. 2014. The Good Society. a Comparative Study of Denmark andSwitzerland. Springer Heidelberg New York Dordrecht London. ISBN 978-3-642-37238-4.

[9] ISBASOIU, G. M. 2007. Industrial Clusters and Regional Development. The Case ofTimisoara and Montebelluna.

[10] LÄMMER-GAMP, T., MEIER zu KÖCKER, G., CHRISTENSEN, T. A. 2011. Clustersare individuals. Creating Economic Growth Through Cluster Policies for ClusterManagement Excellence. The Danish Ministry of Research, Copenhagen. ISBN 978-87-92776-22-8

[11] MANU, A. S. 2006. Industrial Clusters in Spain and Denmark: contextualizedinstitutional strategies for endogenous development. Roskilde: 2006 European Urban andRegional Studies Conference. Available from:http://www.geography.dur.ac.uk/conferences/Urban_Conference/Programme/pdf_files/Manu%20Ahedo%20Santisteban.pdf.

[12] OECD, 1999. Boosting innovation. The cluster approach. OECD Proceedings: Paris.[13] OECD, 2001. Innovative Clusters. Drivers of National Innovation Systems.

http://eb.wewi.eldoc.ub.rug.nl/FILES/rapporten/2010/WD2010-2/WD_2010-2_Weusthuis_Procesregie.pdf

http://www.clusterobservatory.eu/index.html#!view=regionalmapping;i=V16140;y=2011;r=NC10-DK;rsl=2;rp=NC10;s=CC20-KIBS;sp=CC20-KIBS;p=map;ll=56.041786,12.143243;z=7

http://www.clusterobservatory.eu/index.html#!view=regionalmapping;i=V16140;y=2011;r=NC10-DK;rsl=2;rp=NC10;s=CC20-KIBS;sp=CC20-KIBS;p=map;ll=56.041786,12.143243;z=7

http://www.nist.gov/public_affairs/releases/upload/spi-the-plastics-industry-trade-association-attachment.pdf

http://www.nist.gov/public_affairs/releases/upload/spi-the-plastics-industry-trade-association-attachment.pdf

http://www.geography.dur.ac.uk/conferences/Urban_Conference/Programme/pdf_files/Manu%20Ahedo%20Santisteban.pdf

http://www.geography.dur.ac.uk/conferences/Urban_Conference/Programme/pdf_files/Manu%20Ahedo%20Santisteban.pdf


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[14] OECD. 2007. Reviews of Regional Innovation. Competitive Regional Clusters (NationalPolicy Approaches). OECD Publications. ISBN 978-92-64-03182-1.

[15] OECD, 2009. Clusters, Innovation and Entrepreneurship. OECD: Paris.[16] OECD, 2011. Regions and Innovation Policy. OECD: Paris.[17] PAVELKOVÁ, D. et al. 2009. Klastry a jejich vliv na výkonnost firem. Grada

Publishing. Praha. ISBN 978-80-247-2689-2.[18] SERGER, S. S., HANSSON, E. W. 2004. Innovation in the Nordic-Baltic Sea Region.

a Case for Regional Cooperation. IKED. Available from:http://www.bdforum.org/cmsystem/wp-content/uploads/files/state_of_the_region_report_2004_part2.pdf.

[19] SCHOU, S. 2007. Country Report. Denmark. Oxford Research - financed by EuropeanCommission. The Europe INNOVA Cluster Mapping Project. Available from:http://www.clusterobservatory.eu/system/modules/com.gridnine.opencms.modules.eco/providers/getpdf.jsp?uid=100172.

[20] VINNOVA. 2012. Tactics: Better cluster policies and tools for implementation. Wherethe cluster winds are blowing in Europe. Available from:http://www.vinnova.se/upload/EPiStorePDF/Tactics_ClusterWinds.pdf.

http://www.bdforum.org/cmsystem/wp-content/uploads/files/state_of_the_region_report_2004_part2.pdf

http://www.bdforum.org/cmsystem/wp-content/uploads/files/state_of_the_region_report_2004_part2.pdf

http://www.clusterobservatory.eu/system/modules/com.gridnine.opencms.modules.eco/providers/getpdf.jsp?uid=100172

http://www.clusterobservatory.eu/system/modules/com.gridnine.opencms.modules.eco/providers/getpdf.jsp?uid=100172

http://www.vinnova.se/upload/EPiStorePDF/Tactics_ClusterWinds.pdf

Chapter 4 Slávka Klasová

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Chapter 4

Cluster Policy in France

by Slávka Klasová Technical University of Košice, Faculty of Economics, Slovak Republic [email protected]

4.1 Introduction 4.2 Cluster Policy Legislation 4.3 Cluster Policy Principles, Areas and Objectives 4.4 Cluster Policy and Other Related Policies 4.5 Funding Clusters in France 4.6 Cluster Policy Centralisation vs. Decentralisation 4.7 Conclusion

References


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4.1 Introduction

The cluster-based programmes in France started around 1990, and their primary goal was to set up and support networks between small manufacturing enterprises. The French government decided to deal with cluster policy mainly due to the very weak export performance of French businesses. Since 1990 the economic performance has suffered greatly, and the downturn is continuing. The overall trade balance is a symptom of this trend, as evidenced by the figures of 2005, when the trade balance showed a deficit. The growing competition in international markets was the reason behind one of the impulses to orientate the policy towards clustering (Fontagne et al., 2013). At this time the French national policy was strictly centralised, and the traditional policy was based on the top-down approach (Longhi et al., 2013). The industrial policy was also highly centralised and no synergies between the two policies could be seen. The established »New Industrial Policy« was focused on the creation of such conditions in which local enterprises and research institutions could work together to their mutual benefit (Guisard et al., 2010).

The first attempt in this direction dates back to 1998 when the Agency for Territorial Planning and Regional Development (Délégation à l'Aménagement du Territoire et à l'Action Régionale, DATAR) initiated the establishment of so-called »Local Production Systems« (Systèmes Productifs Locaux, SPL). These are clusters consisting of firms and other institutions operating in the same sector and localised close to each other. The programme is still functional, and it has been one of the first instruments to support clusters in France based on the bottom-up approach (Longhi et al., 2013). In comparison with another programme, »Pôles de competitivité«, this programme is not aimed at the largest clusters in France; however, it is still an important programme which helps to make local areas more attractive (DIACT, 2006).

In 2004, according to GCI (the global competitiveness index), France was ranked at the 26th position with its average annual economic growth of 1.95% between 1992 and 2002 (Istrate, 2007). All these reasons led to the decision of the French government to set up a new programme to support high-tech clusters which were able to face international competition. The »Competitiveness Clusters Programme« or »Pôles de compétitivité« (in French) was officiallylaunched in 2004 by a cross-sectoral commission, the »Cross-Sectoral Commission for SpatialPlanning and Territorial Development« (Comité Interministériel d’Aménagement et deDéveloppement du Territoire, CIADT). Based on over two hundred applications, seventy-onecompetitiveness clusters were financially supported through the programme.

In 2009, the »Investments for the Future Programme« (Programme d’investissements d’avenir, PIA), was developed and officially launched as part of the governmental initiative to strengthen France’s competitiveness in the world. It contains two competitiveness cluster-specific measures: the development of structuring R&D projects and the pooling of innovation platforms. The aim of the programme is to boost productivity, employment and competitiveness of firms by supporting investment and research in five focus areas: Higher Education and Training, Research, Industry and SMEs, Sustainable Development, and Digital Technologies. The total budget of the programme is €35 billion, allocated through ten governmental organisations.


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The objective of this chapter is to explore the cluster policy in the specific French conditions, state its main objectives, principles, methods of funding and describe in detail its organisational structure.


The principal national policy document governing the cluster policy in France is the »2011-2014 France National Reform Programme« (European Commission, 2012). The document emphasises that the development of the innovation capacity of France depends mainly on technology transfer from the public-research sector to enterprises. France must seek to strengthen triple-helix relationships, and it is the second phase of the Competitiveness Cluster Programme that aims to meet these objectives (FNRP, 2011).

The third phase of this programme has been announced by the President of the Republic, extending its financing and impact beyond 2017. Preparatory work is underway, led by the General Commission for Investment and the Ministry of the Economy. The Investments for the Future Programme will remain focused on innovation and the digital sector, modernisation of French industry, the ecological and energy transition, research and training. The launching of the third phase of the programme (2013–2018) has been through implementing the »National Pact for Growth, Competitiveness and Employment«. As given in the pact, a new ambition for clusters is to put more emphasis on employment and future opportunities. It is possible to meet this strategic objective only when clusters become “factories for products of the future”. The new phase concentrates on such cluster activities that concern the dissemination of innovative products and services to international markets. Hence, an immanent characteristic of the third phase will be the commercialisation of the products and services of the individual clusters (European Research Area, 2013).

Another key document is a strategic document supporting research, transfer and innovation entitled »France Europe 2020«, part of which was the »National Strategy for Research and Innovation« (NSRI) elaborated for the 2009–2012 period. The Strategy emphasised the significance of regional clusters, which must stimulate a higher level of cooperation between research institutions and universities on the one hand, and enterprises on the other (Ministry for Higher Education and Research, 2009). Each French region has developed its own regional innovation strategy with the aim to strengthen and make the regional innovation system more effective, and to support clusters in the region.

France is number four on the list of the volume of direct foreign investment, right after the USA, China and the UK. There are no bureaucratic obstacles for foreign investment in France. The administrative procedure for the establishment and management of a company is considered to be the most straightforward in the world. France had to introduce several key reforms and programmes to achieve the status quo. The whole reforming process of the creation of conducive environments for firms was initiated in 2003 by the »National Innovation Plan«, which proposed a number of measures to be taken to promote innovation policy. The plan appealed for the introduction of a new legal status of »Young Innovative Company« (Jeune entreprise innovante, JEI) and »Young University Company« (Jeune entreprise universitaire,


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JEU). Both types of companies, if they qualify as young innovative companies or young university companies and obtain the JEI or JEU status, are typically entitled to the exemption of employers’ payroll taxes for research personnel salaries and corporate tax during the eligible period, and/or a reduction in social charges in case they employ qualified workers (engineers, research workers etc.). Other provisions stipulated by the National Innovation Plan include so-called “research tax credit“ (Crédit d'impôt Recherche, CIR). CIR presents a key legislative provision to support private investment in research and development. Firms that invest in R&D can use up to 30% of their qualified research expenses to offset their tax liability. CIR originated as a reaction to the weaknesses of the French innovation system, i.e. traditionally low private R&D expenditure (Griot, 2009).


France has two independent programmes which explicitly support clusters: The first programme, one of the first programmes ever to support local production systems,

is the so-called »Systèmes productifs locaux« (further referred to as SPL). The SPL Programme came into existence during the first call for proposals in 1998, under the responsibility of DATAR, the Agency for Territorial Planning and Regional Development (Délégation à l'Aménagement du Territoire et à l'Action Régionale). The programme is primarily focused on clusters of small and medium-sized enterprises (industrial districts, as these clusters are termed) that frequently concentrate in technologically less intensive industries and peripheral regions (OECD, 2007). These peripheral regions are typically highly specialised in specific industries, and have to face increasing competition. The SPL programme aims at promoting the cooperation and networking of SMEs which operate within the same sector and are localised in the same peripheral region (Martin et al., 2011). Today, there are one hundred organisations clustered under the SPL programme, mostly small and medium-sized enterprises which perform similar or complementary activities (MAXWELL STAMP PLC, 2012). The following figure shows the spatial distribution of SPL organisations.


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Figure 4.1 Spatial distribution of local production systems (SPL or industrial districts) across France

Source: OECD (2007)

The other programme for cluster support is the »Pôles de compétitivité«, which was officially launched at the end of 2004 for a three-year period. The programme is a political initiative of a modern industrial policy character based on the bottom-up approach. The principles underlying the programme embrace the views of firms and regions and comply with the limitations set in specific calls for tenders. The bottom-up approach differs from the top-down approach in which decisions are made by a few people in public authority, rather than the people who are affected by the decisions. The programme itself works with the EU calls for tenders that, when admitted, lead to financial aid delivered to selected clusters for innovative projects (MAXWELL STAMP PLC, 2012). Thanks to the programme, there are eighteen clusters operating world-wide at the moment and fifty-three more specialised clusters operating nationally or regionally (Fontagne et al., 2013). All seventy-one clusters are divided into three groups: the first group consisting of clusters already operating on world markets, the second group trying to penetrate world markets, and the third group consisting of clusters with a regional or national potential (Guisard et al., 2010). The greatest amount of finance, however, is concentrated in six world-wide clusters localised in four French regions. These are:

• »SCS Cluster« (Provence-Alpes-Côte d’Azur Region, near the city of Marseille,founded in 2006): a world competitiveness cluster that brings together players in thefour ICT fields of software, telecommunications, microelectronics, and multimedia.a research network among SMEs, big universities, research laboratories andassociations was built through the cluster that strengthens the competitiveness and


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contributes to the economic growth of the Provence- Alpes-Côte d’Azur Region. The cluster joins two hundred and fifty members. Of these, 70% are SMEs.

• »Minalogic« (Rhône-Alpes Region, the area of the city of Grenoble, founded in 2005):a cluster that fosters the research-led innovation, development and production ofintelligent miniaturised products and solutions for industry. The technologies producedwithin the cluster are applicable in all industrial sectors including traditional industries.Minalogic attempts to respond promptly to the business community’s needs to identifynew value-added services. Membership has increased to over two hundred, while 84%members are SMEs. Since its foundation two hundred and eighty projects wereapproved and financially supported in an amount of €754 million. The projects are inthe following five areas: biology and health care, digital imaging, mobilecommunications, energy, traditional industries, and key technologies.

• »Lyonbiopole Cluster« (Rhône-Alpes Region, the Lyon city area, founded in 2006):a world-class competitiveness cluster that is devoted to health and particularly to thefight against infections and cancer. Its aim is to develop innovative approaches goingfrom diagnostics and prevention to treatment by original administration systems. Itsupports R&D projects involving infectious diseases, cancer, autoimmune diseases, rareinflammatory diseases, and others. Over one hundred and nineteen projects in a totalamount of €588 million have been financed since the foundation of the cluster.

• »Aerospace Valley« (Toulouse Region, founded in 2005): a French cluster that groupsresearch centres and companies working in aeronautics, space, and embedded systemssectors. It is situated in the Midi-Pyrénées & Aquitaine Regions around the city ofToulouse in the south-west of France. It has more than seven hundred membercompanies (Airbus, Air France Industries etc.) of which four hundred and seventeen areSMEs. The cluster employs over 130,000 workers and over 8,500 active researchworkers. Since 2005 it has initiated some two hundred and twenty research projects witha total budget of €460 million (Aerospace valley, 2014).

• »System@tic« (Île-de-France Region around the city of Paris, founded in 2005):a cluster that specialises in complex systems and software solutions, electronicand opto-electronic technologies. The cluster can take great pride in having the uniqueconcentration of the biggest technological players in Europe and an impeccableinternational reputation. It is already the hub of research and the breeding ground forvarious discoveries and scientific inventions. Since its foundation, the SystematicCluster has developed and supported over three hundred and seventy-nine R&D projectswith a total investment of €1.97 billion funded by the French government, its agenciesand from the Paris-Region local governments. The projects fall within the seven priorityareas: automotive and transport, free and open source software, digital trust and security,health and ICT, systems design and development tools, telecommunications, and smartenergy management. The membership base has spanned to over six hundred membercompanies with over 60% of SMEs.

• »Medicen« (Île-de-France Region, the Paris city area, founded in 2005): the ParisRegion global competitiveness cluster that aims to position the Île-de-France Region as


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a European industrial leader in diagnostic and therapeutic innovation and leading-edge health technologies, thus enabling it to become one of the global centres for translational medicine. Medicen’s priority areas for diagnostic and therapeutic applications are those in which it has already invested: cancer, neurological disorders (neurodegenerative, sensory and psychiatric illnesses), infectious diseases, and cardiovascular diseases. In addition, the cluster has focused on the innovation and development of cutting-edge medical imagery, biological engineering and bio-instrumentation technologies. Since 2005 the cluster has initiated approximately seventy-four research project with a total budget of €90 million.

The individual clusters focus on a variety of industries. The following table summarises their industrial division:

Table 4.1 Division of competitiveness clusters (Pôles de competitivité) by industry

Industry Number of clusters Bio-resources 3 Chemical industry 2 Transport and automobiles 5 Ecotechnologies and environmentalism 6

Energy 8 ICT 6 Engineering and related services 5 Aviation 3 Material engineering 5 Microtechnologies and micromechanics 3

Optical industry 3 Agriculture 10 Consumer goods 5 Health care and biotechnologies 7 Source: Author’s interpretation based on MAXWELL STAMP PLC (2012)

The following map depicts the geographical distribution of competitiveness clusters in France. The map indicates that the clusters are scattered all over the country. The authors of a number of studies have analysed the geography of the clusters and agreed that the localisation of the clusters does not fully correspond to the industrial geography of France. This is partly due to the political restraints imposed on policy-makers who have to support clusters in every larger region in France (Martin et al., 2013). Cluster policies thus do not concentrate only in the most significant innovative regions (such as Île-de-France, Rhône-Alpes and Provence-Alpes-Côte d’Azur), but they are implemented all over the country (Guisard et al., 2010). Despite that, four French regions (Poitou-Charentes, Corsica, French Guiana, and Guadeloupe) do not implement their own competitiveness cluster (Pôles de competitivité) programmes.


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Figure 4.2 Spatial distribution of competitiveness clusters (Pôles de competitivité) across France

Source: IFA (2012)

Table 4.2 Comparison of two cluster programmes in France

Pôles de competitivité SPL Year of commencement 2005 1999

Description The most significant cluster programme

Provides support to regional and international joint projects

Provides support to SMEs within the same location and

industrial sector Target sectors and regions All All Number of clusters (2014) 71 100 Value €3.6 mil. €1.5 bil.

Tools Financial support for research and

development projects between enterprises and research centres

Audits, studies and diagnostics, business strategies and

innovations (to a lesser extent)

End of programme / Year of completion

Currently on its 3rd phase (2013-2018) Ongoing programme

Selection mechanism Selection based on a tender submitted

Selection based on a tender submitted

Source: Author’s interpretation based on OECD (2007)


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Clusters play the role of a certain frame of reference for many political areas and the policies concerned. The cluster policy in relation to research, development and innovation is governed by the National Agency for Innovation (OSEO). One of its main goals is to provide support for risky collaborative innovative projects, which means the risk involved is spread and the firms have easier access to capital (Oxford Research, 2007). As a bank held by the state and public institutions, OSEO functions within France’s wider system of innovation support, including, in particular, the research tax credit (Crédit d'impôt recherché). Larger firms or SMEs engaging in information technologies and R&D can qualify for and require a special status, the justification of which lies in the positive externalities generated by the dissemination of knowledge that comes with R&D, thus allowing the firms, especially SMEs, to benefit from a variety of tax reliefs and other communal services. During its existence the agency has widened its scope of intervention. At present, the OSEO mission is not oriented towards technological innovation only; the bank is willing to support firms for non-technological innovation as well. Moreover, it provides counselling for SMEs and usefully addresses their needs as companies go through various stages of their business life cycle: start-up, growth and the expansion of business activities. In 2007, OSEO Innovation granted €365 million in funding to companies collaborating on various projects. In 2011, the amount of financial aid reached €659 million (OSEO, 2012).

The cluster policy in relation to the regional policy is within the responsibility of the Regional Directorate for Industry, Research and Environment (Direction Régionale de L’Industrie, de la Recherche et de l’Environnement, DRIRE). The agency provides financial aid to various cluster programmes at a regional level through its twenty-two subsidiaries operating in every region in France (ClusterCoop, 2013). These regional subsidiaries play a pivotal role in providing facilitating services and granting loans to SMEs. They constitute a connecting link between the state and enterprises. DRIRE has thus become a key representative of the local government. Another agency is the Agency for Territorial Planning and Regional Development (Délégation à l'Aménagement du Territoire et à l'Action Régionale, DATAR). It was founded in 1963 as a response to the growing economic disparities between French regions. After World War II, power and resources in France were highly centralised in Paris. In those days, local governments started to participate actively in the implementation of spatial planning and regional policies. Their goal was to stabilise the aforementioned imbalances and stimulate the redistribution in growth patterns of population and economic activity across all French regions, and bring better spatial coherence to regional development planning. This was the main reason why the French government decided to found the regional agency, DATAR. In its first years of existence, DATAR made great efforts to restrict the dominance of Paris by supporting the development of industry and services by its eight regional centres. Apart from DATAR’s direct interventions, new measures were taken to help the restructuralisation of the country. The agency supported the decentralisation of industry and services by subsidising enterprises located in some specific regions around Paris. DATAR coordinated large-scale projects to foster economic development in the individual regions.


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DATAR was also responsible for the »Special Fund for Regional Development Planning« (Fonds d'intervention pour l'aménagement du territoire, FIAT), which was primarily used to finance infrastructure projects (Francegate, 2001; DIACT, 2006; DATAR, 2011).

Cluster policy in relation to industrial and enterprise policy in France is within the scope of the Directorate-General for Enterprises (Direction des Grandes Entreprises, DGE) that supervises the development of strategic documents regarding French industrial policy and the implementation of French economic policy. It operates under the authority of the Ministry for the Economy, Finance and Industry. DGE supports science and R&D through the Agency for Industrial Innovation (AII), the National Research Agency (Agence nationale de la recherché, ANR), and OSEO (the above-mentioned fund promoting the innovation policy in France) (DGE, 2008).

The links between cluster policy and other related policies are clearly shown in the following table.

Table 4.3 Links between cluster policy and other related policies in France

Related policy Link description

Regional policy Building up competitive regions by networking local actors

Science and technology Financing research by engaging the private sector and creating commercial links

Entreprise policy Supporting the needs common to all clustered small and medium-sized enterprises

Source: Author’s interpretation based on Oxford Research (2007)

4.5 Funding Clusters in France

Resources to support cluster policy in France come from the national budget; funds are allocated through the national ministries and agencies: the Ministry for Economy, Finance and Industry, and the National Research Agency (ANR), National Agency for Innovation (OSEO) and the Single Interministerial Fund (FUI). The following subchapters pertain to these national agencies, and describe in more detail the methods of funding cluster initiatives.

4.5.1 National Research Agency (Agence nationale de la recherché, ANR)

The National Research Agency (Agence nationale de la recherché, ANR) was founded in 2005 under the Ministry for Higher Education and Research. It was then the first national grant agency designed to give a new impulse to the French research and innovation system through the development of new innovative and exceptional projects. Furthermore, the foundation of the agency meant a profound change to the project funding process.

The goal of the agency has always been to facilitate the development of basic and applied research, and the promotion of collaborative partnerships between the public and private sectors. The first agency’s project was initiated in 2005 and ever since, 1,400 out of 5,400


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applications have been approved and allocated financial aid of €540 million in total. Projects are professionally reviewed by experts in the field and their selection is independent. Since 2008, the Agency has been employing a selection method based on competitive peer reviews compliant with ISO 9001 international standards. The independence of decision-making is also guaranteed by the fact that 30% of professionals in the selection committee come from abroad. The Agency provides funds within two programme lines. The first – a thematic programme line, includes four main areas which are also the priority areas of the French government: (1) health, food and agriculture; (2) energy and sustainable development; (3) communications and information technologies; and (4) nanosciences and nanotechnologies. The Agency supports such projects that, when implemented, can contribute to the development of any of these priority areas. The development of new concepts through exploratory research with the so-called “white programmes” (‘programmes blancs’), “young researchers” and “unique chairperson” programmes takes place within the framework of the other line – a non-thematic programme line (Schoen, 2012). Since its foundation, ANR has supported over 12,000 projects. The budget in 2013 amounted to €432 million reduced by almost one half since 2008 (€839 million) (European Commission, 2012). At present, ANR is planning to provide funds for projects in life and social sciences as those fields are becoming very dynamic in France. In the 2014 budget, €25 million was allocated to research in this sector (Centre National Recherche Scientifique, 2006).

4.5.2 Agency for Industrial Innovations (Agence de l'innovation industrielle - AII)

The Agency for Industrial Innovations (Agence de l'innovation industrielle, AII) is a governmental funding agency designed to support technological innovation programmes in the industrial sector. The Agency was officially created in August 2005. Its budget was over €1.7 billion for 2006-2007, and the allocation of funds has always been based on a public-private partnership. The funding mechanism for selected projects ensures that 50% of the funds is provided by the state, and the remaining 50% in the form of payable loans by banks or other financial institutions, or in the form of EU grants. In 2008, the Agency fell under the OSEO organisational structure, whereby it officially suspended its activity. Nevertheless, within its three years of operation, the agency was able to provide financial aid to implement ten important projects which contributed to the creation of over seven hundred and seventy qualified job opportunities and the establishment of several cluster initiatives, by building networks of a great number of firms, mainly larger French enterprises with truly exceptional research and development activities, and medium-sized high-tech enterprises attempting to expand their activities globally and penetrate international markets (AII, 2006). In fact, the creation of the agency was perceived as a symbolic gesture of the policy orientation of the then French President to continue in and further develop the classical French philosophical idea about helping national champions. This political orientation ignited numerous fierce debates which later turned into a new political philosophy presented by Nicolas Sarkozy, who won the presidency in 2007. The new politics was oriented towards the reinforcement of small and


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medium-sized enterprises, which was one of many reasons for the AII to merge with OSEO in 2008.

4.5.3 OSEO (Nátional Agency for Innovation)

The National Agency for Innovation (Nátional Agency for Innovation, OSEO) was created in 1982 as a specialised funding institution designed to support innovative and progressive small and medium-sized enterprises under the aegis of the Ministry of Economy and Finance, the Ministry for Higher Education and Research (BDPME), the SME Development Bank, and the Agency for Small and Medium-Sized Enterprises. The Agency focuses primarily on technological innovation projects; however, its mission is also to provide counselling, assistance and financial aid to French SMEs in the most critical stages of their life cycle. By sharing the risk, it facilitates the access of SMEs to financing by banking partners and equity capital investors. OSEO can perform its activities due to good cooperation with French banks and other financial institutions. The financial aid provided by OSEO takes a number of different forms. One of the forms offered is interest-free loans where the sum loaned is to be repaid only when the implemented project is commercially or technologically successful. The sum loaned – the principal – may be payable in full or only partly, or a certain percentage of the total, whichdepends upon several factors, such as the size of the enterprise, the risk involved in the project,or the project’s subject matter (OSEO, 2012). Loans are used to cover the costs (ranging from10% to 50 %) incurred in the implementation of an innovation project or technological transferin its last preparatory phase, which means the chances for the enterprise of successfullypenetrating the market are quite high. The OSEO total budget amounted to €1.8 billion for theperiod of 2005–2008. In 2010, 80,000 projects amounting to some €569 million in expenditurewere supported, while in 2009 €560 million, and in 2008 over €800 million was allocated(OSEO, 2012).

4.5.4 Single Interministerial Fund (Fonds Unique Interministériel, FUI)

The Single Interministerial Fund (Fonds Unique Interministériel, FUI) is a state fund whose budget is controlled by the Ministry of Economy, Industry and Employment. It is a programme aimed at supporting applied research projects on the development of products, processes and services that may be placed on the short- to medium-term market, which is generally five years. The Fund provides financial aid for R&D projects related to the Competitiveness Cluster Programme and the contributors are almost all French ministries.

The following figure reveals the funding structure of the Competitiveness Cluster Programme (»Pôles de Competitivité«) from 2006 to 2009. The amounts of contributions of the three national agencies (FUI, ANR, and OSEO) are compared with both the EU Funds contributions and local public authorities’ contributions. As can be seen in the figure, the greatest financial contributors are FUI and OSEO.


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Figure 4.3 Funding structure of the Pôles de competitivité Programme

Source: Griot (2009)


The period between the years of 1960 and 1980 in France was characterised by increasing centralisation and coordination of activity at the national level. It was the period marked by the strong intervention policy of the State (Muller et al., 2009). The French population concentrated massively in the Île-de-France Region around Paris. Clearer decentralisation tendencies appeared only at the beginning of the 1980s. In around 1980, the spatial planning policy was aimed at reversing the trend and strengthening the development of other regions by stimulating the redistribution of population and economic activity across the country. The regional policy was aimed at reducing spatial disparities between the regions, mainly by means of the fiscal redistribution and the aid provision for infrastructural development. Since 1982, the decentralisation led to the adoption of intergovernmental measures which gave greater autonomy to regional and local governmental bodies and to corporate entities in their decision-making. In this atmosphere, the French government decided to create DATAR, the Agency for Territorial Planning and Regional Development (Délégation à l'Aménagement du Territoire et à l'Action Régionale), which participated in the establishment of the very first cluster programme in France, the above »Systèmes productifs locaux« (SPL).

The industrial policy, similar to the regional policy, was based on the top-down approach with a strong centralising accent. It was focused only on large prosperous enterprises, so-called “national champions”. The decentralisation process has gradually resulted in the government’s orientation towards small and medium-sized enterprises. In 2005, the so-called “New Industrial Policy” became a symbol of the new French era, based on the reinforcement of public-private partnerships and on the greater support for SMEs. Another cluster initiative, the »Pôles de Competitivité« programme, was then launched. The Programme is a modern industrial policy, immanently based on the bottom-up approach. Although it was not targeted regionally at first,


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it has been integrated into the regional policies over time. Originally, the concept was formulated to support the top ten to fifteen key clusters that could work as economic growth drivers. Ultimately, the government decided to provide support not only to clusters operating on an international scale, but also to regional and interregional clusters. The outcoming selection of regional clusters made their programmes’ objectives more specific and better addressed the issues at regional level. Hence, the programme is a clear manifestation of the gradual decentralisation of the French innovation system.

4.7 Conclusion

Cluster initiatives in France, along with those in other European countries, are becoming a necessary part of innovation and regional policies. They can enhance the competitiveness of small and medium-sized enterprises, and strengthen the attractiveness of countries to foreign investors. The maturity of the cluster policy in the French conditions is determined by the development of the French economy. It can serve as an example in how to bring innovation to the economy, how to link the private and public sectors effectively, and how to allocate resources efficiently. Therefore, France rightfully deserves to be ranked among the major global innovators along with the USA and Japan. The main factors behind this success are, undoubtedly, the flexible funding structure, active public support, developed public research network, tax exemptions, subsidies, assistance provided for small and medium-sized companies, and a number of other instruments having an impact on the country’s innovation performance and its attractiveness.

France had to undergo a radical transformation, one that was accompanied by wide-ranging reforms, to become a successful and innovative country. The reforms were aimed at reducing regional disparities and decentralising the system, while strengthening the multi-level governance, universities’ autonomy, and applying a more attractive and supportive taxation policy for businesses. The introduction of the so-called “Crédit d'impôt Recherché”, the research tax credit, the creation of the new legal status of “young innovative company” (JEI) and “young university company” (JEU), and the foundation of DATAR, the National Research Agency, are only a very few examples of smart decisions of the French government which were to be followed by other countries.

Furthermore, the French government has successfully implemented two essential programmes supporting clusters: »SPL« and »Pôles de compétitivité«. The programmes differ in the tools employed and the budgetary allocations. The Pôles de compétitivité Programme has made it possible for seventy-one clusters to come to existence, which further proves the fact that France is attractive to foreign investors, who join French clusters in order to collaborate and build international partnerships. The programme has recently entered its third phase, covering the period from 2013 to 2018.

In 2009, another funding scheme, the »Investments for the Future Programme«, was officially launched. This programme is not explicitly oriented towards clusters, however, both »Investments for the Future Programme« and »Pôles de compétitivité Programme« seek to


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improve the competitiveness of specific regions and to revive the French economy by fostering the collaboration between the public and private sectors.


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References

[1] AII. 2006. The first programs supported by the AII.[2] CLUSTERCOOP. 2013. Enhancing policy framework conditions for cluster support

and cluster cooperation. 2013. pp. 2-10.[3] CENTRE NATIONAL RECHERCHE SCIENTIFIQUE. 2006. ANR: the new financier

of French research.[4] DATAR. 2011. National Research and Innovation Strategy. pp. 5-15.[5] DELOITTE. 2013. Researchers’ Report 2013. Country Profile: France. pp. 12-13.[6] DGE. 2008. The General Directorate for enterprises is in charge of fostering a business

environment to make French industry more competitive. pp. 2-7.[7] DIACT. 2006. Spatial planning and sustainable development policy in France.

Ministère des Affaires étrangères. pp. 20-80. ISBN : 978-2-11-096447-2.[8] EUROPEAN COMMISSION. 2010. Erawatch Research Inventory Report for France.

European Commission pp. 2-78.[9] EUROPEAN COMMISSION. 2012. Erawatch National Research Agency. European

Commission.[10] EUROPEAN RESEARCH AREA. 2013. Fact and figures. pp. 117-119.[11] FONTAGNÉ, L. et al. 2013. Cluster policies and firm selection: evidence from France

In.: Journal of Regional Science, 00 (0), pp.1-26. ISSN 1467-9787.[12] FRANCEGATE. 2001. The French cities.[13] FRENCH. 2011. French national reform programme 2011-2014. pp. 3-88.[14] GRIOT, A. 2009. Innovation and Competitiveness clusters Policy in France.[15] GUISARD, D. et al. 2010. The French Regional Industrial Clusters Policy: Lessons

from the Lyon Urban Trucks and Bus Cluster. In.: Local Economy, 25 (8), pp. 668-677.ISSN 1470-9325.

[16] IFA. 2012. Job-creating foreign investment in France. Invest in France Agency. pp. 2-5.

[17] ISTRATE, E. 2007. Institutional Barriers to the Implementation of Cluster Policy in theÎle-de-France Region. 2007. pp. 10-18.

[18] LONGHI, C. et al. 2013. Cluster policy for innovation and competitiveness. Lessonsfrom the French experience. In.: European Review of Industrial Economics and Policy,5 (1), pp. 15-25. ISSN 2109-9480.

[19] MARTIN, P. et al. 2011. Public support to clusters. a firm level study of French -LocalProductive Systems. In.: Regional Science and Urban Economics. 41 (2), pp.108-123.ISSN 0166-0462.

[20] MARTIN, P. et al. 2013. Are clusters more resilient in crises? Evidence from Frenchexporters in 2008-2009. pp. 5-12.


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[21] MAXWELL STAMP PLC. 2012. EU best practice in cluster development policy. pp.12-50.

[22] MINISTRY FOR HIGHER EDUCATION AND RESEARCH. 2009. NationalResearch and Innovation Strategy. pp. 2-19.

[23] MULLER, E. et al. 2009. France: innovation system and innovation policy. In:Innovation Systems and Policy Analysis, 18 (2), pp. 20-32. ISSN 1612-1430.

[24] OECD. 2007. Competitive Regional Clusters - National Policy approaches. pp. 267-281. ISBN 978-92-64-03182-1.

[25] OSEO. 2012. The role of Oséo in the financing of innovation. Ministère de l’Économie,des Finances et de l’Industrie. pp.1-8. ISSN 1777-8050.

[26] OSEO. 2008. OSEO missions, financial support, profession: innovation engineering.[27] OSEO. 2009. OSEO garantie. 2009.[28] OXFORD RESEARCH. 2007. Cluster Mapping Project. Country report France. 2007.[29] SCHOEN, A. et al. 2014. Erawatch Country Reports 2012: France. pp. 8-15.

Chapter 5 Miriam Brašková

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Chapter 5

Cluster Policy in Germany

by Miriam Brašková Košice IT Valley, Slovak Republic [email protected]

5.1 Introduction 5.2 Cluster Policy Legislation 5.3 Cluster Policy Principles, Areas and Objectives 5.4 Cluster Policy and Other Related Policies 5.5 Funding Clusters in Germany 5.6 Cluster Policy Centralisation vs. Decentralisation 5.7 Conclusion

References


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5.1 Introduction

Historically, the name “Germany” refers to the territory of several sovereign states which were united under the 1871 founding of the German Empire (MF and EA SR, 2014). After the surrender of Germany at the end of World War II and the agreement of the winning Great Powers in 1949, Germany was split into the Federal Republic of Germany (Bundesrepublik Deutschland) and the German Democratic Republic (Deutsche Demokratische Republik). They were informally known as West Germany and East Germany. These were reunited in on December 3rd, 1990. The united Germany is considered to be the enlarged continuation of the Federal Republic of Germany, not a successor state. As such, it retained all of West Germany’s memberships in international organisations.

Germany is a federal, parliamentary, representative democratic republic, which, in the middle of 2013, had a population of 80.5 million people (MF and EA SR, 2014). Apart from Germans, there are numerous minorities living in Germany, such as Turks, Italians, Poles, Greeks and other Slavic ethnicities. The capital is Berlin, followed by other regional centres such as Düsseldorf, Frankfurt upon Mohan, Hamburg, Cologne upon Rhine, Munich, and Stuttgart.

After World War II, West Germany accepted the so-called “Marshall Plan”, designed to help restore the country of West Germany after the war-time destruction and revive its economy. Gradually, the West German economy became advanced, highly developed, and established itself on the global stage. East Germany went under control of the Soviet Union and thus became part of the “Eastern Bloc”. Following the dismantling of the Berlin Wall in 1989, the eastern and western parts united and the Federal Republic of Germany, as it is known today, came to existence.

The first signs of clustering in Germany can be traced back to the Middle Ages, when trade and crafts flourished in the territory of present-day Germany. Craftsmen organised themselves in guilds and tradesmen created various trade associations. Their roles were, among others, to combine resources and guarantee the quality of training and production. The most famous example of the time was the 14th to 17th century trade group, the »Hanseatic League« (also known as the »Hanse« or »Hansa«), a commercial and defensive confederation of merchant guilds and their market towns. Later, »Hansa« became a strong partner not only representing its members in trade matters, but also actively promoting their interests before the ruler.

Herman (2009) points to another typical feature of the German economy: he does not see large corporations such as, for example, Volkswagen or Siemens, behind the German success, he emphasises the role of small and medium-sized enterprises, usually family-type businesses, which are global market leaders in their segment and which are labelled “hidden champions”. These types of companies are most popular, and constitute the backbone of the country’s economy.


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After the end of World War II Germany became a federation. The federal government was weakened, its competences shifted to the governments of the individual constituent states that gained strong power, especially in the field of economic and industrial development. Today, Germany is a prosperous economy that is ranked among the five strongest economies in the world. The industrial production of Germany is growing and so is its exports (Borrás et al., 2008), although the economic recession of 2008 has slowed down the economic progress. Yet, the Federal Republic of Germany is a driving force of the world’s economy.

However, the journey to the top was not easy. After the reunification of Germany between the years 1989 and 1990 and the initial euphoria, the new government sobered. The GDP began to fall and continued until 1993, when it dropped under the EU-15 average (Borrás et al., 2008). The service sector contributed most of the total German GDP in 2012, followed by the industry, trade, catering, transport, construction, agriculture, forestry, and fishery. The greatest real growth was achieved in the manufacturing industry. The situation was positive also in the agricultural field, trade and transport (MF and EA SR, 2014).

Some efforts to introduce a systematic cluster policy in Germany were first made in 1980s; nevertheless, no serious national strategy was formulated then. The term “cluster” was associated with bad past experience, thus the terms like a “network” or “networking” were used instead (Borrás et al., 2008).

Since its very beginnings, the German cluster policy has been continuously adjusted to the new trends so it is actually able to face the existing challenges. This adaptability is noticeable at both national and federal/regional levels (Hantsch et al., 2013).

5.2.1 Tools and Measures for the Policy Implementation at the National Level

The basic idea underlying the cluster policy in Germany is the federal government’s effort to support small and medium-sized enterprises, by promoting cooperation between partners that either are in close geographical proximity or operate within the same value chain (Hantsch et al., 2013). This is where single cluster policies’ tools are directed.

The specific tools that Germany uses to support clusters can be categorised as follows (Hantsch et al., 2013; Meier zu Kocker, 2009):

• Supporting schemes for clusters regardless of their industrial specialisation.• Supporting schemes for clusters in the bioindustry.• Supporting schemes for clusters in the former East Germany regions.• Tenders for clusters.• Supporting schemes for clusters of excellence.


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Currently, there are three programmes supporting clusters underway at the national level (BMWi, 2015):

• »Go-cluster«: a programme under the aegis of the Ministry for Economic Affairs andEnergy, which provides a stimulus to improve cluster management and help turnGerman clusters into highly effective international clusters. The initiative providessupport for innovative services and raises the international visibility of innovationclusters. Not only does the programme focus on the improvement of the quality ofcluster management organisations, but also on innovative service concepts and projectsdesigned to implement internationally-competitive cluster strategies. Members of the»Go-cluster« programme can obtain funding for novel solutions.

• »Leading-Edge Clusters Competition – More Innovation. More Growth«(Spitzencluster-Wettbewerb - Mehr Innovation. Mehr Wachstum): a competition run bythe Federal Ministry of Education and Research that brings together the most significantpartners within the innovation and value-added chain in their respective fields oftechnology, based on a regional principle. The funding provided supports them inimplementing their cluster and innovation strategy, helping them to establish themselvesin international leading groups in the long term. The aim is to match a cluster witha particular innovation strategy and thus promote exports.

• »Entrepreneurial Regions – The BMBF Innovation Initiative for the New GermanFederal States« (Unternehmen Region – Die BMBF-Innovationsinitiative für die NeuenLänder): a specifically-targeted support scheme organised and supervised by theMinistry of Education and Research, a measure that focuses on establishing anddeveloping particular technology, science and business skills in former East Germanregions. The initiative aims to lay the foundations for the development of regionalbusiness clusters.

When looking at the German clusters from the point of view of external benchmarking, the quality audit of the European Cluster Excellence Initiative, it is obvious where clusters have created a distinctive image for themselves and become successful (European Secretariat for Cluster Analysis, 2015).

Table 5.1 Overview of areas of comparative portfolios and levels of cluster excellence in Germany

Area of comparative portfolio / Level of cluster excellence Bronze Silver Gold Production and engineering 19 x 2 Health and medical science 8 1 x Transportation and mobility 12 x 2 Creative industries 9 x 1 Micro, nano and optical technologies 22 x 2 Aviation and space 4 x 1 Information and communication 13 1 3 Biotechnology 11 x 2 Energy and environment 17 1 x Construction and building sector 2 x x Food industry 3 x x New materials and chemistry 5 x 3 Total 125 3 16

Source: European Secretariat for Cluster Analysis (2015)


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The clusters of excellence are not evenly distributed in the country. The vast majority of them do not operate in another federal state; however, there are exceptions where a cluster operates in two or three federal states. As a rule, it concerns neighbouring federal states. The following figure shows in detail the number of clusters in the individual federal states (if a cluster is located in more than one state, it is included in each state separately).

Figure 5.1 Geographical distribution of clusters of excellence across Germany

Source: Author’s interpretation based on d-maps.com (2015)


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5.2.2 Tools and Measures for the Policy Implementation at Regional Levels

The regional level of the German cluster policy is represented by the cluster policies of the individual federal states. Germany has sixteen federal states of which five states are former East German states. Each federal state has its own constitution, parliament and capital. Some cities, including their own agglomeration, are separate federal states.

Figure 5.2 Federal German States

Source: Author’s interpretation based on d-maps.com (2015)


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Since the mid-1980s, the first attempts have been made to establish regional cluster policies. The first state to celebrate success in this area by its approach towards clusters was North Rhine-Westphalia (Borrás et al., 2008). Germany’s federal states have launched numerous measures to support the development of efficient clusters so far. These measures take into account the individual strengths of the regions – across technology, business or innovation – and are also designed around present structures and other features specific to the region (BMWi, 2015):

• Baden-Württemberg (Stuttgart): cluster policy tools aimed at promoting the regional,national and international development of clusters with emphasis placed on thecompetitiveness improvement of small and medium-sized enterprises.

• Bavaria (Munich): the »Bavaria Cluster Campaign« focused on increasing thecompetitiveness of Bavarian enterprises in nineteen key sectors.

• Berlin: the capital of Germany.• Brandenburg (Potsdam): a cluster policy supporting cluster initiatives and innovation.• Bremen (Bremen): the hub of aviation, wind energy, shipping industry and logistics,

a cluster policy also helping other innovative sectors such as the automotive and foodindustries, environment and health care.

• Hamburg (Hamburg): support directed chiefly to the aviation industry, logistics,environmental sectors and some other areas.

• Hesse (Wiesbaden): a cluster policy based on the bottom-up approach supporting clusteractivities, currently funding over thirty clusters and cluster initiatives.

• Mecklenburg-Vorpommern (Schwerin): networks emerging with the help of theregional enterprises or research institutes usually linked to the important industrialsector or technologies, presenting a great opportunity for collaboration, informationexchange and joint activities, focused on the growing sectors such as energy, food andbeverages, ICT, electro technology, and mobility.

• Lower Saxony (Hannover): a cluster policy aimed at the key technologies for the region,supporting the building of partnerships between scientific institutions and enterprises inthe form of clusters, numerous research networks, associations, regional networks andinnovation associations.

• North Rhine-Westphalia (Düsseldorf): the efforts to create the suitable environment forinnovation, to turn the region into a centre of excellence, bringing solutions to addressglobal challenges in the fields of the environment, economy etc.

• Rhineland-Palatinate (Mainz).• Saarland (Saarbrucken): a cluster policy fostering the innovation and development of

new materials, medicine, informatics, etc.• Saxony (Dresden).• Saxony-Anhalt (Magdeburg): supporting the growth of clusters, cluster management,

and building larger structures.• Schleswig-Holstein (Kiel): fostering innovation and knowledge-based society, a cluster

policy aimed at supporting innovation, growth and employment.• Thuringia (Erfurt): a cluster policy intensively promoting start-ups and cluster management.


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Clusters and networks are part of development strategies of the majority of German federal states and regions (Kiese at al., 2011). The specific characteristic of the regional support for individual clusters in Germany is that its focuses on the approximation of the regions of the former East Germany to the standards of West Germany. a variety of instruments is employed to overcome the structural economic disparity between the two main regions (Maguire et al., 2007).


In the field of cluster policy and cluster initiative, Germany is regarded in Europe as the creator and key facilitator of such activity (Hantsch, 2013). Two-level cluster policy formation and implementation typically occurs in Germany. Regarding the regional level, it is necessary to take account of:

• Regional character of structural policies.• Regional character of the labour market.• Institutional reforms.

The federal level of the German cluster policy specifically addresses cluster policy processes, and promotes “clusters of excellence” and their internationalisation. The federal level guarantees the framework and seeks to mitigate the regional disparities, considering the territories of the former East Germany. Cluster programmes in Germany seek to address both high growth and lagging areas (Maguire at al., 2007). The division of power between the central federal government and the individual states and the governance structure are balanced. The Bundesrat, which is a form of Second Chamber of the Parliament, is made up exclusively of representatives of the federal state governments and the number of votes each state holds is aligned in a sense to the size of its population, i.e. it is based on a geographical principle (Borrás et al., 2008).

Germany’s focus in the cluster policy is on: • Supporting small and medium-sized enterprises.• Promoting science, research and innovation.• Specifically fostering the development of regions and federal states that used to be part

of the former East Germany.

The long-term goals the German cluster policy strives for include: • Improving the competitiveness of domestic SMEs on a global scale.• Increasing the attractiveness of SMEs through innovative products and services.• Building, developing and maintaining partnerships on the regional/local basis.• Linking R&D and practice with the purpose of developing new products.


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It is clusters that play a role of a certain frame of reference for a number of policy areas and policies themselves in Germany (Innova, 2008).

On the other hand, cluster policies may be, but not necessarily, presented exclusively as framework policies dealing with infrastructure and institutional conditions inevitable for the operation of clusters in the country. Some authors argue that cluster policies should be defined in a broader sense, as part of all policies having impacts on clusters (Andersson et al. 2004).

There are numerous measures taken by authorities that influence clusters involuntarily, without any explicit purpose. In theory, cluster policies are monitored by public bodies for the purpose of increasing socio-economic benefits by means of building clusters, or further developing existing clusters. Other policies affect clusters indirectly, for example, education systems, tendering and procurement procedures, the public funding of research and product development, industrial property rights and copyright, etc. (Borrás and Tsagdis, 2008).


Clusters and regionally-linked innovation policies built on research have a long tradition in Germany (Schütte, 2010). The R&D and innovation policy in Germany is only partially controlled by central government, the individual federal states have the greatest say. In general, the German cluster policy aims at promoting innovation through stimulating partnerships between the business sector and academia (Falck, 2010).

Research and development is a priority for Germany because it is an export-oriented country with limited resources, and the dominant comparative advantage given by technological competence. Apart from other things, continued R&D development in Germany can be documented by the growing expenditure of the knowledge economy relative to the country’s GDP and by its innovation performance (according to the EU innovation index).

The Ministry for Research and Education directly promotes clusters in the form of: • Financial support: funding schemes, competitions, awards for clusters, etc.• Non-financial support: the preparation, development and implementation of various

policy instruments, continuous mapping of the status quo and taking the appropriatemeasures, and the dissemination of information to clusters (on cluster establishment,development, management, networking, funding possibilities, etc.).

There is a general shift in the field of innovation policy in Germany towards more networked forms of innovation (promoting networks and partnerships), and a greater emphasis on the commercialisation of R&D outputs. There have been concerns that the R&D system in the past was well-funded but did not lead to the same levels of commercial success for German firms as was the case in other countries (Maguire at al., 2007). To this end, the funding of German research is currently directed to:


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• A wider spectrum of potential actors with the support provided to partnerships notindividual activities.

• More output-oriented R&D and innovation with a great commercial potential. Thepromotion of innovation and entrepreneurship in the lagging regions of the former EastGermany, which been a priority since reunification. The network approach isparticularly appropriate in these states because while the research and universitysystems are relatively strong, there is little tradition of these institutions co-operatingwith private enterprise nor is there a tradition of small businesses conducting researchor engaging in joint projects. As such, the aims of regional policy and these innovationpromotion measures based on clusters seem well aligned (Maguire et al., 2007).


As it is assumed that clusters play a pivotal role in regional development (Brachert et al., 2011), a direct connection between the cluster and regional policies is regarded as a tool for regional development. Given the high level of autonomy of German federal states, each German republic has its own regional strategy and direction, from its own constitution to cluster policy.

The federal nature of the country has a strong influence on the way that the programmes are operated. They tend to be strongly decentralised and involve the federal government mainly in a facilitator role, organising the competition and selection of regions. Managing the programmes is then either a Länder (federal state) responsibility or assigned directly to NGO consortia or networks (Maguire et al., 2007).

In respect of economic growth, the example of North Rhine-Westphalia can demonstrate the working link between the cluster and regional policies, defined mainly by means of:

• Applying the bottom-up approach in policy formulation and local expertise.• Creating local institutions that actively assume responsibility for the environment and

the course of events in the region and promote the local and global sustainabledevelopment.


When having a closer look at the individual federal states, it can be observed that the regions within a specific state differ slightly.

In North Rhine-Westphalia, for instance, the state is divided into sixteen regions which, in most cases, are geographically identical with the scope of operation of local industrial chambers and industrial sectors (Borrás et al., 2008). It is obvious that the cluster policy in the regions is closely linked to the industrial and enterprise policy; they complement and support each other. Each regional chamber of commerce associates with relevant entities in the region and prepares a draft for conceptual policy framework that is further submitted for approval at the state level (Borrás et al., 2008).


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The Ministry of Economic Affairs and Energy is one of the fundamental bodies to support clusters in Germany. It helps clusters and promotes their activities directly and indirectly through a number of funding schemes for small and medium-sized enterprises, networking and promotional campaigns for R&D innovation activities.

The German priority is the support for small and medium-sized enterprises, aimed mainly at increasing their competitiveness and productivity (Hantsch et al., 2013). Apart from collaboration at a regional or value-chain basis, the German cluster policy is focused on the constantly changing business environment and the ability of enterprises to face new challenges.

The support for clusters in regions and/or regional support through clusters helps to generate employment, increase regional performance, and have a spillover effect, i.e. industries that previously did not therefore develop in the region (Delgado et al., 2014).

5.5 Funding Clusters in Germany

Since cluster initiatives have been established by means of public co-funding, there is an intensive on-going debate on how much public funding is to be recommended and for what period of time. As stated by Hantsch et al. (2013), the “right” approach to cluster funding is still unknown, and it is widely agreed that individual approaches are the best options.

Basically, three scenarios are common in funding clusters: • Full or maximum possible funding from public resources.• Combined funding from public, private and clusters’ own resources.• Dominant funding from private and clusters’ own resources.

Cluster organisations in Germany are co-funded from several sources, while the following categories are distinguished (Hantsch et al., 2013):

• Public funding: federal level, federal state level, regional level, local and municipal level.• Funding by dedicated (chargeable) services.• Membership fee-based funding.• Other private funding (subsidies, donations, and any in-kind non-cash contributions).

It is considered that a certain part of the budget of the cluster organisation should come from private sources in order to ensure its better financial sustainability in the medium- or long-term future. In the case of Germany, there is the share of public and private funding in addition to the funding from within the cluster organisation. The analysis of clusters of excellence in Germany reveals the following distribution of funds in the total budget of cluster organisations (Hantsch et al., 2013):

• 41% - public funding.• 28% - membership fees.• 22% - chargeable services.• 9% - other private funding sources including in-kind contributions.


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By setting policies at central and federal levels, clusters are forced to collaborate and seek more funding sources. The available funds are set similarly, the usual number of financial resources varies depending on the type of project, number of partners, and its location. Most frequently, it is a combination of two to three resources.

At present, the cluster policy in Germany is directly governed by two ministries: the Federal Ministry of Economic Affairs and Energy of the Federal Republic of Germany (Bundesministerium für Wirtschaft und Energie, BMWi) and the Federal Ministry of Education and Research of the Federal Republic of Germany (Bundesministerium für Bildung und Forschung, BMBF). Both ministries jointly provide the framework for the German cluster policy. The Federal Ministry of Economic Affairs and Energy of the Federal Republic of Germany controls trade and industry, and supports research, innovation and technology in enterprises. The Federal Ministry of Education and Research of the Federal Republic of Germany provides funding for research projects and institutions.

Between the central federal level and the level of the individual federal states there is the Federal Conference for Education, Planning and Research Presentation, which is of great importance in establishing links between activities of single federal states and the central level (Maguire et al., 2007).

In addition to important financial inputs, non-financial inputs to cluster programmes are very common in Germany, especially those provided by regional or local authorities, for example:

• Assistance from the government officials in addressing the clusters’ needs.• Political/strategic support.• Expertise.• Premises.

Financial resources provided by the European Union for its member states (community programmes, structural and investment funds, and other resources) are specifically targeted at particular areas. For the 2014-2020 periods, one of the most significant documents guiding the European Union’s allocation of funds is »Europe 2020 Strategy«, the strategy for smart, sustainable and inclusive growth. Five headline targets have been defined for the EU to achieve by the end of 2020. These cover:

• Employment.• Research and development.• Climate change and energy sustainability.• Education.• Fighting poverty and social exclusion (European Commission, 2010).

Like for other EU Member States, the above resources are also available for Germany and its clusters. Germany has a relatively long history in funding clusters, whether at a federal level or a federal state level. As can be seen in the following figure, funding clusters in Germany is very systematic and various resources suitably complement each other.


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Figure 5.3 History of some selected German clusters initiatives at the federal state and federal levels (1995-2008)

Source: Meier zu Köcker (2009)

The amount of funding depends on the innovation field, in which the clusters operate. At the federal level, the funding of clusters is generally targeted towards the establishment of new clusters and the development of existing clusters and their activities, or, more specifically, towards selected industrial sectors such as biotechnologies. The recent priority has been the support for excellent clusters in the field of international networking and internationalisation. At the federal state level, it is noticeable that the single federal states started to receive financial aid at different times; however, the priority is frequently the same, promoting regional partnerships and cooperation.

Two examples of the long-term cluster support at the federal level can be provided by the cluster-oriented programmes »BioRegio« and »InnoRegio«. Both programmes were initiated by the Federal Ministry for Education and Research and are recognised as the German cluster flagships (Maguire et al., 2007; Hantsch, 2013).

»BioRegio« consists of four lines, focusing on:• Biotechnologies and biotechnological innovations.• Funding young researchers and centres of excellence for innovations.• Promoting applied research with the focus on emerging companies and start-ups.• Funding specific biotechnological fields.


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Table 5.2 BioRegio Programme

Title of programme: BioRegio

Total budget: €75 mil.

Programme initiator: Ministry for Education and Research

Financial resources: Ministry for Education and Research

Number of regional clusters involved: 26, later focus on 3 clusters only

Focus on SMEs: Yes

R&D funding: Applied research

Selection process:

A competitive selection among the regions, with the most promising potential in biotechnology research and commercialisation freely competing for funding; the winners selected upon the submission of applications and a series of meetings and interviews

Research area: Biotechnology research and technology transfer into practice

Source: Nishimura (2011)

»InnoRegio« has been developed to support innovation and stimulate economic growth inthe federal states of the former East Germany. Most importantly, it aims to:

• Develop self-supporting innovation networks.• Foster cooperation between the R&D institutes, private enterprises and regional and

self-government authorities.

A privileged position in cluster funding is held by the former Eastern German regions. After the reunification of Germany, state-owned companies were privatised (usually by firms from West Germany), which caused the departure of chief researchers and consequently led to the dissolution of research departments (Rosenfeld et al., 2007). This actually heightened pressure on the government to set specific funding programmes and instruments for the regions in the former East Germany.


The basic characteristics of the German political system are a federal system of government and a system of rationalised parliamentarism closely related to Chancellor’s principle. Each of the sixteen federal republics (including cities) has its own constitution, legislation, executive, and judicature. Federal legislative power is vested in the Bundestag (the Parliament of Germany) and the Bundesrat (the representative body of the Länder, Germany’s regional states).

The issues such as citizenship, currency, migration, foreign affairs, duty, railways, postal and telecommunication services fall within the ambit of federal bodies. The current nature of relationship between the federal level and single state levels is the result of gradually-applied


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cooperative federalism. Based on the constitutions of single federal states, each state has formed a parliamentary system very similar to that applies at the federal level. Other competences and responsibilities are devolved downwards, directly to the federal states. Hence, cluster policies are very closely related to regions and regional governments.

The relationship between centralisation and decentralisation of the German cluster policy can be demonstrated by the funding of small and medium-sized enterprises with the aim of increasing their productivity and promoting their innovation, by fostering regional collaboration of partners (Hantsch et al., 2014): the federal government establishes the general framework and determines the desired direction of cluster policy, whereas the majority of practical measures and programmes precisely-targeted towards specific regions are approved and thus introduced at the levels of individual federal states.

Regarding authority and a conceptual framework, the cluster policy in Germany, as well as other government’s policies, is divided between the federal and federal state levels. It clearly reflects the relationship between the federal and federal state levels in all aspects. Each federal state slightly differs in several respects, such as history, geography, social or industrial conditions, and so does its cluster policy.

Individual federal states take a very active and direct approach in their cluster policies. Typically, they give cluster policy close attention, although some of them have devolved cluster control to lower decision-making levels, for example to regional or local authorities. Therefore, there are quite big differences between the individual federal states (Borrás et al., 2008).

The approach of the federal states towards the cluster policy and cluster development seeks, among other things, to:

• Achieve consensus.• Integrate and engage as large a spectrum of stakeholders as possible.

The individual funding schemes at the federal state levels are aimed at improving cluster management practices, promoting innovative projects, educational activities and joint initiatives, while acting in the public interest. One example among many is the »Bavarian Cluster Initiative« (Cluster–Offensive Bayern), designed to enhance Bavaria’s role as a top location for business and research. Since 2006 it has concentrated on the improvement of competitiveness of nineteen key industrial sectors. Its goal is to establish cluster platforms operating in within a specific sector at state level, and, by promoting cooperation between companies and research institutions, to jointly generate products, optimise processes and to win market share (BMWi, 2015).

Germany’s cluster policy decentralisation can also be seen in the behaviour of towns and municipalities, which strive to support innovative firms and networks, and build partnerships within their local sphere of influence, thereby not only stimulating the innovation potential at the local levels, but also affecting the very direction and development of these towns and municipalities (Friedrich and Nam, 2011).


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5.7 Conclusion

Germany became a great industrial power at the end of the 19th century, indeed a world super power, when its science and technology reached the top level of global achievement. Since then, the main driving force of the German economy has been innovation (Porter, 1998). Germany is now one of the five strongest economies in the world, and is one of the leaders and trend-setters in cluster development in Europe.

The history of clusters in Germany goes as back as to the Middle Ages, when a very successful trade group called »Hanse« came to existence. The modern history of German clusters dates from the end of World War II, and its recent history began with the reunification of Germany in 1989 to 1990 and the formation of the Federal Republic of Germany.

Cluster policy in Germany is designed and implemented at two levels which, when pursuing their own specific objectives, complement each other very well. The federal level of the cluster policy is controlled by two ministries (the Ministry of Economic Affairs and Energy and the Ministry of Education and Research). They both aim at supporting clusters at a federal level, promoting innovation and R&D trend, and facilitating the clusters’ efforts to penetrate international markets. The cluster policies at federal state levels are different, each state being somewhat specific, whether in the form or focus of funding it needs, or in the policy tools it needs to employ. The federal states that were part of East Germany during the Communist Era are a specific case; vis-à-vis the western German states, they lag behind in education, innovation and technological transfer, and in their active approach to entrepreneurship. These are the areas of concern which are covered by specific funding programmes from both the federal and federal state levels.

Apart from promoting innovation, research and technological transfer, the German cluster policy concentrates on supporting small and medium-sized entrepreneurs, and on building networks, thereby mitigating regional disparities and boosting employment. Besides this, it supports the efforts targeted at international networking of clusters.

Typically, German clusters are co-financed from several sources, which forces them to take a pro-active approach in the development of new activities and projects and the fund-raising and combining funds. This naturally helps clusters to sustain their organisation in the long run. Cluster policy is closely related to other policies, such as innovation policy, regional policy, and industrial and enterprise policy. They all make up one big body where each policy has its position, and together they form a useful framework for cluster support in Germany.

Clusters in Germany are perceived positively by both the government and entrepreneurial sector. Both parties understand the necessity of clustering; they strongly support clusters conceptually, on the one hand, and actively participate in their activity on the other. Positive trends should continue, although at a slower pace (BMWi, 2014).


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References

[1] ANDERSSON, T., SCHWAAG-SERGER, S., SÖRVIK, J., WISE, E. 2004. ClusterPolicies Whitebook. IKED-International Organisation for Knowledge Economy andEnterprise Development. ISBN 91-85281-03-4.

[2] BORRÁS, S., TSAGDIS, D. 2008. Cluster Policies in Europe. Edward ElgadPublishing. ISBN 978-1-84542-758-0.

[3] BRACHERT, M., TITZEL, M., KUBIS, A. 2011. Identifying industrial clusters froma multidimensional perspective: Methodical aspects with an application to Germany.Papers in Regional Science, Volume 90 Number 2. Blackwell Publishing.

[4] DELGADO, M., PORTER, M. E., STERN, S. 2014. Clusters, convergence, andeconomic performance. In: Research Policy 43. pp. 1785-1799. Elsevier.

[5] EUROPEAN COMMISSION. 2010. EUROPE 2020 - a European strategy for smart,sustainable and inclusive growth. Brussels, 3.3.2010. COM(2010) 2020. Availablefrom: http://ec.europa.eu/europe2020/europe-2020-in-a-nutshell/index_sk.htm.

[6] EUROPEAN SECRETARIAT FOR CLUSTER ANALYSIS (ESCA). 2015. Availablefrom: http://www.cluster-analysis.org.

[7] FALCK, O., HEBLICH, S., KIPAR, S. 2010. Industrial innovation: Direct evidencefrom a cluster-oriented policy. In: Regional Science and Urban Economics 40. pp. 574-582. Elsevier.

[8] FEDERAL MINISTRY FOR ECONOMIC AFFAIRS AND ENERGY (BMWi). 2015.Bundesministerium für Wirtschaft und Energie. Available from:www.clusterplattform.de.

[9] FEDERAL MINISTRY FOR ECONOMIC AFFAIRS AND ENERGY (BMWi). 2014.Cluster Monitor Germany. Trends and Prospects of Clusters in Germany - MonitoringResults of the 3rd Round of the Survey Conducted in May / June 2013.Bundesministerium für Wirtschaft und Energie. Available from: http://www.cluster-analysis.org/downloads/ClusterMonitor_EN.pdf.

[10] FRIEDRICH, P., NAM, CH. W. 2011. Innovation-oriented Land-use Policy at the Sub-national Level: Case Study Germany. University of Tartu - Faculty of Economics &Business Administration Working Paper Series. University of Tartu.

[11] HANTSCH, S., KERGEL, H., LÄMMER-GAMP, T., MEIER zu KOCKER, G.,NERGER, M. 2013. Clusters Management Excellence in Germany: German cluster incomparison with European peers. European Secretariat for Cluster Analysis. Availablefrom: http://www.cluster-analysis.org/downloads/CountryReportGermany2012.pdf.

[12] HERMANN, S. 2009. Hidden Champions of the 21st Century: Success Strategies ofUnknown World Market Leaders. Springer. ISBN 978-0-387-98147-5.

[13] OXFORD RESEARCH AS, 2008. Cluster Policy in Europe. a brief summary of clusterpolicies in 31 European countries. Europe Innova Cluster Mapping Project,Kristiansand, Norway.

http://www.clusterplattform.de/

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[14] KIESE, M., WROBEL, M. 2011. a Public Choice Perspective on Regional Cluster andNetwork Promotion in Germany. In: European Planning Studies Vol. 19, No. 10. Francisand Taylor.

[15] MEIER zu KÖCKER, G. 2009. Clusters in Germany. An Empirical Based Insight Viewon Emergence, Financing, Management and Competitiveness of the Most InnovativeClusters in Germany. 2nd edition. Institute for Innovation and Technology.

[16] MINISTRY OF FOREIGN AND EUROEPAN AFFAIRS OF THE SLOVAKREPUBLIC. (MF and EA SR). 2014. Federal Republic of Germany – consularinformation of Ministry of Foreign and European Affairs of the Slovak Republic.

[17] NISHIMURA, J., OKAMURO, H. 2011. Subsidy and networking: The effects of directand indirect support programs of the cluster policy. In: Research Policy 40. pp. 714-724.Elsevier.

[18] MAGUIRE, K., DAVIES, A. 2007. OECD Reviews of Regional Innovation.Competitive Regional Clusters - National Policy Approaches. OECD. ISBN 978-92-64-03182-1.

[19] PORTER, M. E. 1998. The Competitive Advantage of Nations. New York. Free Press.ISBN 978-0-684-84147-2.

[20] ROSENFIELD, M. T. W., HEIMPOLD, P. F., HEIMPOLD, G. 2007. Economic‘Clusters’ in East Germany: Evidence on the Location and Characteristics of SpatiallyConcentrated Industries. In.: Post-Communist Economies, Vol. 19, No. 1. Taylor andFrancis.

[21] SCHÜTTE, G. 2010. Germany's Leading-Edge Cluster Competition - a contribution toraising Europe's profile as a prime location for innovation. Speech by State Secretary atthe Federal Ministry of Education and Research within the framework of the EuropeanCluster Conference. Available from: http://www.bmbf.de/pubRD/SCW-European_Cluster_Conference_Vortrag_von_Staatsekretaer_Schuette_en.pdf.

http://www.bmbf.de/pubRD/SCW-European_Cluster_Conference_Vortrag_von_Staatsekretaer_Schuette_en.pdf

http://www.bmbf.de/pubRD/SCW-European_Cluster_Conference_Vortrag_von_Staatsekretaer_Schuette_en.pdf


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Chapter 6

Cluster Policy in the Netherlands

by Iveta Korobaničová Technical University of Košice, Faculty of Economics, Slovak Republic [email protected]

6.1 Introduction 6.2 Cluster Policy Legislation 6.3 Cluster Policy Principles, Areas and Objectives 6.4 Cluster Programmes 6.5 Cluster Policy and Other Related Policies 6.6 Funding Clusters in the Netherlands 6.7 Cluster Policy Centralisation vs. Decentralisation 6.8 Conclusion

References


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6.1 Introduction

As early as 1990 the Dutch government started to pursue the strategy of centres, so-called “clusters”, with respect to the country’s regions. In 1994, twelve administrative regions were established (also known as provinces) that cooperate with each other. Several years later, the government worked out new strategies to ensure the cooperation at an international level. The main benefit of the cluster policy introduction in the Netherlands was the change in the government’s role, turning its position from a policy funder to a facilitator or mediator. That meant that the government focused on creating favourable and stable framework conditions for entrepreneurs, aimed at enhancing their competitiveness and innovation potential. The government no longer played the role of the funds provider (Hertog et al., 1999).

A region adopted the role of an innovation driver in 1997. The goal of such a region was to build up a dense network infrastructure of industries, scientific organisations, administrative bodies and/or facilitating agencies. Besides this, regions took control over the provision of risk capital (den Hertog at al., 1999).

In 2000, a new strategic framework was designed for the country, serving as a supporting tool for cluster policy-makers. The following primary objectives have been identified:

• The first managerial objective, regarding the allocation of funds for specific clusters.• The second objective, concerning the flexibility and functionality of the cluster policy

to ensure its further development.• The third objective, regarding the transparency of such policy.

Today, the Dutch cluster policy is based on a political approach that focuses on a dynamic innovation system and collaboration between enterprises and public research organisations (Jansen, 2007).

The goal of this chapter is to gain better insights into the cluster policy in the Netherlands, state its basic objectives, legislative provisions, and methods of funding.


According to an earlier study carried out in 2011, the policy agenda in the Netherlands is concentrated mostly at its national level. Despite this, a sectoral approach is apparently present there as well, since some policies are more relevant to particular regions than others (Barsoumian et al., 2011).

6.2.1 Cluster Policy Implementation at the National Level

The Netherlands is divided into twelve provinces which represent the administrative layer between the national government and local municipalities, and have the responsibility for


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matters of subnational or regional importance. Both national and regional public authorities in the country have their own cluster policy programmes. At the national level, the most important ministry for cluster policy is the Ministry of Economic Affairs (Ministerie van Economische Zaken, EZ), which focuses on the key areas of knowledge economy and innovation, competition and dynamics, and the creation of a stimulating environment for doing business in the country. The Ministry of Education, Culture and Science (Ministerie van Onderwijs, Cultuur en Wetenschappen, OCW) also plays an essential role, mainly in relation to knowledge exchange. However, primary responsibility for the definition, implementation and regulation of the cluster policy at the national level, lies with the aforementioned Ministry of Economic Affairs, and the policy is implemented through its four Directorates-General: Enterprise and Innovation, Energy and Telecom, Foreign Economic Relations, and Economic Policy. Moreover, cluster activities are regulated by eight agencies and two independent administrative bodies, and by the Ministry for Education, Culture and Science and the Ministry of Agriculture, Nature and Food Quality (Coulander, 2010).

One of the principal actors in the implementation of the policy under the Ministry of Economic Affairs is SenterNovem. The purpose of this agency is to convert the government’s environment, innovation, energy and sustainable development policies into tangible results that have a positive effect on the economy and on society as a whole (Coulander, 2010). The agency creates access to a broad Dutch network of knowledge institutes, research centres, trade associations, companies and government officials.

Another agency acting in the field is the Netherlands Organisation for Scientific Research (De Nederlandse Organisatie voor Wetenschappelijk Onderzoek, NWO), concentrating mostly on university research in performing its task (Jansen, 2007). NWO is responsible for enhancing the quality and innovative nature of scientific research and equally initiating and stimulating new developments in scientific research. Furthermore, by managing the national knowledge infrastructure, NWO wants to ensure that Dutch science continues to be amongst the best in the world, and that its currently strong position is further strengthened. The organisation is comprised of eight divisions: Earth and Life Sciences, Chemical Sciences, Physical Sciences, Life & Social Sciences, Medical Sciences, Physics, and Technical Sciences (Jansen, 2007).

The Netherlands Water Partnership (NWP) is an independent body set up by the Dutch private and public sectors in the Netherlands to act as a national coordination and information centre for water-related issues abroad. The principal aims of the NWP are to harmonise the activities and initiatives of the Dutch water sector and promote Dutch expertise in water worldwide (Jansen, 2007).

Syntens (Syntens Innovatiecentrum) is an organisation that tracks down small and medium-sized enterprises in the Netherlands in order to foster their innovative ability. The organisation was founded by the Ministry of Economic Affairs, and through its fifteen subsidiaries it covers the entire country. Apart from providing advice and organising informative workshops, Syntens facilitates forming regional clusters which are aimed at sharing knowledge or at business outcomes (Jansen, 2007).


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6.2.2 Cluster Policy Implementation at Regional Levels

There are several regional agencies operational in the field of cluster development and cluster programmes in the Netherlands. They usually operate within specific regional boundaries, and none them are specifically founded to carry out cluster development tasks. Based on a number of bibliographical references (Jansen, 2007; Coulander, 2010; OECD, 2010 and others), the following regional agencies are distinguished in the country:

• NOM (N.V. Noordelijke Ontwikkelingsmaatschappij, NOM): a regional investment anddevelopment company situated in the Northern Netherlands, which aims to makea contribution to the lasting improvement in the socio-economic structure and workopportunities in some selected provinces in the Northern Netherlands by stimulatingsustainable profitable economic activities. It supports specific projects with share capitaland/or deferred loans.

• The North-Netherlands Technology Centre (Technologisch Centrum Noord‐Nederlandor TCNN): a centre founded in 1998 with the aim to help and provide advice to smalland medium-sizes businesses in the form of projects promoting collaboration withknowledge institutions. The purpose is to strengthen the economy of the NorthernNetherlands through innovation and cooperation. The centre is co-financed by theEuropean Regional Development Fund (ERDF), the provincial government, and theregional R&D institutes.

• The Brabant Development Agency (N.V. Brabantse Ontwikkelings Maatschappij,BOM): a regional agency, founded in 1983, whose mission is to create, improve,maintain and develop the industrial structure of the Noord-Brabant Region. It is co-financed by the Dutch state and the Province of Brabant and its core componentsinclude: foreign investments (assisting potential foreign investors in Brabant in everyfield required, free of charge), venture capital (financing innovative and financiallyhealthy companies by providing equity capital and subordinated loans), new businessdevelopments (supporting R&D programmes and initiating and stimulating innovativeindustrial projects), and business parks (focusing on the development of the regionsindustrial estates).

• The Limburg Development and Investment Company (NV Industriebank LIOF):a regional development and investment company that focuses on the strengthening ofthe economic base, targeting industry and the dynamic service sector in the Province ofLimburg, the most southern province situated at the borders with Belgium and Germany(Liof, 2014).

• The East Netherlands Development Agency (Ontwikkelingsmaatschappij Oost NV):a regional business development and investment agency that focuses its activities andprojects on strengthening and stimulating the economy of the provinces of Gelderlandand Overijsse. Its mission is to create favourable conditions for foreign investors to enterthe region. Basic services also include assisting in site selection and finding joint-


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venture partners, setting up distribution centres, strategic alliances and technology transfers, consulting on government regulations, taxes, financing and subsidies, etc.

• REWIN West-Brabant (REWIN): a regional development authority operating in theWest Branbant Region which stimulates its regional economic development byproviding information concerning business locations, assisting in the process ofrelocating, allocating funds, and initiating regional development plans.

• The Food Valley Organisation: an organisation intended to create conditions so thatfood manufacturers and knowledge institutes can work together in developing new andinnovative food concepts. It came to existence in 2004 as an independent unit, helpingcompanies boost their innovation performance by means of knowledge networks.

• Health Valley Netherlands: a network of biomedical research institutions, productdevelopment companies, and health care and service providers in the eastern part of theNetherlands, which facilitates health care innovations, largely through the stimulationof economic activities in this area. It enables the clustered companies to make use of theexceptional level of collaboration by facilitating their access to public and privatenetworks. Health Valley Netherlands adds another layer to cooperation in the way thatit combines the strengths of specific fields like biomedicine, food and technology.

• Business Cluster Semiconductors East Netherlands (BCS): a regional network ofinnovative semiconductor companies and knowledge organisations which are active inthe entire value chain of research, design, development, production and application ofso-called Advanced ICs, MEMS, Sensors and Wireless Systems. This network in theArnhem Nijmegen Region creates a platform for semiconductor producers,management and financial aid for cooperating projects, promotion of the collectiveknow-how and knowledge of its members (Stahl-Rolf et al., 2012).


The cluster policy in the Netherlands is based on the bottom-up approach, which means clusters in the country are naturally developed under the spontaneous influence of market forces. Public interventions help only to develop the business climate, which eventually enhances the effectiveness of clusters and cluster-related companies (Pavelková et al., 2009).

A sectoral approach towards cluster policy is applied in the country. Sectors are identified in the general industrial policy context and include: the agrifood industry, horticulture, high-tech materials and systems, energy, logistics, creative industry, life sciences, chemicals, and water resources. In 2010, all these sectors were selected as prioritised sectors, i.e. the areas in which the Netherlands excelled; therefore, they have been given the greatest attention from the government ever since. This “top-sector” approach stems from the so-called “golden triangle” (or the “triple helix”) model, defining cooperation between enterprises, institutions and the government. The Dutch Government does not bring forward its own proposals for sectors; on the contrary, it welcomes plans made by entrepreneurs and scientists per se.


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Using input-output analysis, Roelandt et al. (1999) defined twelve large conglomerates of interlinked industry groups in the Dutch production structure at the national level.

Figure 6.1 Clusters in the Netherlands at the national level

Source: Roelandt et al. (1999)

The results of Roelandt et al.’s study (1999) suggest that the classification of economic activities into clusters clearly differs from the traditional sectoral classification. The identified clusters cross the borders of traditional sectors. The importance of the “commercial services” cluster for the Dutch economy is enormous, given by its relatively high (nearly 30%) contribution to the national product. In terms of employment, the two services clusters are also highly important: some 50% of the total working population is employed in these clusters. The rapid rise of media-related activities, a recent development in the Dutch economy, can be deduced from the results. a media cluster has been identified in the above-mentioned study, and interdependence is growing between that cluster and other sectors such as transport and communications. The manufacturing cluster and the chemical industries cluster are both strongly dependent upon the activities of specialised suppliers abroad. The two latter clusters mainly produce for foreign markets, together with the transport, port and communication cluster, and the agro-food cluster. The clusters around health and non-commercial services focus relatively strongly on consumer markets. This also applies to the media cluster, although to a lesser extent.

Another study from 2011, »Competitiveness Analysis of the Netherlands and the Dutch Dairy Cluster«, concerns the economic composition in view of cluster creation. Industrial activity in the Netherlands is dominated by the processing of mostly imported raw material, primarily petroleum and chemicals. After the discovery of a natural gas field in 1959, the “oil and gas products” cluster has been the largest contributor to GDP and the second largest export


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cluster in the Netherlands. The largest sub-cluster, petroleum processing, is the fourth largest in the world. Production technology, which builds on Dutch competencies in processing and production, is the top growth cluster in the country. The historically-important agriculture sector remains an important contributor to the Dutch economy as the country’s largest export cluster (Phillippot et al., 2011).

The majority of clusters are located in the west and south of the Netherlands. The west of the Netherlands specialises in the three sectors: IT, food, and transport. The south of the Netherlands is the only region focused on production technologies. The economic activities such as financial services, education, construction, sport, petroleum and jewellery, are present in all four Dutch regions.

The following table points to the number of employees in some standard sectors such as building and construction, financial services, etc.

Table 6.1 Number of employees in the standard sectors in the Netherlands

Sectors Employees Construction 215 180 Business services 281 804 Financial services 255 716 Tourism and hospitality 90 706 Transportation and logistics 215 080 Distribution 48 759 Processed food 135 507 Farming and animal husbandry 87 997 Education and knowledge creation 166 906 Metal manufacturing 47 637 Agricultural products 73 140 Building fixtures, equipment and services 54 249 Media and publishing 117 419 Automotive 26 185 Entertainment 53 743 Paper products 40 024 Maritime 15 062 IT 70 876 Telecom 68 257 Furniture 13 722 Apparel 5 040 Production technology 32 596 Construction materials 3 822 Plastics 24 678 Chemical products 41 412 Textiles 12 112 Pharmaceuticals 18 181 Heavy Machinery 14 705 Tobacco 14 442 Footwear 619 Lighting and electrical equipment 3 056 Power generation and transmission 3 546 Medical devices 10 407 Aerospace 5 810 Stone quarries 0 Instruments 6 688 Sporting, recreational and children´s goods 67 642


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Jewellery and precious metals 19 115 Leather products 283 Oil and gas 28 941 Biotechnology 4 474


As can be indicated from the table above and the figure below, out of all the employment in the standard sectors in the country, most employees work in the commercial services sector, followed by the construction, distribution, financial services and IT sectors, and transport.

Figure 6.2 The most important clusters in the standard sectors in the Netherlands


Geographically, based on the same results, the greatest share of employees working in the standard sectors occurs in South Holland (Zuid-Holland, the city of Rotterdam), the majority of which work in commercial services (74,475), financial services (56,777), transport and logistics (54,565), construction businesses (40,591), educational institutions (40,431), media and publishing houses (23,287) and in the food-processing factories (21,396). The second geographically important region is North Holland (Noord-Holland). The majority of employees


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work in the financial services in this region (56,187), followed by those working in the commercial services (52,065). In the North Brabant Region (Noord-Brabant), the greatest employment is in the commercial sector (38,881), followed by the construction sector (36,136).

The following figure further displays the employment in the creative and cultural industries.

Figure 6.3 The most important clusters in the creative and cultural industries in the Netherlands


The previous figure illustrates the situation in the creative and cultural industries, where the majority of North-Holland’s population work in the printing and publishing industry (23,129), artistic and literary production (16,919), software (9,251), advertising (8,327), and radio and television (5,451). Publishing activity is present also in South Holland (20,968) and in North Brabant, with a slightly lower level of employment (16,071).

Another classification of clusters in the Dutch knowledge-intensive commercial services sector is given in the following figure.


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Figure 6.4 The most important clusters in the knowledge-intensive commercial services sector in the Netherlands


According to the figure above, the majority of employees are concentrated in South Holland, particularly in the commercial services (74,475), financial services (56, 777), education (40,431), and the IT (18,628) sectors. North Holland is another important region represented by the greatest employment in the financial sector (56,187). Commercial services belong to an important sector in North Brabant, with approximately 38,881 employees.

The following figure displays the distribution of clusters in the life sciences sector.


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Figure 6.5 The most important clusters in the life sciences sector in the Netherlands


Pharmaceuticals dominate in the life sciences sector in North Brabant with 5,909 employees, followed by the medical devices sector with 1,510 employees, and biotechnologies with 490 employees. The second geographically important region is South Holland. As many as 2,314 people are employed in the pharmaceutical sector, 1,392 employees work in the biotechnological sector and 1,146 employees in the medical sector.

6.4 Cluster Programmes

Cluster programmes are implemented at both national and regional levels. Regional cluster programmes are intended to serve the regional needs and are specified by prioritised sectors. National cluster programmes are designed for the country as a whole, where subjects from the private and public sectors and non-governmental organisations can participate.


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6.4.1 Cluster Programmes at the National Level

The Netherlands has successfully transformed the strategic approach of its national place-based policies. In this approach, investments in the key areas such as infrastructure and housing are strongly coordinated and focused on strong city-regions. The »Randstad Urgency Programme« and »Randstad 2040 Vision« are typical examples of this approach, as well as the so-called “area agendas” and the »Multi-Annual Programme for Infrastructure, Spatial Development and Transport« (MIRT), created in 2008. The Randstad is an industrial and metropolitan conurbation, occupying an area of peat and clay lowlands in west-central Netherlands and consisting of the four largest Dutch cities: Amsterdam, Rotterdam, The Hague and Utrecht, and the surrounding areas. Coordination between various regions specialised in the same economic activities has grown, for example, the cooperation between the seaports of Rotterdam and Amsterdam has improved by the so-called “implementation alliances” between public and private entities under the programme »Randstad 2040 Vision« (in which the national and provincial governments, municipalities and metropolitan regions are jointly tackling various issues in the Randstad). There is more space for cooperation, with the Netherlands Bureau for Transport and Infrastructure recommending the fusion of the two ports (Raad voor Verkeer en Waterstaat, 2010).

Simultaneously, the “key innovation areas” approach was introduced, which focuses on the sectors, networks and technologies where there are many innovative opportunities to strengthen the international competitive position. The Key Innovation Areas approach is, as it were, the child of the Innovation Platform, which encourages cooperation between public authorities, businesses, education and research. It is implemented in the Netherlands as part of the National Innovation Strategy, with a strong regional impact. The goal is to strengthen the competitive key areas for the Netherlands in the field of innovation, the country’s international position (performance), and liabilities towards stakeholders (Coulander, 2010).

The Ministry of Economic Affairs uses its »Innovation-Oriented Research Programmes« (IOPs) to encourage long-term R&D collaboration between companies and publicly-funded research institutions in areas that are important to the Dutch economy. Subsidies are offered for innovative fundamental-strategic research through programmes at universities or other non-profit organisations on themes that are in a direction that corresponds to the long-term industrial policy agenda in the Netherlands. IOPs exist in several areas of technology and each of them has a programme plan for a maximum of four years. Examples of IOP topics are electromagnetic power technology, genomics, image processing, photonic devices, and self-healing materials (Jansen, 2007).

Innovation programmes have played a good part in strengthening strategic research in specific areas. In this way, structural attention for industrial themes has been realised, the initial money flows have been moved, and contract research has further grown. a number of new collaborative projects or programmes have been established in which several partners or platforms are engaged.

The subsidy scheme »Innovation Performance Contracts« (Innovatie Prestatie Contracten, IPC) is another tool to promote the innovation policy. The IPC scheme has two phases: the pre-


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IPC Phase, which usually lasts a maximum of one and a half years, and the IPC Phase, which lasts three years. The main aim of the programme is to unite small and medium-sized enterprises in their quest for knowledge (Jansen, 2007).

The »Investment Grants for Knowledge Infrastructure Programme« (Besluit subsidies investeringen kennisinfrastructuur, BSIK) was intended for the time span of 2004-2010, and the main mission of the programme was to carry out fundamental research which led to new products or processes for market or societal purposes (Jansen, 2007).

The »Leading Technological Institute« (Technologisch topinstituut, TTI) is a special type of research institute at a Dutch research university that can apply for subsidy when a strategic research programme is carried out by a consortium consisting of at least three Dutch public research institutes, and at least three Dutch industrial parties or entrepreneurs. The programme is designed to stimulate cooperation between the public and private sectors, and the aim of the joint effort is commercial valorisation of knowledge (Jansen, 2007).

»Smart Mix« is a programme that aims to stimulate economic, societal and culturalinnovation in those areas where the Netherlands can excel. There are no priority areas as long as there is an industrial or societal need in the country (Jansen, 2007).

The »Point-One Programme« is focused on the cooperation between knowledge institutions and private companies, with the aim of joining their efforts to acquire new knowledge. Point-One is a national programme financed by the Ministry of Economic Affairs, and its time span is not limited. The Dutch industry wants to achieve a leading position in the fields of nanotechnologies worldwide.

Another important programme was »Innovation Programme Water Technology«, aimed at strengthening the Dutch sector of water technology, whether nationally or internationally-active. The programme financed and stimulated cooperation between knowledge institutions and private companies in the field of the commercial valorisation of knowledge. The programme was successfully completed in 2011. Its main goal was to establish an excellent Dutch water technology sector which would serve both economic and societal purposes in the Netherlands and abroad (Jansen, 2007).

6.4.2 Cluster Programmes at Regional Levels

Each of Dutch provinces has an individual programme to support innovation, such as the »Innovation Action Programme Drenthe«, »Innovation Action Programme Groningen« orthe »Regional Innovation Programme Fryslân«. These programmes are partly financed by theEuropean Regional Development Fund and are aimed at motivating entrepreneurs to developinnovative projects (Coulander, 2010).

The policy document »Peaks in the Delta« (Pieken in de Delta) earmarked the start of a new Dutch approach to regional innovation policy, with the message that national resources should not be used for regions to “catch up” anymore, but for supporting the region-specific opportunities or regional strengths (“peaks”) and (industrial) innovation. It is the geographical strategy that describes the economic agenda of the Dutch government in relation to six regions


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(“deltas”) in the Netherlands. Through this agenda focused on regional strengths, the government wanted to contribute to establishing a dynamic and competitive economy. Peaks in the Delta comprised six regional programmes for the period of 2007-2010 and emphasised cooperation between regional authorities, governments, big cities, regional development agencies and industry (called »Knowledge Clusters«) (Coulander, 2010).

The general goal of all regional programmes is to stimulate opportunities in the six regions (Jansen, 2007):

• »Peaks in the Delta Eastern Netherlands« has been set up to support growth and privateinvestment in the fields of food and nutrition, health and technology in the region ofEastern Netherlands. The sub-goal and according programme lines are to ensure morecorporate investment and added value in the region, to attract new investors, and toguarantee sufficient and qualitative knowledge workers.

• »Peaks in the Randstad North Wing« is the programme implemented in the Randstadregion. The main goal of the programme is to develop the top economic region. Severalsub-goals have been formulated: the optimal utilisation of the potency of the creativeindustry, the stimulation of growth in the regional medical cluster, the strengthening ofinnovative ability and development in logistics and trade, the utilisation of potential intourism, and the improvement of interaction between industry and knowledgeinfrastructure.

• »Peaks in the Randstad South Wing« is another regional programme covering the mainareas of logistics, horticulture, international law, justice and safety, and life and healthsciences. Correspondingly, the goals and priority programme lines have beenformulated for the region.

• »Peaks in South-Eastern Netherlands« is the programme developed for the region ofSouth-Eastern Netherlands, the region which is known as one of the top internationaleconomic regions. The goal of the programme is to maintain the status of the region bycreating one hundred top companies with international statuses and developing ten topknowledge institutions that provide a knowledge platform for industry in the region.

• The »Northern Compass« is intended for the Northern Region of the Netherlands. Theprogramme is concerned with such areas as renewable energy resources, watertechnology, and multifunctional systems. Apart from these key areas, there are severalsectors that also have potential for growth (referred to as “spearhead sectors”), andconsist of agriculture, chemistry, IT, etc.

• »Peaks in South-Western Netherlands« is the regional programme covering thegeographical area of the South-Western Region of the Netherlands containing two mainports, Antwerp and Rotterdam. The main areas of concern are logistics, tourism andindustry.

The »Peaks in the Delta« approach of 2004 was complemented with an element of strong city-regions, and followed in 2010 by a regional programme called »Strong Regions«, in which the aim was to additionally stimulate economic opportunities in four regions: the Randstad,


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Groningen, Noord Brabant-Eindhoven, and the region of Eastern Netherlands. There is a regional dimension of national innovation policies in terms of regions having aims in different economic industries (Wintjes, 2006; Berenschot, 2010).

Another interesting programme implemented in the provinces of the Northern Netherlands has been the »Koers Noord: op weg naar Pieken« programme (2007). The choice has been made on the basis of the strengths and weaknesses of the northern economy, and the goal is, to expand the three economic peaks of national importance: energy, water and sensor technology. In addition, there is attention for agribusiness, tourism, and life sciences. The programme is implemented on the basis of the decision made by the Dutch government (Coulander, 2010).


Cluster policy creates a framework for other policies. The greatest influence can be noticed in innovation, regional and industrial policies. Furthermore, measures taken by other authorities affect clusters as well, although it is frequently an involuntary effect. In theory, cluster policies are enforced through public bodies, with the aim to enhance socio-economic benefits, and to promote the development of clusters. Other policies operate indirectly; they may influence tendering and procurement processes, public funding of R&D programmes, educational systems, or intellectual property rights (Pavelková et al., 2009).


Based on the report »Innovative Slovakia–Starting Points and Challenges« (Inovatívne Slovensko–Východiská a výzvy) (Balog et al., 2013), the goals of innovation development policies in the Netherlands are anchored in the following two government strategies:

• »To the Top: Towards a New Enterprise Policy«, elaborated and launched by theMinistry of Economic Affairs, Agriculture and Innovation. This policy is focused onestablishing closer interconnection between academia and industry, and on increasingcorporate R&D expenditure (Mostert and Deuten, 2011; in Balog et al., 2013).

• »Strategic Agenda for Higher Education, Research and Science«, developed by theMinistry of Education, Culture and Science. The mission of this agenda is to integrateuniversities into knowledge clusters and therefore strengthen public-private researchpartnerships.

The main feature of both new strategies is a clear shift in the balance of emphasis given to different types of innovation support; direct specific financial support in the form of grants is reduced, while generic indirect support in the form of tax incentives, deregulation, trade liberalisation etc., is enhanced. Also, the main elements include a stronger emphasis on the “top sector” approach built on the previous “key areas” approach, with a cohesive policy agenda across government policy for the top sectors of agro-food, energy, high-tech materials and systems, logistics, biomedicine, and chemicals. The principal actors regulating innovation in


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the Netherlands are the Ministry of Education, Culture and Science (OCW) and the Ministry of Economic Affairs, Agriculture and Innovation (ELI). The latter ministry resulted from the merger of the Ministries of Economic Affairs (EZ) and Agriculture, Nature and Food Quality (LNV), which now shapes the direction of its new enterprise policy. It is also responsible for horizontal innovation policy coordination. Policy coordination is also done via the Council for Economy, Work and Innovation (REWI), which prepares decisions on innovation policy measures which are to be taken for the approval of the plenary cabinet. The agenda is set and coordinated by the special inter-departmental Committee on Economy, Work and Innovation (CEWI), which consists of high-level civil servants from all ministries involved (Mostert and Deuten, 2011; in Balog et al., 2013).

The Dutch governance system includes several advisory bodies that are involved in research and innovation policy analysis and evaluation, which are part of the organisational structure of the Dutch Parliament (Staten-Generaal der Nederlanden). The main bodies are the Advisory Council for Science, Technology and Innovation (Adviesraad voor wetenschap, technologie en innovatie, AWTI, which succeeded the Advisory Council for Science and Technology Policy) officially in 2014, and the Royal Netherlands Academy of Arts and Sciences (Koninklijke Nederlandse Akademie van Wetenschappen, KNAW) (Balog et al., 2013).


Cluster policy is as close to regional policy as it is to innovation policy. The Dutch government has set a strategic agenda which takes into account the six main regions in the Netherlands that represent positive prospects for economic development. The Dutch government commits itself to actively supporting the economic development of these regions. To set this in motion, an innovation programme was started in each region by assigning a steering committee with the task to work out the initial regional agenda. During 2006, these agendas were presented. The six main regions (“deltas”), with their specified top sectors (“peaks”), are as follows:

• The Northern Netherlands (the provinces of Groningen, Drenthe and Friesland): thepeaks in the region focus on innovative water technologies, gas and sustainable energyand other sectors, e.g. agriculture, IT or tourism.

• The Eastern Netherlands (the provinces of Gelderland and Overijssel containing othereconomic core areas): the peaks include the three key sectors of food and nutrition,agribusiness, biotechnologies, and nutraceuticals. There is a university in the easternregion, offering a broad range of technology expertise, with the main focal area ofmicrotechnology, for which the Technology Programme has been developed. The lastsector is health, where neuroscience, biomedical materials and molecular imaging arethe peaks.

• The South-Western Netherlands (the province of Zeeland and the western part of theNorth-Brabant province): the peaks of this region include tourism, bioenergy, logistics& distribution, processing industry, and maintenance.


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• The South-Eastern Netherlands (the rest of North-Brabant and Limburg): the region ischaracterised by focus on high-tech systems & materials, life sciences, medicaltechnology, and food.

• Randstad North Wing and Utrecht: the programmes concentrate on the creativeindustry, life sciences, logistics, services, and tourism.

• Randstad South Wing: the peaks are in horticulture, science, law and justice (TheHague), and industry (Rotterdam).

Current Dutch cluster policy on entrepreneurship and SMEs stems from 2003, when the policy letter entitled »Action for Entrepreneurs« (In Actie voor Ondernemers) was issued. The letter represents an action plan to dismantle barriers for entrepreneurship and thus provide more room for entrepreneurs to thrive. Again, the key policy implementing agencies are the Ministry of Economic Affairs and Syntens. Syntens has the objective to raise the innovativeness of the Dutch SMEs by organising programmes and projects for them, and giving them advice, often containing entrepreneurial elements. The Ministry is oriented towards finance (Jansen, 2007).

6.6 Funding Clusters in the Netherlands

All national cluster programmes are organised under the aegis of the Ministry of Economic Affairs and the Ministry for Education, Culture and Science and/or the Ministry of Foreign Affairs. Sources from which to draw funds mostly come from the state budget, particularly the funds of the relevant ministries (OECD, 2010; Jansen, 2007; Balog et al., 2013).

According to the OECD study of 2007, the total budget for the »Peaks in the Delta« programme for the period of 2007–2010 was €216 million, excluding expenditure for the Northern region of the Netherlands and industrial property funds. An amount of €86 million was earmarked for national projects (allocated upon due consideration) and €130 million appropriated directly for one of the five regions (on average, €32.5 million annually for region-specific projects). For the period of four years, the following amounts were planned: €23 million for the Eastern Netherlands, €42 million for Randstad North Wing, €30 million for Randstad South Wing, €8 million for the South-Western Netherlands, and €27 million for the South-Eastern Netherlands.

In total, the budget for the »Key Innovation Areas« programme, according to the same OECD study of 2007, was €1 billion on average, or €200 million per year (a minimum period of five years, i.e. from 2006 to 2010). Financial support to additional innovation programmes was provided from the Economic Structure Improvement Fund (FES), an investment fund mainly financed by national natural gas revenues. For the purpose of comparison, the following table clearly illustrates the expenditure on specific programmes.


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Table 6.2 Funding region-specific economic policies in the Netherlands Category 2004 2005 2006 2007 2008 Industrial estates 22.9 22.9 23.1 22.9 22.9 Region-specific budgets of which:

REON – Northern Development Compass IPR Central Co-financing the ERDF projects Peaks in the Delta (including future regional policies)

74.1

61.1 13.0

--

74.1

61.1 13.0

--

75.3

61.1 13.0

1.2 -

69.1

--

11.0 58.1

69.1

--

11.0 58.1

Tourism 21.9 20.7 19.5 21.9 21.9 Regional development companies 7.3 7.2 7.0 6.9 7.3 Town economy - 153.9 2.0 2.0 - Total 126.3 278.7 126.8 119.1 118.0

Source: OECD (2007)

In 2010, government interventions into R&D and innovation policies in the Netherlands concentrated on the two key areas: 1 – Innovation Policy and 2 – Research and Technology. The majority of funds went to the following categories: 1.2.1 – Innovation Strategies (€214 million), 1.3.1 – Cluster Framework Policies (€25.9 million), 2.1.1 – Science Excellence at Universities (€128 million), 2.3.1 Direct Corporate Research Support (€102 million), 2.3.2 Indirect R&D Support (tax relief schemes of €692 million), and 5.2.2 – Public Procurement of Green Technologies (the SBIR programme, €41.8 million). The Netherlands invested the majority of funds in indirect tools of R&D and innovation support (Balog et al., 2013).

Table 6.3 Approximate allocation of funds into the intervention areas in 2010 Allocation of funds mil. € % Innovation policy 379.5 23.6 Research and technology 915.0 57.0 Human resources 166.9 10.4 Innovative enterprises 102.4 6.4 Markets and innovation culture 41.8 2.6 Total 1,605.6 100.0

Source: Inno Policy Trendchart: Country specific trends (2012); Mini country reports as of December 2011 (Balog et al., 2013)

As can be concluded from the above, cluster programmes and cluster policy per se in the Netherlands are financed to a large extent from public sources. In some programmes the co-funding of a private partner is required; however, there are no cluster programmes in the country funded only from private funds.

Regional cluster programmes are financed mainly by the Ministry of Economic Affairs; while the amounts allocated depend upon a number of factors: needs, preferences and financial demands of region-specific programmes (Jansen, 2007). The main recipients for funding are the four Dutch regions: the North, West, South and East of the Netherlands. Each region is represented by a regional programmatic organisation, in which provinces, cities and specific industries work together.


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Table 6.4 Funding regional cluster programmes

Regional coverage Region description Northern Provinces of Groningen, Friesland and Drenthe, and the cities of Groningen, Leeuwarden, Emmen and Assen

In the Northern region the central aim is to promote the transition of the northern economy to a knowledge-based economy. In terms of development, the northern region focuses on the key areas and industries like Energy, Water, and Sensor Technology. In addition, several sectors are of a priority because of their above-average innovation potential: Agribusiness, Chemical Industry, Life Sciences, Shipbuilding/Metal Industry, and Tourism.

Eastern Provinces of Overijssel and Gelderland, and five urban networks

In the Eastern region, two main policy directions have been launched. First, the reinforcement of knowledge clusters Food and Nutrition, and Health and Technology. Second, the strengthening of innovative power and competitive position of businesses by stimulating innovation in products, processes, and services, and market development.

Western Provinces of North Holland, South Holland, Utrecht, Flevoland, and the cities of Amsterdam, Rotterdam, Utrecht, and the Hague

The ambition of the Western region is to bring the Randstad back into the top- five European metropolitan areas by 2015. The way to do this is to develop strong clusters, improve knowledge exchange and collaboration between companies and knowledge institutions. The Western region focuses on clusters like Transport, Logistics and Trade, Food and Flowers, Creative Industry, Life Sciences, Medical Technology, etc.

Southern Provinces of North-Brabant, Limburg and Zeeland, and several large cities

The Southern region wants to characterise itself at a European level in the area of innovation and economic dynamics by the stimulation of knowledge intensive and sustainable growth, in which the region wants to obtain a frontrunner’s position in the Netherlands. The Southern region focuses on High-Tech Systems, Materials and Machines, Food and Nutrition, and Medical Technology and Life Sciences.

Source: Author’s interpretation based on Broersma and Edzes (2010)


In 2008, the European Commission took initiative to establish the »European Cluster Policy Group« (ECPG) with the task of advising the European Commission and Member States on how to better promote the development of top-class clusters. The European Union expressly called for cluster policy action in »Strategy –General Principles of the Union«, one of its fundamental cohesion policy documents for the period of 2007-2013. Based on this document, the individual member states developed their own national documents, known as the »National Strategic Reference Framework«. The Netherlands belongs to those states which provide direct financial support to clusters (Pavelková et al., 2009).

The country employs a variety of cluster policy instruments that are related to other policies such as innovation policy and regional policy.


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Figure 6.6 Interrelationship of policies in the Netherlands

Source: OECD (2007)

According to the data from the Cluster Competitiveness Group study of 2007, there are eight national cluster programmes and six regional cluster programmes in the Netherlands, the majority of which have been mentioned in the subchapters above. All the programmes were initiated by the Ministry of Economic Affairs or by other ministries (Jansen, 2007). The ratio between the number of regional cluster programmes and the overall number of cluster programmes is calculated as 0.43 (i.e. six out of fourteen), which means that the cluster policy in the country is more centrally organised. Further evidence can be provided by the fact that not only are the individual programmes governed by the ministries and the relevant authorities, but also the financial support is provided predominantly from the budgetary funds of the relevant ministries.

6.8 Conclusion

In the early 1990s, the Netherlands was one of the first countries to adopt a cluster perspective as part of its innovation policy. Cluster development was fostered by the country’s efforts to achieve the best competitive advantage on the market and to bring high-quality innovations for the country.

Cluster policy is pursued at both national and regional levels in the Netherlands. Various organisations/agencies take part in the implementation of cluster initiatives. At the national level, the key implementing role is played by the Ministry of Economic Affairs, however, other ministries and relevant agencies under their aegis take part as well. Besides this, there are also regional agencies addressing the needs of specific regions and taking responsibility for regional cluster programmes.

Cluster programmes are designed to move from intent to real action. In 2007, there were eight national programmes. »Innovation-Oriented Research Programmes« (IOP) or »Investing in Knowledge Infrastructure« (BSIK) are programmes aimed at promoting cooperation between the private and public sectors in innovation and entrepreneurship. The most successful programme up to date is »Point One«, which is focused on cooperation between knowledge institutions and private companies, with the aim to join efforts in expansion and commercial valorisation of knowledge, especially in the nanotechnology domains. Other programmes

Industrial and Commercial Policy

Regional Policy

R&D and Technology/ Innovation Policy

Key Innovation Areas

Peaks in the Delta


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include »Innovation Programme Water Technology«, »Smart Mix«, or »Leading Technology Institute« (LTI).

At the regional level, six programmes, each for one of the six regions, have been developed. The general aim is to strengthen the position of a region in the areas in which it can achieve the best competitive advantage. The names of these programmes are derived from the names of specific regions, and they all fall under the common name »Peaks in the Delta«.

The individual cluster programmes receive financial support from the public budgetary funds. Participation of a private partner or non-governmental organisation is required for some programmes, however, no cluster programme in the Netherlands is financed solely from private funds.

Based on the collected information, cluster policy in the Netherlands is centrally organised, although some elements of partial decentralisation are noticeable, mostly regional initiatives, in which tasks are delegated to and performed at lower (regional) levels.


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References

[1] BALOG, M. et al. 2013. Inovatívne Slovensko - východiská a výzvy. Slovak Innovationand Energy Agency (SIEA). Bratislava. ISBN 978-80-88823-55-1.

[2] BARSOUMIAN, S., SEVERIN, A., van der SPEK, T. 2011. Eco-innovation and nationalcluster policies in Europe - a Qualitative Review. Greenovate! Europe EEIG. Brussels.

[3] BROERSMA, L., EDZES, A. 2010. Expert evaluation network delivering policy analysison the performance of cohesion policy 2007-2013. Netherlands. University of Groningen,Faculty of Spatial Sciences/ Department of Economic Geography.

[4] COULANDER, V. de L. 2010. The role of public authorities in clusters: a study of clusterpolicy in European regions. Groningen: University of Groningen. Available from:http://eb.wewi.eldoc.ub.rug.nl/FILES/rapporten/2010/WD2010-2/WD_2010-2_Weusthuis_Procesregie.pdf.

[5] CLUSTER OBSERVATORY, 2011. Available from:http://www.clusterobservatory.eu/index.html#!view=regionalmapping;i=V16140;y=2011;r=NC10-NL;rsl=2;rp=NC10;s=CC20-LIFE;sp=CC20-LIFE;p=map;ll=6.096643;z=8.

[6] den HERTOG, P. et al. 1999. Approaches to cluster analysis and its rationale as a basisof policy.

[7] JANSEN, G. 2007. The Cluster Competitiveness Group: Country Report: Netherlands.Oxford Research. Available from: http://www.kooperation-international.de/uploads/media/Cluster.Policies_Country.report.Niederlande.pdf.

[8] LIOF. 2014. Limburg Province The Netherlands. In the Heart of Western Europe.Available from: http://www.liof.com/data/files/alg/id494/General%20Profile-20of%20Limburg%20in%20English%20ed.2014.pdf.

[9] MINISTRY OF ECONOMIC AFFAIRS. 2004. Pieken in de Delta: gebiedsgerichteeconomische perspectieven. The Hague: Ministry of Economic Affairs.

[10] MINISTRY OF ECONOMIC AFFAIRS. 2007. Koers Noord: op weg naar pieken. TheHague: Ministry of Economic Affairs.

[11] MOSTERT, B., DEUTEN, J. 2011. Mini Country Report for the Netherlands. ThematicReport 2011 under Specific Contract for the Integration of INNO Policy TrendChart withERAWATCH (2011-2012). Brussels: European Commission, DG Industry andEntreprise.

[12] OECD. 2007. Reviews of Regional Innovation. Competitive Regional Clusters: Nationalpolicy approaches. ISBN 978-92-64-03182-1.

[13] OECD. 2010. National Place-based Policies in the Netherlands. Available from:http://www.oecd.org/regional/regional-policy/45901622.pdf.

[14] OXFORD RESEARCH AS. 2008. Cluster Policy in Europe. a brief summary of clusterpolicies in 31 European countries. Europe Innova Cluster Mapping Project. Kristiansand,Norway.



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[15] PAVELKOVÁ, D. et al. 2009. Klastry a jejich vlyv na výkonnost firem, GradaPublishing, a.s. Prague. ISBN 978-80-247-2689-2.

[16] PHILLIPPOT, A. et al. 2011. Competitiveness Analysis of the Netherlands and the DutchDairy Cluster.

[17] ROELANDT, T., HERTOG, P., SINDEREN, J., HOVE, N. 1999. Cluster analysis andcluster policy in the Netherlands. In OECD Proceedings (1999). Boosting Innovation:The Cluster Approach. Paris.

[18] STAHL-ROLF, S. et al. 2012. Best Practice Cluster Management Cluster PolicyOverview and Regional Reports. Universitetstryckeriet, Karlstad. Available from:http://www.bpcm.eu/export/sites/bpcm/downloads/public/BPCM_Cluster_Policy_Overview_and_Regional_Reports.pdf.

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Chapter 7

Cluster Policy in Norway

by Slávka Klasová Technical University of Košice, Faculty of Economics, Slovak Republic [email protected]

7.1 Introduction 7.2 Cluster Policy Legislation 7.3 Cluster Policy Principles, Areas and Objectives 7.4 Cluster Policy and Related Policies 7.5 Funding Clusters in Norway 7.6 Cluster Policy Centralisation vs. Decentralisation 7.7 Conclusion

References


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7.1 Introduction

The history of cluster policy development in Norway is closely related to the country’s natural wealth. It is due to that wealth that several clusters originated in Norway in relation to a boom in shipbuilding and oil and gas production. Initial initiatives to support clusters occurred in 1990, when the Norwegian Industrial and Regional Development Fund (Statens Næarings og Distriktsutviklingsfond, SND) was formed. The main task of the fund was to stimulate industrial development through the modernisation of industrial sectors, in order to ensure long-term regional employment (OECD, 2007b). The said fund indirectly led to the development of the first experimental cluster programme called »RUSH« in 1995 (Isaksen and Remøe, 2001). The programme worked on two underlying principles. Firstly, it was aimed at stimulating research workers from state colleges to take part in corporate research activities in firms. Secondly, it was indirectly focused on the development of business services and contract activities as a means of enhancing the transfer of knowledge from the colleges to small and medium-sized enterprises, and creating added value (Remøe, 1999).

Later, the programme developed into the form of a wider institutional programme »REGINN«, which was launched in 1997. REGINN concentrated more on strengthening theregional innovation system, particularly on R&D institutions. Some selected industries situatedin a specific region were analysed within the programme, with the aim of determining how theregional knowledge infrastructure could strengthen the position of these industries. Theprogramme’s strategy was to increase network-based innovation in functional regions, usingthe triple helix model through collaborative R&D projects. Regional R&D institutions werecontract partners and acted as facilitators.

The successor to the REGINN programme was »Arena«, organised in 2002 (Asheim et al., 2011) as a joint initiative of the three organisations: Innovation Norway (Innovasjon Nore, INVANOR), the Industrial Development Corporation of Norway (Selskapet for industrivekst, SIVA), and the Research Council of Norway (Norges forskningsråd, RCN). The main goal of the Arena programme is to promote long-term development of business clusters at the regional level, by establishing a stronger and more dynamic interaction between the industry, R&D institutions, universities, and the public sector. Arena is directed at regional business communities where clusters of companies operate nationwide. Clusters that are pro-growth oriented and want to internationalise can apply for financial support from another cluster programme, the »Norwegian Centres of Expertise« (NCE) programme, which was launched in 2006. Unlike Arena, NCE is not aimed at small and medium-sized enterprises. The programme is targeted at large enterprises and well-established clusters with clear strategies and a high potential for further innovation-based growth. To date, there are twenty-five clusters covered by the Arena programme and twelve clusters have been granted status as Norwegian Centres of Expertise (Furre et al., 2007).

The goal of this chapter is to cast light on the cluster policy in Norway, present some basic cluster programmes, principles, methods of funding, and describe its organisational structure in more detail.


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Cluster policy in Norway is not explicitly governed by law or by any other normative document; nevertheless, it is indirectly implemented in innovation, industrial, enterprise and regional policy strategies. The concept of clusters in Norway was first mentioned and introduced in 1990 by Professor Torger Reve at the Norwegian School of Management. In 1992, he wrote a book entitled »A Competitive Norway« (Et konkonkurransedyktig Norge). Although his concept did not break through politically immediately, the book was vital in stimulating the public debate regarding business development and put cluster development on the agenda (Jakobsen and Rotnes, 2012; Furre et al., 2007). Later, in 1998, a national programme »Business Gardens« (Næringshage) was introduced in a white paper, Meld. St. No.38 (1997-1989) »IT Competencies in Regional Perspective«. The main goal of the programme is to grow innovation, development and new businesses in remote rural areas around the country which had no university or college network. Business gardens are still operational today and have improved the competitiveness and attractiveness inside and outside the regions concerned. Business gardens present one of the first cluster concepts in Norway. Another strategic document at the national level was the new white paper, Meld. St. No.36 (2000-2001) »New Driving Force, New Growth, New Industry«. Norway’s R&D strategies are defined in periodic (every four years) white papers or in Messages to Parliament (Melding to Stortinget, hereinbefore and hereinafter Meld. St.). Hence, cluster policy in Norway was recognised as part of the country’s innovation policy in the form of white papers. The white paper on innovation emphasised the natural resources and comparative advantages of the country vis-à-vis other countries in the world (Furre et al., 2007). At the same time the government introduced the new white paper, Meld. St. No.34 (2000-2001), »Districts and Regional Policy« that insisted that public institutions can support developmental processes in clusters and businesses in order to prevent or reduce systematic failures. This document, together with the white paper Meld. St. No.36, made key legislative provisions for the »Arena« cluster programme of 2002 (European Commission, 2012; Rotefoss, 2003). Subsequently, the government launched another white paper, Meld. St. No.20 (2004-2005) »Commitment to Research«, in which it declared the continuous need of strengthening dynamic cooperation. The newly-established cluster programme of the »Norwegian Centres of Expertise« was to achieve this objective. NCE was launched in 2006, and along with Arena, it is another national initiative in support of innovation in the country (Deloitte, 2014).


There are three basic cluster programmes in Norway: the previously mentioned »Arena« and the »Norwegian Centres of Expertise Programme« (NCE), and the »Global Centres of Expertise Programme« (GCE).


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7.3.1 ARENA Programme

The »Arena «programme was launched in 2002 as a joint initiative of the three organisations: Innovation Norway (Innovasjon Nore, INVANOR), the Industrial Development Corporation of Norway (Selskapet for industrivekst, SIVA), and the Research Council of Norway (Norges forskningsråd, RCN). The main goal of the programme is the long-term development of business clusters at regional levels. The objective of the development processes is to strengthen the clusters’ innovation ability by establishing a stronger and more dynamic interaction between the industry, R&D institutions, universities, and the public sector. The programme is focused on regional business communities with a high concentration of firms operating within the same industry, one value chain, and market, or within the same areas of interest. It is targeted at strengthening the regional business environment, promoting innovation and creating values by fostering partnership (Bulanova and Madsen, 2014). Arena offers both specialist and financial support to clusters in early stages of their lifecycle. Regarding the number of organisations taking part in a cluster, the programme does not set any limitations, although, based on previous experience, the number of companies joined in a cluster most frequently ranges from twelve to fifteen.

Clusters self-select and apply to the programme. Applications are considered through annuals calls for proposals at the end of each year. The deadline for the submission of applications is usually at the end of March in the following year. The programme provides financial aid and expertise for the implementation of three-year development projects. In special cases, upon satisfying defined criteria, some projects may be granted a two-year extension of their Arena projects (Arena, 2014). The following map displays the spatial distribution of the Arena clusters across Norway.


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Figure 7.1 Spatial distribution of the »Arena« clusters across Norway

Source: Arena (2013)

7.3.1.1 Projects and scopes of operation within the framework of the ARENA programme

At present there are twenty clusters with the »Arena« status operating in a variety of industries. Six clusters that follow are given as examples. »Arena Beredskap« is a cluster aimed at developing worldwide solutions in cleaning or containing oil spills. »Innovative Opplevelser« is a cluster of twenty-nine companies actively working on creating a tourist industry market offering tourists to Norway world-class nature, culture and culinary experiences. »Omegaland« is another cluster with an objective to develop the great potential of Omega-3 products, i.e. to strengthen its position as world leader within the procession of marine oils for human consumption and health products; currently, the cluster accounts for nearly 40% of the Omega-3 production worldwide. »Arena Norwegian Offshore Wind« is an industrial cluster of suppliers and operators working together to develop and deliver complete offshore wind power systems. The cluster comprises over fifty companies and R&D institutions which represent the entire offshore wind value chain in conducting environmental studies, project development, and engineering, supply of infrastructure, installation and operation of wind farms. Wind energy is a rapidly growing commodity on the European market today. The »MediArena« business cluster is a unique collaboration project between global technology


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corporations, national broadcasters and small, forward-leaning meditech entrepreneurs, all situated in Bergen, Norway. Its aim is to become the national leader in finding innovative solutions for digital data production and distribution. The cluster currently represents twenty members with a total of 2,600 employees. »IKT Grenland« is a network of companies focused on Information and Communication Technology which consists of more than eighty companies.

7.3.2 Norwegian Centres of Expertise (NCE)

Another national programme for cluster support is the programme of »Norwegian Centres of Expertise« (NCE), which was launched in 2006 under the aegis of the Norwegian Ministry of Trade and Industry (NHD) and the Norwegian Ministry of Local Government and Regional Development (KRD). Similar to Arena, the NCE programme is a joint venture of INVANOR, SIVA and RCN. The programme seeks to strengthen Norwegian clusters with an international orientation and potential for innovation-led growth, by enhancing co-operative innovation and internationalisation. The objective is to build a solid foundation for clusters and facilitate their development within the area of their operation (Iceland Ocean Cluster, 2012). The clusters participating in the programme are provided with specialist and financial support in process development during a ten-year cycle, although the timeframe is broken up into three contractual stages for three years with minimum milestones to continue receipt of funding. This means that clusters are evaluated every three years and have to answer three basic questions: is the cluster an important tool for grasping new challenges and opportunities? Has the cluster achieved its objectives? Is the cluster an effective instrument? (Bardelen, 2011; Mahieu et al., 2012).

NCE is designed to select internationally-oriented clusters with high potential for innovation-led growth that seek to increase the level of R&D collaboration. The programme is more selective than Arena as it targets the strongest clusters in the country. While Arena focuses on SMEs, NCE focuses on large businesses. The annual programme budget in 2007 was €5.7 million (OECD, 2007b). Upon the first call, twenty-four project proposals were submitted, six of which were selected and then funded. The second round of project proposal submissions was opened in 2007. Ten proposals were present, three of which were accepted. The last call for proposals was announced in 2009, when three projects were accepted and five were rejected (Aasen, 2008; Bardelen, 2011). The following map displays the spatial distribution of NCE clusters across Norway.


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Figure 7.2 Spatial distribution of the »NCE« clusters across Norway

Source: NCE (2014)

7.3.3 Global Centres of Expertise (GCE)

One of the most recent cluster programmes in Norway is the »Global Centres of Expertise Programme« (GCE), launched at the beginning of 2014. The programme was developed as a next step or third-level programme for clusters which have performed well and succeeded in internationalisation, cooperation, and R&D (the two preceding levels being »Arena« and »Norwegian Centres of Expertise«). These clusters tend to continue to thrive and thus seek newaction areas with which they can actively engage (Bulanova and Madsen, 2014). Therefore,a new cluster programme for mature clusters with a well-functioning cluster organisation wasset up, aimed at increasing value creation and strengthening attractiveness and a better positionof clusters in global value chains, through strategic collaboration projects between the clusterpartners and potential external partners. Up to date, the programme has supported two clustersthat were awarded the prestigious status as Global Centre of Expertise by the Norwegiangovernment, namely:

• »Blue Maritime Cluster Norway«: a maritime cluster on the western coast of Norway,the centre for Norway’s maritime expertise, the world leader in design, construction,and operation of the most modern ships for the global industry. While most of thecompanies of the cluster are home-bred, an increasing number of major internationalplayers are seeking their place in the cluster.


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• »NODE Cluster«: a world-leading business cluster on the southern coast of Norwayoperating within the oil and gas sector. The cluster specialises in mechatronics; theparticipating companies provide everything from ready-made platform solutions tohigh-tech equipment on-board platforms and ships, and their customer lists include rigowners in addition to oil and shipping companies located all over the world. Currently,the cluster has sixty-three member companies with a total of over 10,000 employees.

The comparison of the three cluster initiatives in Norway is given in the following table.

Table 7.1 Comparison of cluster programmes in Norway

ARENA programme NCE programme GCE programme

Year of commencement 2002 2006 2014

Target

Newly-established and/or immature clusters in their early development stages, mostly at a regional level

Active, pro-growth oriented clusters (global clusters),

mostly at national and international levels

Mature clusters, mostly at an

international level

Programme participants (2012)

1404 companies, 100 R&D institutions, 124 other partners

1127 companies, 149 R&D institutions, 236 other partners Not found

Number of clusters (2014) 25 12 2

Funding 3 years, with a possible 2-year extension Up to 10 years Up to 10 years

Annual average expenditure per cluster

Approximately €50,000 in the first phase,

later €200,000-300,000 €600,000-700,000 Not found

End of project Still in progress Still in progress Still in progress

Selection mechanism Upon submitting applications and having interviews Upon submitting applications Upon submitting

applications Source: Author’s interpretation based on OECD (2007a)

7.4 Cluster Policy and Related Policies

An essential feature of cluster policy in Norway is that it touches upon a number of policy areas, amongst others, the innovation policy, labour market policy, education and research policy, infrastructure policy, tax policy, and regional policy. They all constitute a complex network of interlinked relationships, aimed at bringing the country lasting prosperity and economic growth.


Innovation is a vital condition for economic growth and welfare in Norwegian society. a sustainable Norwegian industry, productivity and economic development depend upon the country’s ability to continuous renewal and new business gestation. As a result, the innovation


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policy should promote the ability to effect increased renewal and readjustment of the Norwegian industry and commerce. Norway’s ability to innovate is dependent upon a range of factors and areas. The government seeks to establish the so-called “Nordic model”, a model which is based on good welfare arrangements combined with a high level of value creation and the ability to readjust to the constantly-changing conditions on the increasingly globalised market. a key document of the Norwegian innovation policy is the white paper on innovation, Meld. St. no. 7 (2008-2009) »An Innovative and Sustainable Norway«, launched in 2008. The document points to the necessity to respond to new challenges arising from globalisation. They present a certain opportunity for Norway to develop new innovative products and services for society.

The innovation policy in Norway is looked at from a broader holistic perspective and it depends upon cooperation between different departments and policy areas. In order to fulfil the government’s overall goals, the government, with the help of various agencies, has developed several schemes to contribute to release projects that are profitable from both a business and/or socio-economic perspective. One of such schemes that was created by the Research Council of Norway in 2005 is named the »Centres for Research-Based Innovation« (SFI). The centres seek to encourage companies to innovate through a greater focus on long-term research, based upon close collaboration between research-based companies and leading-edge research institutes (Furre et al., 2007).

The CRI are selected according to the two main assessment criteria: the centre must have potential for innovation and value-creation, and it must have scientific merit (RCN, 2008). They are affiliated with a research institution or company that is responsible for the centre’s activities, which is called a “host institution”. Host institutions may be universities, university colleges, independent research institutes, R&D-performing companies or R&D-performing public service providers that have the resources needed to fulfil the requirements set out for the CRI scheme. The CRI have a budget allocated for a period of operation of eight years; however, an extension for beyond the first five-year period is dependent upon the positive outcome of an evaluation conducted after approximately three years. By 2014, twenty-one centres were granted a status of CRI: in the first phase of the programme, in 2007, fourteen centres were selected; in the second phase, in 2011, seven centres were opened (Ragnar et al., 2014). The third phase of the scheme started in 2014. Over fifty project applications were submitted, fourteen of which were accepted. Hence, in 2015, the fourteen new centres will be established. The overall annual allocation for the centres in 2012 was €68 million, of which the Research Council of Norway contributed €23 million, the host institutions €12 million, research partners €10 million, consumers €21 million, and the remaining €2 million was financed from international resources (RCN, 2012).


The Norwegian government places primary importance on the fostering of equal opportunities throughout the country, and sustaining in large measure the optimal settlement pattern in Norway. The aim is to facilitate a fair distribution of growth between cities and rural


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areas (OECD, 2007a). According to the government, it is essential to support clusters and business agglomerations of small and medium-sized enterprises all over the country that contribute to growth and competitiveness both regionally and locally. To this end, two programmes are of great importance:

• »Mobilisation for R&D-Related Innovation« (MOBI): an umbrella programme forseveral smaller sub-programmes, initiated in 2003. In 2007, it became part of the»Policy Instruments for Regional R&D and Innovation« programme (VRI). Theprogramme focused on stimulating innovation and R&D activities by fostering long-term cooperation between firms, research institutions, and actors at the regional level(European Commission, 2013; OECD, 2007b). It sought to support training, innovationand increase value added in firms with little R&D experience, notably SMEs (Starmap,2004).

• »Value Creation 2010« (VS): an applied research programme based on a partnershipbetween the Confederation of Norwegian Business and Industry, the NorwegianConfederation of Trade Unions, Innovation Norway (INVANOR), and RCN. Thanks toINVANOR, the programme joined at the national and regional level. The main objectiveof this programme was to encourage innovation both within individual enterprises andin learning networks between enterprises, based on new forms of cooperation betweenindustrial and social partners and other players in the value-creation process. Theprogramme has produced a considerable body of knowledge, contributed to a broaderselection of learning material (OECD, 2007a), and it has promoted development ofregional innovation strategies within regional associations and partnerships (OECD,2007b).

Apart from the aforementioned initiatives, the government seeks to concentrate on business development and job opportunity creation by providing specific incentives to the areas outside the central urban area. a central player to perform this task is SIVA, the Industrial Development Corporation of Norway mentioned above, which offers grants to rural areas. The amount allocated depends upon the rural character index of a specific area. Rural areas receive a greater amount of support than urban areas. In 1998, SIVA introduced the programme of »Business Gardens« (Næringshage) to support business development in remote areas in Norway with no university or college networks (Aasen, 2008). Knowledge-based groupings of SMEs in small communities operating within a business garden scheme can use the common physical infrastructure (e.g. offices, receptions and administrative services) and thereby lower their costs (SIVA, 2012). In 2012, over fifty-two business gardens were created, which grouped approximately nine hundred firms (European Commission, 2012) with an employment of over 5,000 workers under the scheme. Business gardens are located in all Norwegian regions, as shown in the following figure.


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Figure 7.3 Spatial distribution of business gardens across Norway

Source: OECD (2007)


Industrial and enterprise policies both contribute to a large extent to Norway being an innovative, dynamic and knowledge-based economy in the sectors where it has considerable competitive advantages. These mainly include maritime and oil industries, fisheries, and tourism. Maritime clusters of Norwegian companies are favoured tax-wise, as they pay a lower rate than companies in general. Moreover, Norwegian companies which have their ships registered with the government’s Norwegian Ship Registers agency (sometimes abbreviated as NIS-NOR: Skipsregistrene), have the so-called “net wage scheme”, which involves indirect state wage subsidies (Furre et al., 2007). Specific competitive framework conditions are also characteristic of the fishing industry, which puts Norway at the forefront in developing modern, efficient and sustainable seafood production. There is, for example, a regulation on how much fish may be caught, and the government has determined six companies which can sell fish in Norway. Under the Ministry of Trade and Industry (Nærings-og handelsdepartementet) the government’s maritime development initiative »MARUT« was introduced, the aim of which is to promote innovation and increase value- creation in the maritime sector by utilising cooperation between the industry, government and R&D institutions (Tactics, 2012; Mahieu et al., 2012).

Clusters play a certain role in enterprise policy as well. Again, the main support agency within this field is the aforementioned Innovation Norway (INVANOR). Many of the agency’s


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export-oriented programmes and activities are generic; however, some are targeted towards specific industrial sectors. For example, within the energy sector, the agency set up the »German Norwegian Energy Forum« in 2001, which serves as a common meeting place forNorwegian energy businesses aiming at exploiting the deregulated energy markets in the EUand Germany (Furre et al., 2007). Other forums are those for biotech firms and for firms withairport-related products and services.

The relationship between the Norwegian cluster policy and other related policies is clearly shown in the following table.

Table 7.2 Relationship between cluster policy and other policies in Norway

Related policy Relationship description

Regional policy Targeted at small enterprises and lagging regions; the goal is to develop competitive regions by joining local actors.

Science and technology policy

Funding research based on mutual cooperation between industries; focused on research outputs commercialisation.

Industrial and enterprise policy

Supporting the needs of small and medium-sized enterprises; helping small enterprises remove barriers, creating competitive advantages, and attracting investment to the country.

Source: Author’s interpretation based on OECD (2007a)

7.5 Funding Clusters in Norway

Cluster programmes in Norway are financed mainly from the individual ministries, particularly from the Ministry of Trade and Industry (Nærings-og handelsdepartementet) and the Ministry of Local Government and Regional Development (Kommunal-og regionaldepartementet). The ministerial funds are further allocated to the governmental agencies such as INVANOR, RCN and SIVA, which earmark funds to cluster programmes, for example, to the abovementioned »Arena« and »NCE« programmes.

7.5.1 Innovation Norway (Innovasjon Norge – INVANOR)

INVANOR is a state-owned agency formed in 2004. The goal of Innovation Norway is to promote industrial development in all Norwegian regions by establishing partnerships between the public and private sectors in order to release the potential of different districts and regions in Norway, by contributing to innovation and internationalisation of local companies. Through the agency, the companies have access to a wide range of business services and funding schemes (Furre et al., 2007). Innovation Norway employs over seven hundred people worldwide and has offices in all the Norwegian counties and more than thirty-five countries in the world, with the head office in Oslo (Iceland Ocean Cluster, 2012). The agency focuses upon industries where Norway has a high level of competence and/or specific competitive advantages; for example, its maritime industries, marine industries, energy, environment and


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tourism. In addition, priorities are given to rural areas, young entrepreneurs, women, inventors, and particularly to small and medium-sized enterprises with growth potential (EU, 2013). The financial support is provided in the form of secured loans, venture capital loans, grants and competence and network-related programmes. The level of financial support varies according to rurality and firm size. The organisation, along with the Norwegian tax authorities, introduced the »SkateFUNN« tax rebate arrangement in 2002, aimed at supporting small and medium-sized enterprises (and since 2003 also at large enterprises) in their innovation activities by the tax rebate on R&D and innovation related expenditures. The overall financial support in 2013 amounted to almost €667 million, while the relevant ministries, regional and local governments invested €350 million. The structure of funding instruments used in 2013 is displayed in the following figure.

Figure 7.4 Structure of funding instruments

Source: Author’s interpretation based on INVANOR (2013)

7.5.2 The Research Council of Norway (Norges Forskningsråd – RCN)

The Research Council of Norway was founded in 1993 with the aim of identifying significant research fields, allocating funds and evaluating research and development activity. The agency allocates finance for projects falling within four basic categories: research programmes, independent projects, infrastructural and institutional measures, and networking measures (Ørstavik and Nås, 1997). RCN is financed by several ministries, where the Ministry of Education and Research (Kunnskapsdepartementet) and the Ministry of Trade and Industry (Nærings-og handelsdepartementet) have the greatest share, 28% and 23% respectively (Mahieu et al., 2012). Out of the total annual budget in 2014, over €840 million was allocated for projects and, in 2013, it was €711 million (RCN, 2012).

7.5.3 The Industrial Development Corporation of Norway (Selskapet for industrivekst – SIVA)

The Industrial Development Corporation of Norway (SIVA) is a state-owned agency formed in 1968 under the Ministry of Trade and Industry (Nærings-og handelsdepartementet). The agency aims to develop strong regional and local industrial clusters through ownership in

loans

grants and counselling

guarantees

low-risk loans


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infrastructure, investment in real estate and commercial property, knowledge networks, innovation, and internationalisation. SIVA also provides counselling services in entrepreneurial and administrative matters. SIVA is primarily focused on promoting innovation in peripheral and remote areas (OECD, 2007b), especially through the programme of »Business Gardens«. In contrast, its programme of »Business Incubators« is targeted at smaller companies that are linked to a larger company or university in order to promote their development and potential formation of spin-off start-ups (Rotefoss et al., 2003; Furre et al., 2007). SIVA has partial ownership in more than one hundred and fifty companies, thirty-seven business gardens, thirty-five incubators, twenty-five R&D parks, and sixteen industrial parks. The overall investment of the agency in 2009 amounted to €79 million.

The three basic cluster funding programmes are compared in the following table.

Table 7.3 Comparison of cluster funding programmes

INVANOR RCN SIVA

Focused on programme coordination

Focused primarily on research and development

Focused on support through physical and

organisational infrastructure development

Operated internationally Operated mostly nationally Operated internationally

Targeted at funding later phases of innovation process

Targeted at managing projects and programmes that are

initial inputs for innovations

Targeted at funding and developing

innovation infrastructure Financial aid in the form of

loans, grants and venture capital

Financial aid in the form of

purpose-specific grants

Financial aid in the form of

company co-ownership Source: Author’s elaboration based on Mahieu et al. (2012)


Like other Scandinavian countries, Norway is a decentralised unitarian state. There are nineteen governments in regions or counties (known in Norwegian as “fylker”) that are further divided to four hundred and twenty-eight municipalities (known in Norwegian as “kommuner”). The nineteen counties or regions in Norway also play a vital part regarding the regional economic development policy. In the recent years, the Ministry of Local Government and Regional Development has made an effort to assign more responsibility and channel more resources to regions, mainly to companies for innovation policy purposes. a key document for policy decentralisation was the white paper, Meld. St. No.19 (2001-2002) »New Tasks for Local Democracy–Regional and Local Levels«, which became a basis for a large-scale reform in 2003. The purpose of the reform was to strengthen local and regional democracy through the decentralisation of power and competences from the state to regional agencies. The reform clearly specified the division of labour between the individual government levels, and developed a more integrated and effective public sector. By the reform, the government delegated the responsibility and powers concerning the implementation of regional and local policy instruments to lower administrative levels, seeking to create value and greater


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employment in regions according to local and regional demands (OECD, 2007b). All regions should develop their broad »Regional Development Plans« focused upon creating favourable conditions for regional development.

The reforming process was further elaborated in the following white paper, Meld. St. No.12 (2006-2007) »Regional Advantages–Regional Future«, which declared the maintenance of the three-level government. Under the national level, there are the regions themselves to perform key tasks in regional development, while the municipalities should remain as the main providers of public services. Hence, the institutional framework in Norway offers a phenomenal combination of centralism with delegated powers. On the one hand, the ministries in Norway are relatively small and many responsibilities are delegated to their agencies with regional subsidiaries; on the other hand, the key players of regional governments are in fact the representatives of these subsidiaries. The most remarkable aspects of the new Norwegian regional strategy are in placing more emphasis upon regions and local areas with certain growth potential. The »Arena« and »NCE« programmes seek to promote cohesion across various levels of public government by insisting on good consistency of national programmes with regional development plans and regional actors. Both cluster programmes are thus based on the bottom-up approach, which is a further obvious manifestation of the decentralised innovation system.

7.7 Conclusion

Cluster policy in Norway started to develop at the end of 1990 as part of regional and innovation policy. Gradually, due to globalisation and significant changes related to the country’s decentralisation, regional and innovation policies based on the bottom-up approach were put forward in Norway. Initially, they were orientated towards large players only, and support was preferentially given to the largest industries such as the maritime, marine, and oil and gas industries. At present, cluster policy aims at supporting clusters in less developed or even peripheral areas with no large universities and R&D institutions networks.

The Norwegian government has successfully implemented three cluster programmes: »Arena«, »NCE«, and »GCE«. The programmes have been targeted at different kinds ofenterprises. While Arena aims mainly at regionally operating clusters in their embryonicdevelopmental phase (so-called “emerging” clusters), the NCE programme dominantly atnationally and/or internationally-active and pro-growth oriented clusters (so-called “world-leading” clusters). The latest GCE programme financially supports mature clusters that seek topenetrate international markets. The individual programmes differ in the instruments used andthe budgetary allocations. Thanks to Arena, there are twenty-five clusters in Norway. The NCEprogramme covers twelve clusters and the GCE programme, which was launched in 2014,funded two clusters in its first phase of project proposals submission. All three clusterprogrammes are regarded as important policy instruments at both national and regional levels,and they have considerably contributed to the strengthening of the regional innovation systemand the triple helix relationships in the Norwegian economy.

Therefore, the Norwegian cluster policy can provide solid evidence that even a highly industrialised country based mostly on heavy processing industry, typical of its low R&D


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intensity, can become a successful knowledge-based economy. Nevertheless, the Norwegian government had to implement a series of reforms for the country to become highly innovative. The Nordic model of cluster support appears to be an effective tool for making the country an innovative, dynamic and knowledge-based economy. Norway, with its comparative advantages represented by the regional innovation system comprising top universities, colleges and independent research institutes, and cooperative relationships based on trust between partners within the innovation networks, has all of the qualifications necessary not only to become an innovative leader among the Nordic countries, but worldwide.


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References

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[2] ARENA. 2013. Innovation through cooperation. Innovation Norway.[3] ARENA. 2014. The Arena programme. Innovation Norway.[4] ASHEIM, B. et al. 2011. Knowledge bases, modes of innovation and regional innovation

policy. a theoretical re-examination with illustration from the Nordic countries. In.:Bathelt, H. et al. (ed.), Beyond territory, pp. 228-249. ISBN 978-0-415-710007-7.

[5] BARDELEN, O. 2011. Norwegian Cluster Program Evaluation. Innovation Norway. pp.2-19.

[6] BARDELEN, O. 2013. Evaluation of cluster policy initiatives Case: The NCE program.Innovation Norway. pp. 2-20.

[7] BULANOVA, O., MADSEN, E. L. 2014. ERAWATCH Country Reports 2012: Norway.European Union. pp. 20-28. ISBN: 978-92-79-34514-2.

[8] DELOITTE. 2013. Researchers’ Report 2013. Country Profile: Norway. pp. 2-13.[9] DELOITTE. 2014. Researchers’ Report 2014. Country Profile: Norway. pp. 12-13.

[10] EUROPEAN COMMISSION. 2012. Business Gardens. European Commission.[11] EUROPEAN COMMISSION. 2013. Research and innovation performance in Norway.

Country profile. European Commissions. pp. 1-6. ISBN 978-92-79-29199-9.[12] EUROPEAN COMMISSION. 2014. Country fiche - Norway. European Commission.[13] FURRE, H. et al. 2007. Country Report Norway. Oxford Research. pp. 3-25.[14] HANNESSON, S. 2014. ERAWATCH Country Reports 2013: Norway. European

Union. pp. 20-50. ISBN: 978-92-79-39498-0.[15] INVANOR. 2013. From proposal to profit 2013-2014. Innovation Norway. pp. 10-21.[16] ICELAND OCEAN CLUSTER. 2012. North Atlantic Ocean Clusters. Increased

opportunities through cooperation. The Iceland Ocean Cluster. pp. 14-19.[17] ISAKSEN, A., REMOE, S. O. 2001. New approaches to innovation policy: some

Norwegian examples. In: European planning studies, 9 (3), pp. 285-302. ISSN 1469-5944.

[18] JAKOBSEN, E. W., ROTNES, R. 2011. Cluster programs in Norway- evaluation of theNCE and Arena programs. Menon. pp. 4-20.

[19] MAHIEU, B. et al. 2012. Evaluation of the Research Council of Norway. Technopolis.pp. 5-60.

[20] MINISTRY OF TRADE AND INDUSTRY. 2003. From Idea to Value. TheGovernment’s Plan for a Comprehensive Innovation Policy. The Ministry of trade andindustry. pp. 24-38.

[21] NORWEGIAN INNOVATION CLUSTER. 2013. Norwegian clusters - for theinnovation and competitiveness of the future.. Innovation Norway. pp. 10-30.


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[22] NORWEGIAN INNOVATION CLUSTER. 2014. Norwegian clusters - for theinnovation and competitiveness of the future. Innovation Norway. pp. 8-30.

[23] NORSK INSTITUTT FOR STUDIER AV FORSKNING OG UTDANNING. 2004.Governance of the Norwegian innovation policy system. Nifu Step. pp. 30-90.

[24] OECD. 2007a. Competitive Regional Clusters - National Policy approaches. pp. 267-281.ISBN 978-92-64-03182-1.

[25] OECD. 2007b. Territorial Reviews - Norway. pp. 30-200. ISBN 978-92-64-03801-1.[26] OECD. 2012. Science and innovation: Norway. pp. 356-359.[27] OST. 2006. Private Sector Interaction in the Decision Making Processes of Public

Research Policies Country Profile: Norway. pp. 1-10.[28] RAINES, P. 2001. Local or national competitive advantage. The Tension in cluster

development policy. European policy research centre. pp. 4-27. ISBN 1-871130-49-2.[29] VRI. 2007. Regional R&D and Innovation 2007-2017 – VRI programme description. The

Research Council of Norway. pp. 1-18. ISBN 978-82-12-02497-7[30] ROTEFOSS, B. et al. 2003. The case of Norway. Kunnskapsparken Bodø. pp. 177-208.[31] REMOE, S. O. 1999. Rushing to Reginn: The evolution of a semi-institutional approach.

STEP group. pp. 5-52.[32] SCORDATO, L. 2001. Mini Country Report/Norway. NIFU. pp. 5-15.[33] SMITH, K. et al. 2010. The Norwegian National Innovation System: a Preliminary

Overview and Assessment. Step group. pp. 10-25.[34] TACTICS. 2012. Where the cluster winds are blowing in Europe. Tactics. pp. 75-77.

Chapter 8 Janka Pálfyová

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Chapter 8

Cluster Policy in Slovenia

by Janka Pálfyová Technical University of Košice, Faculty of Economics, Slovak Republic [email protected]

8.1 Introduction 8.2 Cluster Policy Legislation 8.3 Cluster Policy Principles, Areas and Objectives 8.4 Cluster Policy and Other Related Policies 8.5 Funding Clusters in Slovenia 8.6 Cluster Policy Centralisation vs. Decentralisation 8.7 Conclusion

References


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8.1 Introduction

Cluster policy in Slovenia was first formulated in 1999, when clusters became a part of one of a broader set of measures for fostering entrepreneurship and competitiveness which were implemented by the Ministry of Economy between the years 1999 and 2004 (European Cluster Observatory, 2011).

In 2005, the Slovenian government stopped encouraging cluster development and the support provided for cluster development programmes was withdrawn. Since 2008, the government has not supported clusters, but instead has supported networking between entrepreneurs, research institutions and universities through the »Centres of Excellence«, »Centres of Competence«, and the »Economic Development Centres« (European ClusterObservatory, 2011).

Cluster policy at the national level is a framework policy with more specific regional cluster policies (European Cluster Observatory, 2011).

Slovenia shifted its attention to clusters at the end of 1990s due to the government’s efforts to accelerate industrial productivity that was well below the EU average. The government decided to develop and implement a systematic and comprehensive conceptual clustering scheme with the intent to help long-term economic strategic goals. Clusters became a part of the core of a pro-active industrial policy which was focused on supporting small and medium-sized enterprises, and on exceeding production levels and modernising potential in industry (OECD Multilingual Summaries, 2005).

Between 2001 and 2004, the Slovenian Ministry of Economy invested almost €9 million in the establishing and supporting of twenty-nine clusters in Slovenia. The majority of the funds was used for cluster organisational aspects. The analysis of cluster policy measures from 2001-2004 had positive effects on local economy (Palčič, 2013).

In 2005, there was a change of government and the new one terminated the direct funding of clusters, which created a formidable barrier for younger clusters. Many of these clusters lost their starting enthusiasm and simply disappeared. Older and more established clusters continued to exist; however, they were faced with a number of unexpected problems. Clusters had to find additional funding elsewhere. In the period from 2005 to 2013, cluster policy was not an important part of the national policy to foster competitiveness and entrepreneurship of Slovenia (Palčič, 2013).

From the operational point of view in the initial stages of cluster development, the most obvious obstacle was a cultural problem: the lack of confidence between competitors from the same industry. Due to strong initiative from the government with massive financial support, it was not obvious for a long time whether the firms and institutions formed clusters due to financial support, or due to clear business interest (Bradač and Krošlin, 2007).


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Cluster policy in Slovenia is defined by various policy initiatives. They include well-structured cooperation between academia, research institutes and firms, which appears to be an ideal opportunity for technology and knowledge transfer, and the development of new business-related modules within these universities and research institutes (European Cluster Observatory, 2011; Meijenfeldt et al., 2010).

8.2.1 Cluster Policy Instruments and Measures at the National Level

The main organisation responsible for the formation of national cluster policy is the Ministry of Economy, and the main implementation organisation is the Public Agency of the Republic of Slovenia for Entrepreneurship and Foreign Investments (JAPTI). Another organisation, which has influenced the clusters development in Slovenia, is the Chamber of Commerce and Industry of Slovenia.

Clusters are pertained to in the following strategic documents: • »Programme of Measures for Promoting Entrepreneurship and Competitiveness

2007-2013«.• »National Research & Development Programme 2006-2010«.• »National Action Plan for the Lisbon Strategy« (Bradač and Krošlin, 2007).

In the overall process of cluster development in the country, the role of the government in general and the Ministry of Economy in particular is that of a catalyst. By promoting key knowledge transfer to the business sector, cluster development acts as a chief agent for permanent change via the effective adaptation of the economy to the dynamic environment of global competition and new technologies (Dermastia, 2005).

The »Programme for Stimulating the Internationalisation of Companies for the Period 2010-2014« is part of the legislative agenda of the Ministry of Economy. Slovenia seeks to support, inter alia, the sectors that are traditionally important for the country’s economy: the automotive industry and spare parts production, the wood processing industry, transport logistics clusters, construction, energy and some others (Government of the Republic of Slovenia, 2010).

8.2.2 Framework Cluster Policy Instruments at Regional Levels

Regional development agencies are responsible for the implementation of cluster policy. They work as implementation organisations by inviting tenders for projects on behalf of the Ministry of Economy. There are twelve regional development agencies. Their mission is to offer a complete development as well as organisational, technical and financial support to regions.


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The main tasks of the regional development agencies include: • Development of relationships between the public and private sectors at local, regional,

national and international levels, in order to promote development initiatives and toenhance coherent regional development.

• Acceleration of integrated regional development.• Planning and implementation of regional and other development programmes.

Acquisition of domestic and foreign financial support (Bradač and Krošlin, 2007).

The Regional Development Agency in Celje can serve as an example of a regional development programme. It is a company that focuses on the development in a specific Slovenian region covering thirty-two municipalities. It is able to identify problems concerning the regional development and to solve them using the necessary instruments it has at disposal (Regional Development Agency Celje, 2011).

A different example is the Regional Development Agency of the Ljubljana Urban Region (RDA LUR) with the capital city of Ljubljana, whose mission is to connect all the regional development efforts, ideas and subjects in twenty-six municipalities into a whole. The agency represents all municipalities and acts as a facilitator between the EU regions. It supports economic, social and cultural activities in the municipalities of the central Slovenian region, aiming to become a friendly and recognisable entity with common goals (Regional Development Agency of the Ljubljana Urban Region, 2014).


The key research findings of a review of the geographical concentrations of industries and an identification of potential clusters in Slovenia in 2000 showed that no “real” clusters actually existed in Slovenia at that time, due to weak links among potential cluster participants and the early stage of cluster development infrastructure. However, the fact that the research pointed to the existence of at least ten potential clusters had a significant influence on the original cluster policy concept. Cluster policy in Slovenia pursued the following three objectives:

• Encouraging cooperation and networking among companies in order to strengthenindividual and joint abilities and to develop partnerships in different areas of business,and to intensify cooperation between companies and R&D institutions in order to fortifythe common capabilities required to promote innovation and technologicaldevelopment.

• Strengthening the know-how, skills and expertise required by cluster developmentactors (people and institutions) to promote the development and functioning of clusters.

• Initiating the formation of clusters in practice by means of proposed pilot clusterprogrammes, such as the »Slovenian Cluster Pilot Programme 2000-2003« (Pilotskiprojekt slovenskega grozda 2000-2003) resulting in the formation of three clusters inthe tool-making industry, automotive industry and transport logistics in 2000(Dermastia, 2005).


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Cluster development in Slovenia is guided by the bottom-up approach and by the principle of learning by doing. This allows constant adaptation of existing measures and the creation of new policy instruments which match actual cluster developmental phases (Dermastia, 2005).

The main objectives of the cluster policy in Slovenia are as follows: • Sustainable regional development.• Fostering cooperation among companies and research organisations.• Increasing innovative capabilities of companies.• Increasing competitiveness of companies.• Access to new knowledge and knowledge transfer (Bradač and Krošlin, 2007).

Based on the resources from the databases of the European Cluster Observatory, clusters in Slovenia are directed into four basic sectors:

• Standard sectors.• Creative and cultural industries.• Knowledge-intensive commercial services.• Life sciences.

The following table shows the number of employees in clusters in the standard sectors in Slovenia, ordered from the highest to the lowest number of employees.

Table 8.1 Number of employees in the standard sectors in Slovenia

Sectors Employees Metal manufacturing 36,066 Construction 35,880 Financial services 23,542 Business services 19,677 Education and knowledge creation 18,254 Food processing 16,903 Transportation and logistics 16,145 Tourism and hospitality 13,095 Automotive 11,111 Building fixtures, equipment and services 10,311 Paper products 9,180 Media and publishing 8,735 Production technology 7,009 Distribution 6,987 Telecommunications 6,942 Plastics 6,811 IT 6,672 Heavy Machinery 6,022 Pharmaceuticals 5,641 Chemical products 5,420 Furniture 4,924 Textiles 4,819 Apparel 4,514 Power generation and transmission 4,415 Entertainment 3,351 Lighting and electrical equipment 2,601 Leather products 1,896 Farming and animal husbandry 1,755


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Medical devices 1,450 Footwear 1,442 Agricultural products 1,422 Construction materials 1,373 Instruments 1,365 Maritime 1,137 Sporting, recreational and children’s goods 604 Jewellery and precious metals 346 Stone quarries 296 Biotech 213 Oil and gas 137 Aerospace 119 Tobacco 0


Figure 8.1 The most important clusters in eight standard sectors with the highest employment in Slovenia


Figure 8.2 The most important clusters in the creative and cultural industries in Slovenia



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Figure 8.3 The most important clusters in the knowledge-intensive commercial services sector in Slovenia


Figure 8.4 The most important clusters in the life sciences sector in Slovenia


Among the most recognised agencies that support cluster policy in Slovenia are the National/Regional Development Agency, the Slovenian Research Agency (SRA), the Public Agency for Technology of the Republic of Slovenia or, for short, the Slovenian Technology Agency (TIA), the Small Business Development Centre (SBDC), the Chamber of Commerce


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and Industry of Slovenia (CCIS), the Slovenian Trade and Investment Promotion Agency (TIPO), and the Central and Eastern European Privatisation Network (Dermastia, 2005).

The agencies geared towards cluster policy promotion are listed in the following table.

Table 8.2 Agencies geared towards cluster policy promotion in Slovenia

Agency description Focus, mission and objectives of the agency

Slovenian Technology Agency, responsible for strengthening technological development and innovation until 2012; in 2012, the government founded a new agency, SPIRIT Slovenia or the Public Agency of the Republic of Slovenia for the Promotion of Entrepreneurship, Innovation, Development, Investment and Tourism (in full).

SPIRIT Slovenia, a merger of three former agencies (the Public Agency of the Republic of Slovenia for Entrepreneurship and Foreign Investments, the Slovenian Tourism Organisation, and the Slovenian Technology Agency) has undertaken a mission is to be an active player in the business environment and ensure the competitiveness and promotion of the Slovenian economy and tourism. In cooperation with the Ministry of Economic Development and Technology and other stakeholders, the Agency offers Slovenian companies effective and comprehensive support for development and promotion on the global competitive market.

Small Business Development Centre, established in 1995 as a main business support services provider for small businesses.

The Small Business Development Centre played an important role in promoting cluster development in 2002. It was responsible for the implementation of SME strategy and also the implementation of the second pillar (entrepreneurship) of the government’s employment action programme, which was developed by the Ministry of Labour, Family and Social Affairs. The Centre took on the task of identifying potential local clusters, i.e. clusters of micro companies (up to fifty employees).

Chamber of Commerce and Industry of Slovenia; one of the projects under the Chamber of Commerce and Industry in the period 2008-2010 was the »Regions of Knowledge«, Coordination Action, FP7 (REG CON) with the main progressive R&D concept and the idea of transnational European cooperation between research-driven regional clusters in the construction business sector.

Clusters are essential for increasing productivity and value-adding of SMEs due to their provision of access to knowledge, skills, R&D infrastructure, networking, promoting partnerships, marketing, production systems, innovation, technology and co-funding from private and public sources. In 2014, the Slovenian government received full support for improving a business environment for small companies and their competitiveness.

»National Research& DevelopmentProgramme«, specifying the R&D policy (andimplicitly also innovation policy), itsobjectives and priorities, the stakeholders,scope and means of financing and theevaluation criteria.

The main targets of the »National Research& Development Programme« were to increase public R&D investment, shift balance of public research funds from basic, non-targeted research in favour of targeted (and applied) research, foster growth of the number of researchers in the business sector, a higher rate of establishment of new high-tech firms, support to the growth of patents, growth of high-tech exports, and to encourage the value-creation in the Slovenian economy. The programme also focused on cluster mapping and sectoral innovation studies.


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The key novelty of the Law on Research and Development 2002 (OG 96/2002) was the establishment of the two agencies: Agency for Scientific Research and Agency for Technology and Development, followed by the establishment of the Slovenian Research Agency that began functioning formally in 2004.

The main objectives of the Slovenian Research Agency as an independent public funding organisation are to perform tasks related to the National Research and Development Programme and European Research Area. Its primary role and priority is strategic R&D policies, which are long-term research agendas. Other priorities include innovation strategies, framework cluster policies and other horizontal policies, for example, society-driven innovations etc.

Source: Dermastia (2005); European Commission (2011); European Commission (2012a); European Commission (2012b); European Commission (2012c); Chamber of Commerce and Industry of Slovenia (2012); Chamber of Commerce and Industry of Slovenia (2014); Government of the Republic of Slovenia (2007); Slovenian Technology Agency (2013); Rangelova (2008); Rebernik and Bradač (2011); Slovenian Research Agency (2007); Spirit Slovenia (2014a); Stretoproject (2012)


Cluster policies may not necessarily be conceived of as framework policies focusing on infrastructure and/or institutional conditions needed for cluster functioning (Andersson et al., 2004).


The document entitled »Slovenia’s Development Strategy« is a long-term economic development programme of the Slovenian government that serves as a national framework based on sustainable development and integration of all developmental policies. It sets an overall vision of future economic and social development. One of the measures aimed at improving competitiveness is “promoting innovation and increasing companies’ competitiveness”. This fact encompasses the development of individual systems in order to increase productivity in companies, and the development of network systems. Moreover, the programme works as an umbrella for organisational networks, university incubators, technology parks, clusters, and technology platforms (Bradač and Krošlin, 2007).

»CluStrat–Boosting Innovation through New Cluster Concepts in Support of Emerging Issuesand Cross-Sectoral Themes« is a transnational project aimed at developing a common strategy on how to increase the innovation capacity and competitiveness of clusters in Central Europe. In 2011, eighteen partners and seven associated institutions from the Czech Republic, Austria, Germany, Hungary, Italy, Poland, Slovenia, Slovakia and Ukraine joined forces to explore suitable and effective cluster concepts and supportive policy measures (Spirit Slovenia, 2014b). The project was implemented within the framework of a strategic call for project proposals in the »Eastern Europe Programme 2007-2013«, lasted from 2011 to 2014, and was co-financed by theEuropean Regional Development Fund in an amount of over €2,946 million.

The outcomes of the project are eight pilot measures and policy recommendations for new cluster concepts which should contribute to national and regional cooperation. The members of the project made six policy recommendations for member organisations to communicate with their country’s legal authorities and the EU legislative bodies in order to incorporate the new


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cluster concepts into their national cluster development strategies. In 2014, de Marchi (Padua University) in Ljubljana introduced policy recommendations for the new cluster concepts that would include three emerging industries: active ageing, green economy, and intelligent mobility (Spirit Slovenia, 2014b).


At the moment there are several regional R&D agencies in Slovenia, however, they do not determine the policy. Legally, they hold various positions ranging from public agencies at local community levels, through public-private partnerships to private-owned agencies. They are primarily engaged in providing counselling services to local entities (SMEs) tendering for funds from the Structural Funds or other subsidies (Government Office of the Republic of Slovenia for Local Government and Regional Policy, 2012).

Regional development policy is focused on regions with the lowest level of development, municipalities with special developmental problems, border regions, and national minority regions (Bradač and Krošlin, 2007).

The most active cluster region in Slovenia at NUTS i level is Slovenija (European Cluster Observatory: Regions). From the viewpoint of NUTS III level, these are twelve regions: Pomurska, Podravska, Koroška, Savinjska, Zasavska, Spodnjeposavska, Jugovzhodna Slovenija, Notranjsko-kraška, Osrednja Slovenska, Gorenjska, Goriška, and Obalno-kraška (Official Journal of European Union, 2011).

The regional development policy has five strategic aims: • Decentralisation of decisions in regional development.• Establishment of conditions to form the Euro-region.• Efficient acquisition of EU regional funds.• Successful realisation of special measures of regional policy.• Successful realisation of regional development programmes in all regions (Bradač and

Krošlin, 2007).


The Slovenian Ministry of Economy introduced the clustering concept in 2001, as the Ministry recognised both the value of industrial clusters and the need for greater innovation and networking among Slovenian manufacturers. Quickly, industrial clusters became a part of the »Programme of Measures for Fostering Entrepreneurship and Competiveness«. In 1999, threepilot projects were launched: the »Toolmakers Cluster of Slovenia« (TCS), »SlovenianAutomotive Cluster« (ACS), and »Slovenian Transportation-Logistic Cluster«. Since then thenumber of clusters has been continuously rising; the successful Slovenian clusters operate inthe field of the automotive, tool-making, transportation, logistics, air-conditioning, buildingconstruction, plastics, ecology, textile, wood, tourism, catering, hotels, geodesy industries, etc.(Palčič, 2013).


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In general, Slovenian cluster policy is not sector-specific, neither is there any particular business network policy. The importance of business networking can be found in other documents, such as regional development policies, for example, »Slovenia’s Development Strategy«. The foreign direct investment policies (FDI) are not linked to cluster policy (Bradač and Krošlin, 2007).

Slovenia’s extensive economic reforms in 2000 led to gradual regulatory changes in the foreign direct investment area. a growing recognition of the importance of FDI as a source of fixed capital formation to economic growth and performance was reflected in the government’s commitment to actively encouraging inward investment, which is effected by streamlining the investment promotion agencies and offering special investment incentives (Invest Slovenia, 2011).

Clusters are not merely a capital linkage. Clusters can also be used to boost the synergic effects that alone the companies would not achieve. Scientific and research institutions can play an important role in the process, for it is up to them to make sure that the step from theory into practice runs smoothly, which is a great advantage for the effects of innovation (Trupac, 2012).

8.5 Funding Clusters in Slovenia

One of the key factors for successful cluster functioning is their access to finance. Cluster managements should have sufficient budgets to be able to conduct their planned activities. Well-funded clusters are then capable of achieving more challenging and ambitious goals. To finance clusters or cluster initiatives, funds from private or public sectors can be used, or a combination of the two (Pavelková et al., 2009).

8.5.1 Funding Cluster Programmes at National and Regional Levels

Based on the experience gained by launching a pilot project in 2002, the Ministry of Economy of the Slovenian Republic designed measures to financially support cluster initiatives. In its first step, the Ministry co-financed activities connected with defining a cluster’s internal organisation and communications, as well as a joint strategy for cluster development. Companies, together with support institutions, could compete in tenders to benefit from a maximum of €70,000 per cluster development project. In its second step, the Ministry supported activities to implement the previously defined cluster strategies. The target users were groups of at least ten companies and three support institutions. In 2002, another tender for cluster development projects was called, bringing forward fifteen proposals for new initiatives, eight of which were selected (Dermastia, 2005).

Some methods of funding of the cluster programmes in Slovenia which had been completed before 2007 are presented in the following table.


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Table 8.3 Some examples of funding regional and national cluster programmes before 2007

Name of Programme / Level / Time Span Budget / Programme Goals

»Programme for FosteringCluster Development inSlovenia«(Program za spodbujanje razvoja grozdov v Sloveniji) a national cluster programme Time span: 2001-2004

Financial resources were allocated mainly by the Ministry of Economy, with a budget amounting to €8.92 million. The programme was initiated by the Ministry of Economy and carried out by the Public Agency of the Republic of Slovenia for Entrepreneurship and Foreign Investments (JAPTI). Prioritised activities were the (self)identification of pilot clusters and co-financing the establishment of their cluster organisation. In the first pilot clusters some R&D institutions were involved.

»Supporting Linking Companies into Clusters« (Spodbujanje povezovanja podjetij v grozde): a regional cluster programme Time span: 2007.

The programme supported the transformation of companies into clusters. It was financed from the resources provided by the Municipality of Ljubljana. The municipality of Ljubljana initiated and implemented the programme while co-financing the establishment of the cluster. Prioritised activities were the (self)identification of clusters with a particular focus on SMEs. One of the conditions was to include at least one research organisation into the cluster.

Source: Bradač and Krošlin (2007)

The cluster initiative was launched in 2000. Supporting clusters started very carefully; in the first year of the cluster development programme only three pilot clusters were established. In the following year, their number increased to five; however, a real breakthrough in clustering came in 2003, when a total annual budget for cluster policies of approximately €1.5 million was made available. The Ministry of Economy accepted fourteen projects and, on average, it was able to cover 21% of the required funds. In 2004, there were eighteen clusters operating in Slovenia. Altogether, twenty-nine projects related to clustering had been supported by the end of 2004: three pilot cluster projects, thirteen early stage clusters and additional thirteen cluster initiatives, bringing together three hundred and fifty companies and forty education/research institutions. All the evaluations carried out in 2004 assessed the cluster programme as a successful measure, contributing to increased cooperation among business enterprises as well as increased cooperation between the business sector and public research institutions. Nevertheless, a somewhat unexpected decision was made to discontinue the »Programme for Fostering Cluster Development in Slovenia« upon the change in government at the end of 2004 (European Commission, 2004).

8.5.2 Funding Cluster-Related Programmes at National and Regional Levels

Since support for cluster programmes in Slovenia was terminated in 2005, the government orientated towards other institutional forms of support. The current cooperation and networking between the R&D and business sectors is supported by several basic initiatives (»Centres of Excellence«, »Competence Centres«, and »Development Centres«). The total funds amounted to €350 million for the time period of 2010-2014. The following subchapters are devoted to the »Centres of Excellence« and »Competence Centres« (European Cluster Observatory, 2011).


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8.5.3 Centres of Excellence

The »Centres of Excellence« are a measure within the framework of the scientific and technology policy of the Republic of Slovenia, aimed at promoting the concentration of knowledge at priority technological areas and horizontal linking along the entire chain of knowledge development, which is realised on the basis of strategic partnerships between the private sector and academia (Republic of Slovenia, Ministry of Higher Education, Science and Technology, 2012).

Eight centres of excellence were selected within a public call for the development of centres of excellence between 2009 and 2013. The table below shows the selected centres and their budgets.

Table 8.4 Centres of Excellence in Slovenia and their budgets

Centre of Excellence

Budget / Co-funding of the

programme €

The Centre of Excellence in Nanosciences and Nanotechnology 9,803,463 The Centre of Excellence for Biosensors, Instrumentation and Process Control 10,000,000 The Centre of Excellence for Integrated Approaches in Chemistry and Biology of Proteins 8,407,000

The Centre of Excellence for Low-Carbon Technologies 9,989,739 The Centre of Excellence Advanced Non-Metal Materials with Technologies of the Future

9,417,264

The Centre of Excellence for Polymer Materials and Technologies 10,000,000 The Centre of Excellence Space: Science and Technology 9,966,506 The Nuclear Magnetic Resonance Centre of Excellence for Studies in Biotechnology, Pharmacy and Physics of Matter 9,970,013

Source: Republic of Slovenia, Ministry of Higher Education, Science and Technology (2012)

In 2009, all the Centres of Excellence (CoE) obtained the funds from the European Regional Development Fund (85%) and from national public funding (the remaining 15%) over the period of five years in an amount of €77.5 million. In 2013, the funding of the CoE from the European Regional Development Fund was terminated. The established CoE delivered excellent results, both in science and in the technology transfer to industry (University of Ljubljana, 2013a).

In total, one hundred and fifteen partnering institutions have participated in the CoE, including sixty-six large and small companies and private research organisations, forty-four public research and educational institutions, and five partners from non-profit research and development institutions. All partners have jointly conducted over 577 full-time (FTE) research hours. Between 2010 and 2013, the CoE carried out one hundred and eighty-five R&D projects in collaboration with companies, registered one hundred and one new patents and developed three hundred and eleven innovations. The CoE investments in R&D facilities amounted to a total of €42,580,728 (University of Ljubljana, 2013a).


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8.5.4 Competence Centres

The »Competence Centres« are defined as development and research centres that are managed by partners from the industrial sector, and link partners from the industry and public research sector. They focus on the promotion of the development capability and the application of new technologies in manufacturing new competitive products, services and processes at priority areas of technological development. This function is complementary to that of the »Centres of Excellence«; together they constitute an autonomous whole in the area of researchand development (Republic of Slovenia, Ministry of Higher Education, Science andTechnology, 2012).

Seven centres that were selected within a public invitation to tender for the development of competence centres between 2010 and 2013 are shown in the following table.

Table 8.5 Competence Centres in Slovenia and their budgets

Competence Centre Budget /

Co-funding of the programme €

The Competence Centre for Advanced Control Technologies 6,355,500 The Competence Centre for Advanced Systems for Efficient Use of Electrical Energy 6,399,999

The Competence Centre for Biomedical Engineering 6,399,863 The Competence Centre for Sustainable and Innovative Construction 6,399,800 The Competence Centre for Biotechnological Development and Innovation 6,387,750 The Competence centre for Cloud-Assisted Services 6,395,380 The Competence Centre for Open Communications Platform for Integrated Services 6,398,000

Source: Republic of Slovenia, Ministry of Higher Education, Science and Technology (2012); University of Maribor (2013)

In total, €44.7 million was granted for co-financing the Competence Centres (CoC). The majority of the funds, 85%, was allocated by the European Regional Development Fund, while 15% was provided by the state budget (University of Ljubljana, 2013b).

In 2013, the funding of the CoC on the part of the European Regional Development Fund was terminated. More than a third of a total of fifty-nine different partners that had participated in the CoC were public research institutes, and about two thirds were mostly small and medium-sized enterprises (SMEs). The CoC conducted 1,445 full-time (FTE) research hours, involving a large number of young researchers. The CoC implemented fifty-two projects, developed one hundred and sixty-two new products and services and one hundred and seventy-seven innovations, and registered fifty-two new patents. In addition, four CoC developed twenty-four new technological, procedural and organisational solutions. In three years of their activity, the partners invested €20.5 million of private funding in the R&D field (University of Ljubljana, 2013b).


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8.5.5 International Project of Cluster Cooperation (ClusterCOOP)

The duration of the »ClusterCOOP Project« of 2011 was thirty-six months. 85% of it was co-financed by the European Regional Development Fund. Seven countries, namely Hungary, the Czech Republic, Slovakia, Slovenia, Germany, Italy and Poland participated in the project. The ClusterCOOP project partners had set the general aim to help clusters better exploit their innovation capacities and improve their competitiveness so that in the long term, their development and effective cooperation would improve the position of the Central European Region in the European Economic Area (Slovak Innovation and Energy Agency, 2011).

The project supported an integrated collection of policy measures and solutions which could effectively support the cross-regional and transnational cooperation of clusters and, at the same time, identify emerging industries which, through cluster-cooperation, could become a driving force for national/regional economies and which could benefit from such international cooperation (ClusterCOOP, 2014).


Cluster policy in Slovenia is centralised within the hands of the government, as its decentralisation to the regional level would be inappropriate due to lacking links between potential cluster participants. The Ministry of Economy acted as an implementer and facilitator of cluster activities that were undertaken in the country (Bradač and Krošlin, 2007).

Slovenia looks at ecological innovations as one of the aspects that can be horizontally supported by cluster policy. This means that eco-innovations are, de facto, a performative aspect that is integrated into a cluster policy horizontally and is concerned with all national competitive sectors. Eco-innovations are considered to be an inter-sectoral aspect which should be related to all industrial sectors. Slovenia approaches eco-innovations more from a political rather than industrial point of view (European Cluster Observatory, 2011).

Sources and decision-making processes in Slovenia tend to be centralised at the national level. The establishment of political and administrative structures of a new state, management of economic transformation and Slovenia’s entry into the European Union, were at the top of the political agenda. At the same time, specific measures were made to support demographically endangered regions, namely the regions with high unemployment, border regions, and other regions hosting high rates of ethnic minorities. In the recent years, the government has paid special attention to the regions most affected by the industry restructuralisation and economic crisis. For instance, a government office has been established for the Pomurska region, and positive discrimination measures have been introduced by a special act in the region. In 2009, the Prime Minister appointed an advisory body of experts (the Strategic Council for Regionalisation and Decentralisation). Following its statement, the Government Office for European Affairs and Growth, proposed several legislative provisions for regions. Regionalisation has remained part of the political agenda; it is expected that regionalisation activities will continue in the future (OECD, 2010).


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8.7 Conclusion

Slovenia focused its attention on clusters as early as in 1999 in an effort to overcome the lagging of the country’s industrial productivity behind the EU average. In the cluster development process, the Ministry of Economy plays a role of catalyst and the main implementation agency is the above-mentioned Public Agency of the Republic of Slovenia for Entrepreneurship and Foreign Investments (JAPTI). The development of clusters and cluster policy is determined by the bottom-up approach.

In 2005, the government support for cluster programmes was withdrawn, and the government instead decided to support networking among entrepreneurs, research institutions and universities in the form of “centres of excellence”, “competence centres” and “development centres”. The role of clusters within the framework structure is thus somewhat unalike in different policy areas.

Funds for national and regional programmes come mainly from the government’s ministries and the budgets of specific regions. In addition, support geared towards cluster initiatives has a certain place in cluster funding as well.

Nevertheless, a climate of initial distrust among large and small companies that to a great extent prevents the cluster functioning improvement still persists in Slovenia.


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[31] SLOVENIAN RESEARCH AGENCY. 2007. About the Agency: Mission.[32] SPIRIT SLOVENIA. 2014a. Vision and Mission.

http://www.investslovenia.org/business-environment/

http://ec.europa.eu/research/innovation-union/pdf/erac/si__peer_review_report_2010.pdf

http://ec.europa.eu/research/innovation-union/pdf/erac/si__peer_review_report_2010.pdf

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:013:0003:0054:EN:PDF

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:013:0003:0054:EN:PDF

http://www.rra-celje.si/defaultc43b.html?V_DOC_ID=849

http://www.rralur.si/

http://www.arhiv.mvzt.gov.si/en/areas_of_work/science_and_technology/centres_of_excellence_and_competence_centres/


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[33] SPIRIT SLOVENIA. 2014b. CluStrat - Boosting Innovation through new ClusterConcepts in support of emerging Issues and cross-sectoral Themes.

[34] STRETOPROJECT. 2012. Chamber of Commerce and Industry of Slovenia. Availablefrom: http://www.stretoproject.com/P42A8C3S1/Chamber-of-Commerce-and-Industry-of-Slovenia.htm.

[35] TRUPAC, I. 2012. More Competitiveness for Slovenia and its Companies through theSlovenian Transport Logistics Cluster. PROMET-Traffic&Transportation, 20(1). pp. 19-30.

[36] UNIVERSITY OF LJUBLJANA. 2013a. Centres of Excellence.[37] UNIVERSITY OF LJUBLJANA. 2013b. Competence Centres.[38] UNIVERSITY OF MARIBOR. 2013. Competence Centres. Research, Development and

Innovations.

http://www.stretoproject.com/P42A8C3S1/Chamber-of-Commerce-and-Industry-of-Slovenia.htm

http://www.stretoproject.com/P42A8C3S1/Chamber-of-Commerce-and-Industry-of-Slovenia.htm


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Chapter 9

Cluster Policy in Spain

by Janka Pálfyová Technical University of Košice, Faculty of Economics, Slovak Republic [email protected]

9.1 Introduction 9.2 Cluster Policy Legislation 9.3 Cluster Policy Principles, Areas and Objectives 9.4 Cluster Policy and Other Related Policies 9.5 Funding Cluster Policy in Spain 9.6 Cluster Policy Centralisation vs. Decentralisation 9.7 Conclusion

References


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9.1 Introduction

The Spanish clusters initiatives and cluster policy have their origins at the beginning of the 1990s. These were some elements of cluster policy integrated in other policies or components as parts of various initiatives (European Cluster Observatory, 2011a).

In the early 2000s, the Ministry of Industry, Tourism and Trade began working on developing a strategic framework to coordinate and articulate the cluster policy in Spain at the national level. Its approach aimed to complement the actions already being developed by regional authorities. a clear example is the report »Identification of Local Systems of Labour and Industrial Districts in Spain«, published in 2004. It made the first identification of two hundred and thirty-seven industrial districts scattered throughout the whole Spanish territory. As a result, the Ministry developed a complete strategic framework to support cluster initiatives and to enhance the appearance of cluster. The main instrument designed and implemented by the Ministry in 2007 was the »Support Programme for Innovative Business Groupings« (the Agrupaciones Empresariales Innovadoras), commonly known as the »AEIs Programme« (Castillo et al., 2011).

In 2014, the European »Mission for Growth« was introduced to the regions of Seville (Andalusia) and Mérida (Extremadura) in Spain, with the aim of promoting business partnerships between companies in Spain and other European countries that are active in targeted sectors. Thirty-two representatives of cluster organisations participate in the cluster match-making mission in the following sectors:

• Aerospace and aeronautics.• Agri-food and Packaging.• Bio-tech and Health• Eco-Construction.• Information and Communication Technologies (ICT).• Metal Mechanical.• Renewable Energy (Cluster Collaboration, 2014).


Regional governments used cluster policy to support the business environment. Unlike the regional level, at the national level there had been no real cluster policy efforts up until 2006, when the Spanish government designed a cluster policy comprising a set of activities aiming to intensify business networking. Currently, the cluster policy in Spain is applied at both national and regional levels: at the national level, the cluster policy aims at reinforcing innovation and business competitiveness, and at the regional level, it has typically addressed areas such as regional economic development, promoting innovation and technology, internalisation and cluster specifics (European Cluster Observatory, 2011a; Müller, 2007).

Cluster policy in Spain is defined by the national regulatory framework for regional policy. Regions are responsible for the development and the subsequent implementation of cluster


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policy in regions. Spain has no sectoral approach to cluster policy at a national level; as such policy should be complementary to the regional policy that is applied in every specific region autonomously (European Cluster Observatory, 2011a).

9.2.1 Cluster Policy Instruments and Measures at the National Level

The main tool to implement cluster policy at the national level in Spain is the »Support Programme for Innovative Business Groupings« (the Agrupaciones Empresariales Innovadoras), which provides finance and supports innovation projects and the competitiveness of businesses. The aim of the Programme is to enhance the competitiveness of businesses by improving their innovation capacity by means of supportive measures leading to the establishment and reinforcement of innovative business groupings (European Commission, 2014a).

At the national level, there is no central underlying principle concerning sector selection. The selection is left to autonomous regions which had pursued their cluster policies long before the government established its cluster policy at the national level (European Cluster Observatory, 2011a).

The cluster policy in Spain is implemented by the following measures: • A »Spanish Business Promotion Plan«, that aims at reinforcing innovation and

business competitiveness of small and medium enterprises. Among other measures, itincludes support for innovative clusters.

• A ministerial regulation, from the Ministry of Industry, Tourism and Trade, aiming toidentify and label existing innovative clusters. The Ministry began working ona complex policy to support cluster initiatives through »Programmes for InnovativeBusiness Groupings«, and also began developing a strategic framework to coordinateand articulate the cluster policy at the national level, whilst its approach seeks tocomplement the actions already being developed by regional authorities (Castillo etal., 2011; OECD et al., 2007).

9.2.2 Cluster Policy Instruments at Regional Levels

The administrative decentralisation that followed the adoption of the Spanish Constitution, directly led to significant regional autonomy. With this autonomy, the newly created regional governments began to take the initiative in promoting economic development in their respective regions (Castillo et al., 2011).

Spain places greater emphasis on cluster policy at regional levels than at a national level. The number of organisations responsible for cluster policy at the Spanish regional levels is considerably greater that at the national level. Most agencies in charge of the implementation of cluster policy at the regional levels focus on entrepreneurship and regional development (Furre, 2008).


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Two kinds of cluster maps have been elaborated, which have highlighted the benefits of using a cluster approach for developing the competitiveness of a region:

• A map of regional clusters based on the Marshallian concept of industrial districts. Inthis map, one hundred and forty-two so-called “industrial local systems” have beenidentified, mostly specialised in rather traditional, labour-intensive and low-technologyindustries.

• A cluster map combining three types of classification methodology: the Porterianconcept, the Delaunay system, and SITEDEC – a qualitative method based on theinformation of businesses obtained from a survey, using information from regionaladministrations (Müller, 2007).


Spain was one of the first countries that adopted cluster policy. We can clearly distinguish two different models for cluster development in the country. On the one side, some regions have launched scattered/isolated cluster initiatives that are not part of a well-structured plan; on the other side, some other regions run cluster programmes with long-term objectives, consisting of different phases for implementation. Cluster policy evolution in this case has been consistent over time (Müller, 2007).

Drawing from the European Cluster Observatory databases, clusters in Spain are directed into four basic sectors divided into:

• Standard Sectors.• Creative and Cultural Industries.• Knowledge-Intensive Commercial Services.• Life Sciences.

The table below shows the number of employees in clusters in the standard sectors in Spain.

Table 9.1 Number of employees in the standard sectors in Spain

Sectors Employees Construction 1,337,655 Business services 523,704 Financial services 463,084 Tourism and hospitality 442,047 Transportation and logistics 353,849 Distribution 344,622 Processed food 340,292 Farming and animal husbandry 282,250 Education and knowledge creation 254,706 Metal manufacturing 229,779 Agricultural products 213,544 Building fixtures, equipment and services 191,854 Media and publishing 172,105 Automotive 167,289 Entertainment 122,824


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Paper products 105,784 Maritime 101,394 IT 101,024 Telecom 90,225 Furniture 82,697 Apparel 76,084 Production technology 71,508 Construction materials 67,581 Plastics 66,141 Chemical products 52,363 Textiles 52,310 Pharmaceuticals 50,440 Heavy Machinery 47,938 Tobacco 40,641 Footwear 29,072 Lighting and electrical equipment 25,197 Power generation and transmission 18,164 Medical devices 17,276 Aerospace 16,980 Stone quarries 10,522 Instruments 10,408 Sporting, recreational and children’s goods 9,972 Jewellery and precious metals 8,878 Leather products 5,342 Oil and gas 3,203 Biotech 1,861


Figure 9.1 The most significant clusters in eight standard sectors with the highest employment in Spain



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Figure 9.2 The most significant clusters in the creative and cultural industries in Spain


Figure 9.3 The most significant clusters in the knowledge-intensive commercial services sector in Spain



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Figure 9.4 The most important clusters in the life sciences sector in Spain


The most significant clusters can be found in the regions of Andalusia, Aragon, Asturias, the Balearic Islands, Extremadura, Galicia, Cantabria, Castilla-La Mancha, Castilla and Leon, Catalonia, the Basque Country, La Rioja, Madrid, Murcia, Navarra, Valencia, and the Canary Islands. The cities of Ceuta a Melilla in the north of Africa have also been constituted as part of Spain.

Based on the data given in the European Cluster Observatory database, there are five cluster networks in Spain:

• »Clusterplast«: a European inter-cluster initiative targeting the future challenges for theEuropean polymer converting industry.

• »Coordina2«: a network of multiple organisations focusing on electronic health andsocial technologies.

• The »European Aerospace Cluster Partnership« (EACP): a permanent platform formutual exchange, policy learning, and cooperation to achieve high-level performanceamong European aerospace clusters.

• »Green Transport«.• The »Spanish Water Technology Platform« (SWTP): a public-private network formed

by one hundred and seventy-five national scientific and technological agents with theaim to promote research, development and innovation of technologies applicable to thesustainable management of water resources.


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Clustering has the longest tradition in the Basque Country and Catalonia. As early as 1986, the Basque Ministry for Labour and Health, in close cooperation with Michael Porter, sought to set up a pioneering cluster programme and, in 1990, Porter and the analysts of the Monitor Group were commissioned by the Basque government to conduct a study to analyse the strengths and weaknesses of the Basque economy, one of the very first successful cluster initiative with long-term prospects ever implemented (Pavelková et al., 2009).

Table 9.2 Overview of cluster networks in Spanish regions

Cluster network / Brief description

Main objectives and priorities Region in Spain

»Clusterplast«:The European cluster networkfocused on the polymerconverting industry

Promoting cooperation between regional authorities, research institutes and local companies; strengthening knowledge-based economic development and enhancing business competitiveness; drawing up a Joint Action Plan; stimulating new enterprises, attracting new investment etc.

Valencia Region: IVACE: The Valencian Institute of Business Competitiveness (l'Institut Valencià de Competitivitat Empresarial) UA: The University of Alicante AVEP: The Plastic Companies Association in Valencia Region (Asociación Valenciana de Empresarios de Plástico)

»Coordina2«:A network of electronichealthcare services integrated inthe »Spanish TechnologicalPlatform for Health and Activeand Independent Living« (eVIA)

Expanding the ICT sector into health and social care by supporting coordination and communication between the leading associations by putting together interests of different stakeholders; supporting such associations (clusters, forums, networks etc.); promoting initiatives for the benefit of the industry as a whole, etc.

Murcia: TicBiomed: Electronic healthcare Catalonia: TicSalut: An agency focused on technologies, innovations and health

»European Aerospace ClusterPartnership« (EACP):A network of over forty-oneaerospace clusters in fourteenEuropean countries representingthe interests of clustersconcerned with political andindustrial framework conditions

Strengthening the position of the European aerospace and aeronautics industry in the world markets through clustering; improving the cluster performance as a result of the EACP initiative; etc.

AERA: Aragonian Aerospace Cluster (Asociación Aeronáutica Aragonesa) BAiE: Barcelona Aeronautics and Space Association Cluster Aero CV: The community of the Aerospace Cluster in Valencia HEGAN: The Basque Aerospace Cluster (Asociación Cluster de Aeronautica y Espacio del Pais Vasco, HEGAN) Hélice: The Andalusian Aerospace Cluster (Fundación Hélice - Cluster Aeronautico Andaluz) Heliclust: Helicopter Cluster in Madrid Madrid Cluster Aeroespacial (Madrid Plataforma Aeronáutica y del Espacio)

»Green Transport«as part of the »Green FreightTransport Cluster«:A cluster for green and efficientfreight transport

Supporting sustainable transportation and logistics operations throughout Europe, concentrating on so-called intermodal transport, where short sea shipping, rail, inland waterways and road are combined to enable the choice of environmentally friendly

Barcelona Region: Emakers: a product supplier and service provider The Basque Country: Bilbao: The initiative developed by local authorities The Cluster of Mobility and Logistics MLC ITS Euskadi: a private non-profit association seeking to enhance the


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transport. The main priority of the organisation is pursuing a network of green and efficient multimodal transport corridors, apply a need-based approach to infrastructure investments in the joint cluster activities.

competitiveness of its partners in logistics and supply chain infrastructure, and mobility of both people and goods Donostia-San Sebastián in the Basque Country: Txita: Sustainable transport CIVITAS: The initiative for sustainable public transport strategy Donostia-San Sebastian

»Spanish Water TechnologyPlatform« (SWTP):A public-private network formedby one hundred and seventy-fivenational scientific andtechnological agents with theaim to promote research,development and innovation oftechnologies applicable to thesustainable management of waterresources

Elaborating and implementing the Strategic Research Agenda; generating value added for its members, industry and society; promoting cooperation between the parties involved at the national and international levels; identifying and supporting R&D and innovation activities; promoting technology transfer, etc.

A network seated in Madrid with more than 50% of SME affiliations, integrating fourteen national associations; supported by the Ministry of Economy and Innovation (MINECO) and the Ministry of Agriculture, Food and Environment (MAGRAMA).

Source: Aqua Conserver (2014); Bestfact (2013); Cluster Collaboration (2011a); Cluster Collaboration (2011b); Cluster Green Freight Transport (2013); Clusterplast (2012); European Aerospace Cluster Partnership (2015); European Cluster Observatory (2009a); European Cluster Observatory (2009b); European Cluster Observatory (2010); European Cluster Observatory (2011b); European Cluster Observatory (2013a); European Cluster Observatory (2013b); European Commission (2008); Evia - Coordina2 (2014); Milotti (2014); Moreno (2011)


A great number of measures taken by authorities involuntarily influence clusters. In theory, cluster policies are monitored by public entities for the purpose of increasing social-economic benefits due to cluster formation or their further development. Other policies affect clusters indirectly, for example, education systems, procurement and tendering procedures, funding research and product development from public funds, intellectual property rights, etc. (Andersson et al., 2004).


The main governing body in charge of innovation and technology policy at the national level is the Science and Education Ministry, which has two main executing bodies: the Secretary for Scientific and Technological Policy and the State Secretary for Universities and Research. Clusters have not formed part of the national innovation and technology policy. Innovation and technology policy in Spain focuses on six main areas: R&D projects, human resources for R&D, technological transfer, scientific and technological infrastructure, international cooperation, and scientific and technological culture.

At the regional level, cluster policy has gradually and effectively been incorporated into innovation and technology policy. There are several examples, such as:


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• The Basque Country, where each of the clusters formally constituted has been asked intwo consecutive terms, to formulate a Technological Plan which has later beenincorporated into the Basque government’s Innovation Plans. The Basque governmenthas had several important regional plans to support its technology policy. The»Industrial Technology Plan« (1993-1996) was succeeded by the »Science andTechnology Plan« (1997-2000). This plan took into account the cluster-specifictechnology plans which were developed as part of the industrial policy competitiveness(cluster) programme and the EU framework programmes that worked to encouragea systems approach among firms, universities and government via the »BasqueTechnology Network«, and also to encourage a greater participation of firms in thegovernance of technology centres.

• The »Navarran Technological Plan«, the main instrument used to incorporateinformation and communication technologies in Navarran industries, has already madea strong push to use the cluster approach as the main driver to improve ICT conditionsin Navarra (Müller, 2007; OECD, 2007).


Given the high degree of autonomy of Spanish regions, each regional government in Spain is in charge of overseeing economic development policy. Each region has introduced its own package of measures. Based on the data from the European Cluster Observatory databases, the most active regions include:

• The Canary Islands (Canarias).• The centre of Spain: Castilla-La Mancha, Castilla and León, Extremadura.• The east of Spain: the Balearic Islands (Illes Balears).• Madrid.• The north-east of Spain: La Rioja.• The north-west of Spain.• The south of Spain: Ceuta.• Melilla.

The table below shows some selected examples from those regions that throughout history have been most active in incorporating cluster policy as a means to achieve economic development.


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Table 9.3 History of cluster policy in some selected regions in Spain

Region Responsible authorities / Brief description

The Basque

Country

In the Basque Country, the Department of Industry, Trade and Tourism is responsible for the region’s economic development. The »Basque Industrial Policy Plan« is an institutional plan for economic promotion that integrates areas such as commerce, tourism, energy and inter-firm cooperation. The Plan gives a high degree of responsibility to local authorities; clusters do not receive special treatment, but are recognised as a means to achieve effective industry collaboration.

Catalonia

The Department of Industry, Commerce and Tourism of Catalonia, through the »Industrial Pact of the Barcelona Urban Region«, which was one of the main local development policies in Catalonia, carried out thirty cluster-specific initiatives representing 60% of the total industrial GDP between 1998 and 2004. With the entrance of a new government party, cluster policy has been reshaped and it is no longer centralised by the Department. Economic development policy in Catalonia has consisted of small-scale actions and initiatives in concrete micro-clusters, helping to reinforce a deeper tradition, public-private collaboration at the industry level.

Valencia

»The Valencian Agreement for Growth and Employment 2001-2006« has been regarded as thebackbone of the new Valencian regional development policy. It focuses on promoting clustertheory as a means to foster local economic development and local business activity. Clusterinitiatives were launched for marble processing, nougat and footwear. Their aim has not only beento secure the present competitiveness performance of Valencian companies, but to assure theirsustainability in the future in the ever-changing business environment.

Source: Aranguren et al. (2006); Müller (2007)


There are many regions in Spain that have analysed and/or identified clusters as a means to define sectoral industrial policy in their territories. The following table presents the results of selected regions.

Table 9.4 Cluster as a means to define industrial policy in selected regions

Region Brief Description

Andalusia has been defined as a significant region for strengthening the competitiveness of Andalusian companies.

The efforts of the regional government created the conditions necessary to form an effective cluster system. The first emerging clusters were mainly those operating in the food and beverages industry, some also in the furniture industry, footwear production, natural stone or the fur industry. a number of companies in the region were set up in the vicinity of scientific and technology parks.

Valencia Region has launched several cluster initiatives.

The objective of the initiatives is to provide the clusters with a strategic analysis that would help them identify their main challenges and the strategic options available to face these challenges and deciding the action lines to be carried out. This information should serve the Valencian government as direct feedback to shape industrial horizontal policies.

Catalonia The Catalan Government has commissioned the Monitor Group to conduct a study of the competitiveness in Barcelona (mapping the region).

The Monitor Group identified eight relevant industries and their respective micro-clusters. In 1993, Catalonia launched its first cluster initiatives adjusted to the real situation in the Catalan industry. Their initial analyses have led to a proposal for transition from cluster to micro-cluster, which is defined as a trade group frequently located in relatively small geographical regions.


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Navarra The Government of Navarra commissioned »The Business and Innovation European Centre of Navarra« (CEIN) to support SMEs and entrepreneurs in Navarra.

A study published in 2006 identified ten potential clusters to be prioritised in the following sectors: biotechnology; transport and logistics; recreation, culture and tourism; ICT; automotive; renewable energies; health; agro business; machinery equipment; and air quality systems. CEIN cultivates entrepreneurial spirit, identifies, promotes and develops business projects, and fosters innovation in companies.

Source: European Commission (2014b); Guerrero (2014); Muton et al. (2006); Müller (2007)

In the process of identification and labelling innovative clusters, two steps have been defined: • The identification of Spanish clusters that comply with such definition of »Innovative

Business Groupings« (IBG).• The creation of a new registration for IBG (Müller, 2007).

9.5 Funding Cluster Policy in Spain

The main source of finance for cluster programmes is the national budget. Regional programmes in Spain are financed from national budgets of national ministries, regional budgets, trade and other activities (Furre, 2008).

The funding of national and regional programmes will be looked at in the following subchapters.

9.5.1 Cluster Mapping Programmes at National and Regional Levels

The goal of the European INNOVA Cluster Mapping Project is mapping clusters and cluster policies, cluster institutions and cluster programmes in European Countries. Clusters are increasingly perceived as a key element in understanding the competitiveness and innovation capacity of regional and national economies. There are three main objectives of the cluster mapping project, namely:

• The establishment of the all-European database of regional clusters.• The analysis of identified business clusters and documentation of national government

agencies and cluster-specific policies.• The development of political recommendations for cluster-managed policies with the

aim of enhancing innovation and competitiveness in Europe (Panteia, 2012).

The table below shows the differences in cluster mapping programmes at national and regional levels.


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Table 9.5 Cluster mapping programmes at national and regional levels

Name of Programme

Programme Level/

Time Span Funding Sources Priorities

National Cluster Mapping Programme

National cluster programme Time span: completion was expected in 2007

It was funded and initiated by the Ministry of Industry, Trade and Tourism through the Directorate General for Small and Medium Enterprise Policy (DGPYME).

The Programme targeted all autonomous regions in Spain and was focused on industrial and enterprise policy. The main objective was to map all clusters within the Spanish territory and define which clusters should be further developed according to their importance and legitimacy in the Spanish economy.

Cluster Mapping Programme

Regional cluster programme Time span: one year

It was funded by the Department of Industry, Trade and Tourism.

Geographically, the Programme covered the Catalan Region and its objective was to identify all clusters and define the industries within the Catalan economy that would serve as drivers for economic growth. The project identified eight relevant industries and their respective micro-clusters.

Source: Müller (2007)

9.5.2 Funding Cluster Programmes at the National Level

The national programme of »Innovative Business Groupings« (IBG) is a programme developed within the responsibility of the Ministry of Industry, Energy and Tourism (MINETOUR) and implemented by the General Directorate of Industry and the Small and Medium-Sized Enterprises. It was first launched in 2007. It contributes to the pursuit of the European strategy promoting business competitiveness through the formation and development of innovative clusters, which is regarded as the highest priority of the EU Competitiveness and Innovation Framework Programme (CIP) from 2007 to 2013. The IBG Programme offers a possibility of financing projects and their implementation process. The intensity of supporting measures could reach up to 75% of the overall costs of the accepted project (Directorate General of Industry and the Small and Medium-Sized Enterprises, 2013).

Innovative business clusters provide funds for cluster establishment and reinforcement in the form of:

• Grants for the implementation of strategic plans.• Grants for the coordination, management and administrative structure of the established

innovative business clusters.• Grants for the implementation of projects aimed at strengthening the innovation

potential of companies within a cluster.• Grants for the support of joint ventures or collaborative projects between different

Spanish innovative business clusters, or between Spanish innovative business clustersand clusters with similar qualities residing in other countries within the European Union.


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9.5.3 Funding Cluster Programmes at the Regional Level

The process of increasing the number of measures in research, technological development and innovation presents a strategic line of events in Spain and one of the thematic objectives of the European Regional Development Fund. It focuses on the four main areas such as infrastructure investments, investment support for public projects, investment support for private projects, and financial instruments for innovations. Spain has concentrated on a greater utilisation of innovative financial instruments supporting research, development and innovation in small and medium-sized enterprises (Zubieta, 2014).

The table below shows some methods of funding regional programmes in Spain.

Table 9.6 Regional funding programmes

Name of the Programme Programme Budget and Objective

»Micro-ClustersReinforcement Programme«

The funds for the programme came from the Department of Industry, Commerce and Tourism. In the beginning, each micro-cluster initiative cost approximately €20,000, and then the budget ranged between €100,000 and €120,000. Several initiatives were launched between 1993 and 2004. The ambition was to improve the competitiveness of the prioritised industries.

»CompetitivenessStrengthening SME Plan«

This long-term programme is financed by the Ministry of Employment and Industry, with a budget of €140,000 € per each initiative. The geographical coverage is Catalonia. The ambition of the project is to improve the competitiveness of the prioritised industries, with a specific focus on SMEs. First, the programme offers the projects an assessment study and a prioritisation mechanism, and then, direct funding.

»The Strategic Agreementfor Internationalisation,Labour Quality and EconomicCompetitiveness ofthe Catalan Economy«

This strategic agreement was signed by the Catalan Government and economic and social stakeholders in 2005. The agreement established eighty-six measures to be implemented over the period of 2005 to 2007. It was financed by the Consortium for Commercial Promotion of Catalonia with a budget of approximately €150,000 per cluster initiative. The goal was to facilitate access to competitive analyses informing the companies within the cluster on strategic decisions. The programme offered funding to the projects.

»Shared Services ClusterCompetitivenessReinforcement Initiative«

The programme offers finance and provision of premises to the projects in order to conduct workshops and public assemblies with a budget of €100,000. Geographically, it covers Barcelona and its surroundings. The main ambitions are to understand the sector, launch successful action lines that improve the overall competitiveness of the shared services sector, to understand why companies choose Barcelona shared services centres, and to incorporate local ICT SMEs in the value chain of the cluster.

»CompetitivenessReinforcement Initiatives«

The programme took place between 1997 and 2006 and was co-financed by the Department of Economy and local savings banks, with the Mediterranean Savings Bank playing a major role. The budget per each initiative ranged from €100,000 to €150,000. It targeted the Valencia Region, offered funds for the projects, and lobbied local savings banks to get sufficient funding.

»Cluster InitiativesUp-Dating Programme«

The programme is situated in the Valencia Region and is financed by the Department of Economy, with a budget of €315,000. It offer direct financing to the projects. Its main ambition is to bring up to date the strategic context and assess the strategic options that were proposed at the time, then either to continue or modify them accordingly.

»Identification of PotentialClusters in Navarra«

The funds for this programme are provided by the Business and Innovation European Centre of Navarra (CEIN). The goal of the programme is to identify which sectors should be prioritised by the Navarra Government. The programme offers finance to the projects and business studies.


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»Formal Constitution ofthe Wood Cluster«

This long-term programme is orientated to the region of Galicia with the aim to improve the competitiveness of the companies that form part of the cluster, fostering collaboration and participation. Particular attention is paid to those links within the value chain that could be perceived as weak or non-existent within the cluster in order to improve them. The programme offers the projects finance to cover the costs of premises where the participants can meet.

Source: Government of Catalonia (2012); Müller (2007).

9.5.4 The Basque Competitiveness Programme

The programme is of a representative long-term regional kind. There have been different Basque Competitiveness Programmes since 1991 in the region, although not exclusively linked to cluster initiatives:

• 1991: The »Basque Competitiveness Programme«, which supported workgroups in ninepriority clusters.

• 1991-1995: The »Competitiveness Programme«, which was introduced within theframework of the regional »Industrial Policy Plan« along with other priorities.

• 1995-1999: The »Industrial Policy Plan«, which focused on improving cooperationamong companies and between the government and industry. Cluster associations wereto set up the first plans and formal committees for each cluster.

• 2000-2003: The »Industrial Policy Plan«, which included other sectors and was re-designed in order to harmonise activities at both regional and provincial levels. Thecluster agreements were signed on a yearly basis. Financial support was limited, and toreceive the financial support, each year every cluster association had to present anannual plan and a Strategic Action Plan for the following three or four years. Thegovernment created organisational matrices of officials for work with clusters.

• Today: Clusters, unlike private sector representatives, include regional technologycentres, public institutions and universities that collaborate in order to improve thecompetitiveness of the companies involved, foster innovation and sustainabledevelopment, and to strengthen links between the regional government, private sectorand technologies. Innovation is the top priority for cluster associations (Aranguren etal., 2006; Borowik, 2014; OECD, 2007).

The funds for the programme came from the Department of Industry, Agriculture and Fishing (initial programme funding), the Department of Industry, Trade and Tourism (supporting twelve cluster associations), and from the Department of Transport of the Basque Government (supporting one cluster association) (Müller, 2007).

The Basque government provided support for 60% of the internal costs and 50% of the external costs of the project, to a maximum of €240,000 per cluster association. Initially, the selection of clusters was based on the top-down approach; however, soon, as this was considered to be too secretive, the Basque government transferred the responsibility to the


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private sector. Subsequently, the bottom-up approach was applied and new cluster initiatives were launched in sectors such as telecommunications or energy (OECD, 2007).


In Spain, autonomous regions have been empowered competencies over industrial, enterprise and innovation policy areas. The national government has kept powers in macro-economic regulations, large public services, science policies, etc. This decentralisation process has not established clear coordination mechanisms among the different levels of government. Consequently, within a regulatory framework at the national level, there have been both similar institutional policy frameworks (such as the constitution of regional development agencies, growing support for small and medium-sized enterprises, fostering innovation, etc.) and different policy developments across regions. Each regional government has developed their own policies based on the region’s business characteristics. In general, different Spanish regions have experimented with different forms of regional industry-government collaboration, some of them under a cluster-policy approach (Müller, 2007).

Progressive decentralisation measures keep empowering regions with responsibilities and instruments which are important for clusters. While the central government took the governance over the industrial policy area as early as the 1990s, it is regional governments nowadays that decide on a number of policy areas important for businesses and the business environment as a whole, including industrial policies. Furthermore, the constitutional jury has decided that innovation falls within the responsibility of regional government, whereas R&D falls within the responsibility of the national government, although it needs to coordinate its activity efficiently with regional governments (OECD, 2007).

The area of ecological innovations is decentralised with variability over priorities and regions. Ecological innovations are not dealt with at the national level. However, at the regional level, as is the case of the Basque Country, the situation is somewhat different. Ecological innovations are explicitly monitored at the regional level (European Cluster Observatory, 2011a).

9.7 Conclusion

The earliest mentions of the Spanish cluster policy were made in the 1990s. The longest tradition of clustering has existed in the Basque and Catalonian regions, both of which launched their first successful cluster initiatives with a long-term perspective in 1990. The main instrument for the cluster policy implementation at the national level is the »Support Programme for Innovative Business Groupings«, known as the »AEIs Programme«.

The number of organisations responsible for the implementation of cluster policy at regional levels is considerably greater than that at a national level. There is no governing principle at the national level as far as the sector selection is concerned. The selection is left up to regions that


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had been implementing their cluster policies long before the national cluster policy was introduced by the government. The Basque Country and the Valencia region have had long-term and well-structured cluster development plans, which distinguishes them from other Spanish regions.

Funds for regional programmes are provided from the national budget of relevant ministries, regional budgets, and commercial and other activities. Spain was one of the early adopters of cluster policies; thus the country has highly professional public administrative bodies, while the majority of them provide programmes which tackle problems in the human resources and cluster-linked innovations areas.


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[2] ARANGUREN, M. J., LARREA, M., NAVARRO, I. 2006. 12. The policy process:clusters versus spatial networks in the Basque Country. Clusters and globalization.

[3] AQUA CONSERVER. 2014. Aqua conserver Project promoted on SWTP - SpanishWater Technology Platform.

[4] BESTFACT. 2013. Bestfact Best Practice Case Quick Info: Urban Freight. Availablefrom: http://www.bestfact.net/best-practices/cl1_urbanfreight.

[5] BOROWIK, I. M. 2014. Knowledge Exchange Mechanisms and Innovation Policy inPost-Industrial Regions: Approaches of the Basque Country and the West Midlands.Journal of the Knowledge Economy, 5(1). pp. 37-69.

[6] CLUSTER COLLABORATION. 2011a. EACP – European Aerospace ClusterPartnership. Available from: https://www.clustercollaboration.eu/web/european-aerospace-cluster-partnership.

[7] CLUSTER COLLABORATION. 2011b. SWTP – Spanish Water Technology Platform.Available from: https://www.clustercollaboration.eu/web/plataforma-tecnologica-espanola-del-agua.

[8] CLUSTER COLLABORATION. 2014. EU Cluster Matching Event - Mission forGrowth to Spain (Seville-Mérida) April 3-4, 2014: Build European and InternationalCluster Collaborations that will create Opportunities for SME Growth. Available from:http://www.clustercollaboration.eu/spain-2014.

[9] CLUSTER GREEN FREIGHT TRANSPORT. 2013. Available from:http://www.gftcluster.eu/site/site.nsf/index.xsp?page=6B3DCE15A79F03D8C2257B9D004EFDE3.

[10] CLUSTERPLAST. 2012. Inter-cluster initiative to target the future challenges for theEuropean polymer converting industry. Available from: http://www.clusterplast.eu.

[11] DEL CASTILLO, J., BARROETA, B., PATON, J. 2011. Main findings and proposals ofthe Spanish cluster policy evaluation: the AEIs Programme. European Regional ScienceAssociation.

[12] DIRECTORATE GENERAL OF INDUSTRY AND SME. 2013. Entrepreneurs andSMEs. Support Programme for Innovative Business Groupings.

[13] DIRECTORATE GENERAL OF INDUSTRY AND SME. 2014. Entrepreneurs andSMEs. Support Programme for Innovative Business Groupings - more information.

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[16] EUROPEAN CLUSTER OBSERVATORY. 2009b. European Aerospace ClusterPartnership.

[17] EUROPEAN CLUSTER OBSERVATORY. 2010. Coordina2 (eHealth network).[18] EUROPEAN CLUSTER OBSERVATORY. 2011a. Eco-innovation and national cluster

policies in Europe - a qualitative review. Greenovate Europe, Brussels.[19] EUROPEAN CLUSTER OBSERVATORY. 2011b. Spanish Water Technology

Platform.[20] EUROPEAN CLUSTER OBSERVATORY. 2013a. Green Transport. Available from:

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[21] EUROPEAN CLUSTER OBSERVATORY. 2013b. Green Freight Transport Cluster.[22] EUROPEAN COMMISSION. 2008. Research & Innovation. Regional Dimension of

Innovation. Synthesising regional polymer expertise for European success.[23] EUROPEAN COMMISSION. 2014a. Enterprise and Industry. Regional Innovation

Monitor Plus. Groups of Innovative Businesses.[24] EUROPEAN COMMISSION. 2014b. Enterprise and Industry. Regional Innovation

Monitor Plus. Navarran European Business Innovation Centre (CEIN).[25] EVIA. Coordina2. 2014. Available from: http://evia.imasdtic.es/es/Ini-

cio/corporativo/grupos_de_trabajo/Coordina2/contenido.aspx#.[26] FURRE, H. et al. 2008. Cluster Policy in Europe. a Brief Summary of Cluster Policies in

31 European countries. Norway, Oxford Research AS.[27] GENERALITAT DE CATALUNYA GOVERNMENT OF CATALONIA. 2012.

Catalonia 2020 Strategy. Government of Catalonia - Ministry of Economy andKnowledge.

[28] GUERRERO, A. N. 2014. Fenaeic: Clusters, engines of business innovation in Spain.Available from: http://www.fenaeic.org/wp-content/uploads/2014/05/Clusters-in-Spain-PDF.pdf.

[29] MILOTTI, A. 2014. Bestfact - Best Practice Case Quick Info. Green Logistics & Co-Modality.

[30] MORENO, S. 2011. Evia: El Grupo de Trabajo Coordina2 y la Secretaría eVIAOrganizan Este Encuentro en la Sede de Setsi. i Encuentro TIC Salud PYME/GranEmpresa.

[31] MUTON, E. G., MONCO, E. G., BARAJAS, L. D. P. 2006. Erawatch. Analysis of theRegional Dimensions of Investment in Research. Case Study Regional Report: Andalusia(Spain).

[32] MÜLLER, A. 2007. The Cluster Competitiveness Group: Country Report: Spain. OxfordResearch.

http://www.clusterobservatory.eu/index.html#!view=programs;mode=one;sort=region;uid=bf487c14-0495-4f73-a394-c89ba665fc9e;id

http://www.clusterobservatory.eu/index.html#!view=programs;mode=one;sort=region;uid=bf487c14-0495-4f73-a394-c89ba665fc9e;id

http://www.clusterobservatory.eu/index.html#!view=programs;mode=one;sort=region;uid=fb0cae04-03e0-4200-8635-5037a6cb5387;id

http://www.clusterobservatory.eu/index.html#!view=programs;mode=one;sort=region;uid=fb0cae04-03e0-4200-8635-5037a6cb5387;id

http://evia.imasdtic.es/es/Inicio/corporativo/grupos_de_trabajo/Coordina2/contenido.aspx

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[33] OECD. 2007. Competitive Regional Clusters: National Policy Approaches, OECDReviews of Regional Innovation, OECD Publishing. ISBN 978-92-64-03182-1.

[34] OECD. FOUNDATION FOR SCIENCE AND TECHNOLOGY - FECYT. 2007. R&Dand Innovation in Spain Improving the Policy Mix: Improving the Policy Mix. OECDPublishing. ISBN 9789264065673.

[35] PANTEIA. 2012. The Europe INNOVA cluster mapping project. Available from:http://www.panteia.eu/Projects/The-Europe-INNOVA-cluster-mapping-project.


[37] TCI. 2014. The global practitioners network for competitiveness, clusters and innovation.Cluster Resources / Cluster Initiatives: TICBioMed. Available from: http://www.tci-network.org/initiatives/initiative/3998.

[38] ZUBIETA, F. A. 2014. ERAWATCH Country Reports 2013: Spain. Publications Officeof the European Union.

http://www.panteia.eu/Projects/The-Europe-INNOVA-cluster-mapping-project

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Chapter 10

Cluster Policy in Sweden


10.1 Introduction 10.2 Cluster Policy Legislation and Organisational Support for Clusters in Sweden 10.3 Cluster Policy Principles, Areas and Objectives 10.4 Cluster Policy and Other Related Policies 10.5 Funding Cluster Policy in Sweden 10.6 Cluster Policy Centralisation vs. Decentralisation 10.7 Conclusion

References


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10.1 Introduction

The Swedish economy is dominated by a few moderately sized regions with density levels slightly below the European average. Geographic factors and the density of economic activity in particular provide a meaningful context for the development of clusters. Sweden stretches across a geographic area that is large in relation to its population; most of the population and the country’s economic activity are, however, concentrated in the southern third of the country.

Despite a business environment and a high level of trust in the academic sector conducive to cluster development, many representatives of the Swedish economic and political elite have for a long time been sceptical about cluster policies in Sweden. Sweden has a long intellectual tradition of looking into the role of collaboration in a specific geographical context as a driver of economic performance and prosperity. The country was part of the initial Porter-study, and there has been a constant flow of academic publications on clusters ever since. In parallel, there has been strong interest in the related ideas of innovation systems and the triple helix collaboration between companies, academia, and the public sector.

In the economic policy space, despite what has been mentioned above, there have for a long time been strong reservations against sectoral policies that could lead to distortions, and this has created a significant wariness about cluster policies, at least after the harsh lessons of the Nordic banking crisis in the 1990s.

Despite the remaining scepticism, cluster policy has become a more important factor in government policy, and the initiated programmes received generally good marks for their design and impact. Individual government agencies like Tillväxtverket (named NUTEK before 2009), VINNOVA, Knowledge Foundation (KK-Stiftelsen), Invest in Sweden (ISA), and a number of Swedish regions have increasingly drawn on cluster/innovation system-thinking. a global survey of cluster initiatives in 2006 identified one hundred and two Swedish cluster initiatives, and the number has even risen ever since. The vast majority of these efforts have some form of government involvement and the public sector has frequently been a key driver in their creation (Ketels, 2009).

At present, Sweden is a world leader in exploring theoretical aspects of clusters and innovations as well as in supporting them, both at national and regional levels. Mapping the position of clusters in Sweden has become a research topic for a number of scientific studies of Swedish authors who belong to world-leading experts in the field of clusters (Dinnetz, 2007; Lindqvist et al., 2008; Lindqvist, 2009; Ketels, 2009; Ketels, 2012; Sölvell and Williams, 2013).

There is a great variety in clusters in Sweden and this variety of cluster actors is often perceived as a driver for the cluster. Cluster members sometimes come from a number of related sectors, and most of the clusters show a high level of tolerance and trust. Open and congenial, collaborative atmosphere has positive impact on creativity and cluster development, which enables cluster members freely express their ideas, opportunities and worries at the same time, which may be then discussed by other cluster members. The efforts to maintain such variety thus facilitate access to cluster for other participants, which further enhances the cluster competitiveness (Ketels, 2009).


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10.2 Cluster Policy Legislation and Organisational Support for Clusters in Sweden

Legislation concerning the position of innovation systems and clusters in Sweden is rather complex. Although the country ranks overall amongst the leading countries in the world in terms of innovation and technological readiness, great emphasis is still placed on the continuous growth of worldwide competition in both fields. For example, patenting rates are high, but over the last five years the Swedish position has deteriorated while others, Asian countries in particular, have registered strong growth. Like in other policies, Swedish legislation has always accentuated the environmental aspects and needs in innovation and cluster policy. Moreover, it can be stated that further efforts and improvements are necessary to overcome barriers that, to a certain degree, hinder the performance of the Swedish economy. a key barrier for the development of strong clusters in Sweden is the combination of a relatively small national economy with a significant level of population and market segmentation across national borders. Regional clusters should become a crucial element for regional development strategies. The way the individual clusters perform this task within the regional economy should be important when deciding on their further support (Ketels, 2009).

The significance of clusters and cluster policy in Sweden, and their impacts on the regional competitiveness growth as well as on the innovativeness of regions, was taken into account when a suitable organisational model for cluster support was being developed, as is shown in the following figure.

Figure 10.1 Organisational model of clusters support in Sweden

Source: OECD (2007)

∗Note: Until 2009, the Swedish Agency for Economic and Regional Growth was named NUTEK. Since 2009 the Agency has been known as Tillväxtverket, whereas the scope of its activity has not changed and has not been affected by the changing of its name.


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The main actors dealing with cluster policy and innovation at both national and regional levels in Sweden are:

• The Ministry of Enterprise, Energy and Communications (Näringsdepartementet),which has the overall responsibility for cluster policy implementation in Sweden. Bothinnovation policy and cluster policy are considered to be extremely important at thenational and regional levels (OECD, 2007).

• VINNOVA: The Swedish Agency for Innovation Systems (Verket förInnovationssystem), which was founded in January 2001. Its mission is to enhance thecompetitiveness of Swedish researchers and companies, and its main goal is to promotesustainable growth by funding needs-driven research and improving the conditions forthe development of effective innovation systems. To this end, every year VINNOVAinvests approximately €220 million in various new and ongoing initiatives (VINNOVA,2013).

• Tillväxtverket: The Swedish Agency for Economic and Regional Growth, which until2009 worked with the implementation of cluster policies under the name NUTEK.Tillväxtverket is now a national government agency promoting entrepreneurship,business development and regional development. It creates incentives for renewable andsustainable economic growth and works to improve the general framework forconducting business in Sweden. The agency’s most important tools are knowledge,networks and finance. Based on the knowledge of the requirements for enterprises andregions to grow, Tillväxtverket builds networks for cooperation and finances initiativesthat strengthen the business sector. The Swedish Agency for Economic and RegionalGrowth has three hundred and ninety employees working in eleven locations aroundSweden. It collaborates with national and regional organisations in order to support theutilisation of environmental management systems in small and medium-sizedenterprises. In addition, it provides financing, counselling and information services tocommercial organisations, company networks, and local and regional authorities Since2003, it has been tasked by the Swedish Government to promote women’sentrepreneurship, which means supporting information transfer, training, makingbusiness development more accessible to women, and making women’sentrepreneurship and its importance to the economy more visible, for example, throughproviding ambassadors for women’s entrepreneurship and by developing facts, statisticsand knowledge about women’s entrepreneurship (Tillväxtverket, 2014).


Based on a complex study mapping clusters and their influence on the Swedish economy, four fundamental principles for cluster policy in Sweden have been defined:

1. The Swedish data have confirmed in the long run the role of clusters as a driver of thenational economy and prosperity and as a useful analytical tool to understand regionaleconomies.


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2. Swedish regions do not have the absolute size to support a wide range of significantcluster positions. They need to specialise, and to do so in a number of regions beyondthe level currently achieved. Sweden needs an economic policy, including dedicatedcluster policies, which support further specialisation.

3. The significant differences across clusters indicate the need for a cluster-specific policyresponse; the same policies will not work equally well across the entire cluster sector.Sweden needs a cluster policy that allows for a high level of regional leadership withinan overall national framework.

4. Sweden’s export structure suggests that the country is moving from a manufacturingbase to become a platform for advanced services within manufacturing-driven fields.Sweden needs an economic policy that supports this process while taking care that thecountry remains in a true global leadership position in the number and performancelevel of clusters (Ketels, 2009).

To identify potential weaknesses, an analysis has been made to look at the three levels of indicators:

1. Prosperity decomposition – high labour productivity, labour mobilisation and localprice levels determine the level of prosperity a location can enjoy. Sweden is one of thefew countries that combine solid positions on both labour productivity and labourmobilisation, which is a key driver for the high level of overall Swedish prosperity.Domestic price levels remain a challenge, although more recently the entry of foreignfood retail chains and other changes have led to an improvement relative to the otherNordic countries. One of the reasons for the still high level of domestic prices is thesegmentation of the Nordic region into small national markets. This lack of full marketintegration is also limiting the emergence of strong clusters.

2. Intermediate drivers and indicators of competitiveness – indicators of trade, investment,knowledge, and entrepreneurship. Sweden’s position in this area is mixed. World exportmarket shares are generally stable, with significant changes between clusters andtowards services. The level of foreign direct investment is high, but has been lessdynamic in the recent years. The total domestic investment rate remains relatively low.Sweden’s position in patenting rates has deteriorated over the last number of years whileothers, Asian countries in particular, have registered strong growth. Entrepreneurshiprates are low, especially the growth of new businesses into companies of significantsize. Cluster efforts can improve the conditions for new business formation, increase theattractiveness of engaging in R&D, and – more importantly for Sweden – reduce thebarriers to turn research into valuable products and services.

3. Competitiveness fundamentals – a range of macroeconomic and microeconomic factorsthat set the level of productivity that companies are ultimately able to reach a location.Macroeconomic competitiveness, an area that includes both the strength of institutionsand macroeconomic policy, is generally marked high in Sweden. This provides a solidfoundation for companies to operate and is thus generally beneficial to clusteremergence. The one area where Sweden is ranked lower is the devolution of economicpolicy decision powers to the regional level. This could be a challenge and an


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opportunity for cluster programmes to help regions play a more important role in setting their specific economic agenda. On microeconomic competitiveness, Sweden ranks overall amongst the leading countries in the world. The Swedish business environment has particular strengths in the communication infrastructure, innovation infrastructure, and its capital markets (Ketels, 2009).


In Sweden, both cluster policy and innovation and R&D policy have received considerable attention in recent times. The high quality of institutions underpinned by a generally high level of trust in society have also helped to make Sweden an environment safeguarded against the misuse and abuse of cluster policies (as a tool to introduce market distortions and limit competition). Besides this, clusters in Sweden are an important tool for the regional and industrial and commercial policies, which substantially contribute to the national and regional competitiveness growth.


In the last ten years Sweden has always belonged to the countries in the world which have invested heavily into research and development relative to its GDP. CzechInvest (2013) has stated that cluster policy in Sweden is even part of R&D and innovation policy, albeit with an extra-strong regional focus. Networking, cooperation promotion and cluster development are political tools used in various national programmes to foster regional development.

Innovation policy and the objectives of innovative schemes in Sweden are regulated by the 2008 Innovation Act and the 2012 National Innovation Strategy. The execution of the policy comes within the competence of individual ministries and government agencies (Melin et al., 2011). a specific Swedish feature is the size of ministries and government agencies laid down by law, thus some governing tasks in the innovation policy area are delegated to government agencies instead of the direct responsibility of ministries (Balog et al., 2013).

Larger fundamental issues are dealt with by the Ministry of Enterprise, Energy and Communications (Näringsdepartementet). It concentrates on general promotion of entrepreneurship, electronic communication and ICT technology policies. The practical implementation of innovation policy is within the responsibility of VINNOVA, an implementing agency formally independent of the Ministry. It was founded in 2001 and is currently employing approximately two hundred people. VINNOVA has defined it mission as the effort “to make Sweden a world-leading country in research and innovation and an attractive place to invest and do business” (Melin et al., 2011). Today, VINNOVA is engaged in the formation, implementation, evaluation and financing of applied research and development policies, promotion of cooperation between academia and the business sector and the promotion of international R&D cooperation. The agency’s activities can be divided into eleven strategic areas (health, transport and the environment, services and ICT, industry, partner programmes


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with specific ministries and industrial sectors, innovation capacity in the public sector, innovative small and medium-sized enterprises, a knowledge triangle, individuals and the innovative environment, international cooperation, and the EU relations). Annually, VINNOVA invests over 2 billion SEK in all these initiatives. R&D policies at universities (overlapping with R&D policies in the public sector) are within the domain of the Ministry for Education and Research (Utbildningsdepartementet) and an independent agency, the Swedish Research Council (Vetenskapsrådet), whose mission as funder of basic research (in the academic sector) through competitive programmes is combined with a strategic role as advisor to the Government on issues relating to research policy (Balog et al., 2013).

Despite its top level of innovation management, Sweden is aware of some present shortcomings, thus it has formulated several tasks for the future. The main challenges in the area of innovation policy to be faced with are as follows:

• The creation of innovation platforms and so-called “testbeds” that could provide spacefor experimentation with new types of business models, products, collaborationpatterns, etc. based on market principles.

• The utilisation of Swedish facilitation/orchestration skills in managing complex systemsof development processes and establishment of challenge-driven internationalpartnerships.

• Better cooperation of actors in the supply chain networks including users of innovativesolutions and customers (Melin et al., 2011).

10.4.2 Cluster Policy, Regional Policy, and Industrial and Enterprise Policy

Delgado et al. (2010) point to the fact that the presence of clusters, i.e. geographic concentrations of economic activity in related industries, is a crucial aspect of the business environment that has in recent years rightly received more attention in Sweden. These clusters have been shown to be associated with higher levels of economic performance at the firm and regional level, reflecting the benefits of specialisation that high institutional density allows.

In 2002, Lindqvist, Malmberg and Sölvell drew a detailed map of clusters and dominant industries with some potential for cluster development in Sweden, which was published in the Swedish language in 2003 and in the English language in 2008 and 2009. Until 2015, however, the map had not been updated in such close detail. The localisation of clusters in Sweden, particularly in the southern third of the territory, can be seen in the following figure. The concentration of Swedish clusters in this area has not altered ever since. In 2015 it still tends to copy the density and structure of population and companies of that time.


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Figure 10.2 Clusters in Sweden

Source: Lindqvist (2009)

In 2012, Ketels published a survey mapping employment in selected cluster-intensive industries. According to Ketels (2012), clusters emerge in industries that show significant signs of agglomeration in terms of their geographic employment patterns. For Sweden, these industries provide roughly 1.1 million jobs. Of the roughly 240,000 new jobs created in the


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Swedish economy between 2000 and 2008, approximately 30% were created in the cluster sector. Business services and construction were by 2008 the largest Swedish cluster categories, accounting for about 25% of all jobs in the cluster sector. Paper products, information technology, and automotive were the cluster categories in which Sweden remained most spe-cialised (which, in fact, is a precondition for clustering), employment remained relatively high, despite some loss of position over time. The Swedish cluster sector has gained jobs between 2002 and 2008. Business services and construction added about 100,000 jobs in this period, while the remainder of the cluster sector lost a net 18,000 jobs.

Figure 10.3 Employment in cluster-intensive sectors in Sweden between 2000 and 2008

Source: Ketels (2012) based on the European Cluster Observatory database

10.5 Funding Cluster Policy in Sweden

Sweden belongs to the countries that invest substantially into research and development relative to its gross domestic product (GDP). The amount invested is constantly growing with the exception of R&D for the Swedish army. In the recent years, the overall R&D expenditure in Sweden has amounted on average to 3.5% of GDP. The business sector has contributed by three quarters of the overall expenditure whilst the higher educational sector by 21%. Companies fund their own research to a great extent themselves, but are also allocated funds by the central government and from abroad.


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10.5.1 Funding R&D and Innovation from Public and Private Funds

The public sector provides finance for R&D through appropriations directly to universities and through allocations to research councils and research agencies. The Swedish Parliament provides R&D funds for all ministries that are responsible for research and development in the country. R&D policy programmes are coordinated by the Ministry for Education and Research. The largest share of the total R&D spending in Sweden is still the governmental appropriations in the academic sector. The share channelled through the research councils and similar agencies for R&D is comparatively low.

Research councils predominantly support basic research. Sectoral research agencies allocate funds to R&D that is focused on linking the necessary knowledge within individual sectors to business development promotion. Sweden has a total of twenty R&D funding sectoral research agencies. Regional councils and municipalities finance R&D as well, especially in the healthcare and social services sector. The Innovation Union Scoreboard (2014) ranked Sweden second in Europe in the R&D expenditure in the public sector relative to GDP, namely 1.08%, surpassed only by Finland in this respect.

In addition to the public funds, Swedish R&D is financed by private businesses, foundations and other financial organisations. Some of these are main participants in the R&D sector and highly subsidise research in their fields. Again, the Innovation Union Scoreboard (2014) ranked Sweden number two in the R&D expenditure in the private sector relative to GDP, with 2.31%. The R&D intensity in the business sector is above 2% of GDP in only four countries: Finland, Sweden, Slovenia and Switzerland (Hollanders and Es-Sadki, 2014).

10.5.2 National Cluster Programmes

National cluster programmes in Sweden support both national and regional clusters. However, the country has recently been promoting regional clusters more actively.

10.5.2.1 VINNVÄXT Programme

»VINNVÄXT« is by far the internationally best known Swedish initiative for the support ofinnovation systems and clusters. The aim of the programme is to promote regional sustainable development through the development of internationally competitive research and innovation environments. The programme was formed and initiated for this purpose in 2001 and it is financed by the Swedish governmental agency VINNOVA. Organisational set-up for the programme is provided by the programme council with representatives from the business world, R&D, and public authorities. Panels for judging applications in each of the fields – business, R&D and public administration – are appointed to discuss funding developmental projects, which are targeted at improving the environment for R&D, innovation, and particularly at promoting cooperation between the business sector, universities, research institutes and other subjects within the innovation infrastructure. Projects are aimed at specific industries


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significant for a region. VINNVÄXT is a competitive programme in the sense that regions are invited to compete for financing. The allocation of funds is made according to a strict set of criteria laid down and assessed by R&D experts, business professionals and officials from the public sector. The best regions win financial support from the implementing agency VINNOVA in an annual amount of €1.1 million for up to ten years. The VINNVÄXT-processes are evaluated every third year by an international panel when the compliance with the conditions set is verified in order to secure progress. The programme is ranked highly by independent international groups of scientists. Each VINNVÄXT-process has its own regional organisation, but is regarded as national by the scope of activity. The success of the project in regions is based on the establishment of cooperation within the triple helix. The aim is that all the winning clusters should remain very powerful innovation systems even when the support period is over. They should be able to fully compete in the international innovation arena (Dinnetz, 2007).

The VINNVÄXT programme brings about a number of positive impacts. It supports the improvement of innovation systems in regions and stimulates sustainable knowledge-based regional growth. Moreover, it has triggered competition among regions through public competition, which may be reflected positively in the regions’ strategies based on developing regional innovation potential.

The shortcomings of the VINNVÄXT programme, according to its reviewers, are identified in two areas. Firstly, there need to be a stronger focus on internationalisation. This is a problem in many government-funded cluster efforts and has now become a key priority for cluster policy EU-wide. Secondly, the appropriate integration of national and regional agencies, i.e. the right balance of top-down and bottom-up efforts, seems problematic. This is a challenge that countries with a traditionally centralised government structure often have to face. On the contrary, the strongest positive impact of the programme has been registered on institutional capital and the ability to collaborate, also beyond the boundaries of the specific cluster.

10.5.3 Regional Cluster Programmes

Cluster policy at the regional level in Sweden dates its beginnings mainly to the existence of regional developmental programmes in some Swedish regions. These regional programmes were developed by the relevant regional authorities responsible for regional development. This was an act of the government by which the regions were given a strong mandate to create their own regional policies to support clusters. The Tillväxtverket agency (still named NUTEK in those days) played an important role in evaluating success of individual regional development programmes.

10.5.3.1 Visanu Programme

»Visanu« was active between 2002 and 2005 and its budget was €7.5 million for three years,within which the national government allocated €3 million for the process of cluster development, €1.5 million for knowledge development, €1 million for investment within the


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cluster, and €2 million for supporting activities. Visanu was a joint programme and involved the cooperation of three Swedish agencies: VINNOVA, the Swedish Government Agency for Innovation Systems; Tillväxtverket, the Swedish Agency for Economic and Regional Growth (formerly known as NUTEK); and Invest in Sweden (ISA), the agency to promote investment in Sweden. The main ambition of the programme was to support clusters by engaging local actors and stimulating the process of spreading knowledge between participating clusters members. Each of the thirty clusters that were the ultimate recipients of the funds received approximately €33,000 per annum. The funds were earmarked mainly for the management of processes and common business activities, business collaboration, education, development of new products and services, the process of cluster expansion, networking and making analyses. Again, the support was provided only if the project was 50% co-financed by regional authorities.

10.5.3.2 Regional Cluster Program

Despite its name, the programme was a national initiative but acted mainly on the regional level. Funding was partly demanded from clusters. It operated from 2005 to 2010. From the organisational point of view, the programme was formed as a competition between cluster initiatives. Geographically, it covered the entire country but was focused on regional levels. It aimed to strengthen the sustainability and abilities of Swedish clusters, no matter where in the country they were situated (Dinnetz, 2007).

The »Regional Cluster Program« was a six-year programme with a total budget of €7.5 million. It could be said to be a continuation of Visanu and it was supported by NUTEK, the agency that was later renamed Tillväxtverket. It main goal was to enhance the international competitiveness of the participating Swedish clusters. Regional co-funding was demanded at 50%. In total, 80% of the funds were channelled to cluster initiatives that participated in the Visanu programme. The remaining 20% was directed to embryonic, emerging or less mature cluster initiatives. The funding was related to promoting market-driven processes, developing business plans, cluster competitiveness analyses, encouraging participation in the EU programmes, and fostering innovation and innovative methods (Kempinsky et al., 2005; OECD, 2007; Dinnetz, 2007; Oxford Research AS, 2008; OECD, 2012).

10.5.3.3 VINN Excellence Centres

»VINN Excellence Centres« is a development of the Swedish Competence CentresProgramme, currently managed by VINNOVA. The effort is to build bridges between science and industry in Sweden by creating excellent academic research environments in which industrial companies participate actively and persistently in order to derive long-term benefits.

Activities are run by a managing director and a board consisting of representatives of different sectors, where the participants from businesses and universities constitute a majority. This means that the contributing parties can align the direction of research with the needs of


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business and the public sector. Further guarantee is provided by regular and extensive stage-by-stage evaluations (every two to three years), in order to achieve effectiveness and international excellence. In addition to this, each centre submits an annual report to VINNOVA.

The programme started in 1992, when Tillväxtverket, at that time still called NUTEK, the National Board for Technical and Industrial Development, set up a number of industry-related Competence Centres.

Since 2001, the programme is managed as a joint venture by VINNOVA, which finances twenty-three centres, together with the Swedish Energy Agency (Energimyndigheten, STEM), which is the governmental financing partner in five energy-related competence centres. The expected overall annual budget for one centre is approximately €23 million, and VINNOVA provides €7.5 million of this amount.

One of the programme’s benefits is the fact that the research in the centres is directed towards the areas or disciplines that appeal to both businesses (in view of new technological developments leading to new products, processes and services development and improving their competitiveness) and universities, which deal with both basic and applied research. This benefit was highlighted also in the first evaluation of five of the VINN Excellence Centres carried out in 2007. The evaluation also proposed changes in leadership across those responsible for creation of the vision of the centres and execution of the programmes. The second comment raised was the need to be more active on the international level, i.e. to establish collaborations with leading organisations outside Sweden, and to participate in the wider international research community.


There are two state agencies that systematically implement cluster policies at the Swedish national level: VINNOVA and Tillväxtverket. VINNOVA has more of a focus on innovation and knowledge spillover, whereas Tillväxtverket works with entrepreneurship, business development and regional development. Moreover, there is another agency under the Ministry of Foreign Affairs, Invest in Sweden (ISA), which deals with cluster policy to some extent. It is through these agencies that Sweden has for a long time supported strong microeconomic policies in a variety of areas in the country. However, there are doubts as to whether these policies are fully effective. Integrated competitiveness strategy should clearly determine business environment priorities that will decide for the benefit of Sweden in competition with other developed countries. The top priority is to be the linkage of a strong economic, business and innovative climate, with the efforts to maintain or even improve the high quality of environment (Dinnetz, 2007; Ketels, 2009; Wise and Johansson, 2012).

At the regional level, clusters should remain an important element in regional development strategy. Regions have to change their views and stop regarding clusters as isolated units, and start to monitor potential links and support emergence of new clusters on the borders of the existing ones. Regions need to make sure that the knowledge gained and improvements made in clusters are beneficial for the entire regions, not only for the individual clusters.


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10.6.1 Regional Approach to Cluster Policy Formation - The “Triple Helix” Model

An impressive example of a successful region with very well-implemented cluster policy in Sweden is the Värmland County. It is a relatively small peripheral region in view of the capital city, situated in central Sweden on the border with Norway. Local cluster initiatives began to form in the region in the 1990s, when cluster policies and industry promotion strategies were more or less absent, and later, even more intensely, at the turn of the century by the gradual clustering of paper mills, ironworks and the IT and telecommunications industries. The clusters emerged due to the abundant natural resources existing in the region. The region has attracted other skills and suppliers over time and has thus made itself the centre of innovation development.

Efforts of local government representatives which were directed towards the development of a business operation scheme in the paper industry appeared in the second half of 1990s. As a response came the development of a common cluster initiative named »The Paper Province« in 1999, consisting of approximately two hundred companies in the pulp and paper industry. The cluster organisation has so far employed more than 10,000 people and in the last ten years invested over €1 million (Forsberg, Lindgren, 2013 and Sölvell, Williams, 2013).

The regional »Steel and Engineering Cluster« should be mentioned with a long and strong tradition in the Värmland region, which increasingly focuses on new materials and the development of wear-and-damage-resisting tools, and supports over fifty steelworks and manufacturers in the region in collaboration with significant regional actors from the private sector and academia. The number of employees within the cluster is approximately 11,000.

Another important regional cluster is »Compare«, focused on co-operation in the IT and telecommunications sector, which consists of about one hundred companies. It has the form of a foundation, tries to create and attract new business into the region for which it develops the relevant competences. Its members are mainly small companies whose number started to grow rapidly after 2000. The cluster employs approximately 5,000 workers and has been established to promote cooperation and make use of joint marketing activities in order to find, employ and retain qualified workers in the region (Forsberg a Lindgren, 2013).

The aforementioned positive examples have helped to anchor cluster support to regional development programmes. Systematic measurement and assessment of the results of these clusters across the business community, public sector and university have become part of joint efforts of the implemented cluster initiatives. In 2003, Region Värmland and the County Administrative Board in Värmland (a Swedish regional government body in each region) started a political debate over spending public funds on regional development. They worked out a proposal for how an assessment of the cluster initiatives could be designed. Other governmental agencies, such as VINNOVA, Tillväxtverket and Invest in Sweden (ISA), were invited to take part in the discussions on cluster development and their effects. The talks resulted in a decision that sought to make an assessment of the Värmland cluster initiatives a pilot project, with the aim of developing a method of assessment which, on the basis of cluster development, sheds light on the effects of the cluster initiatives on the development and growth


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within the region, the increase in employment, and the reinforcement of regional competitiveness. The model can be fully adapted to suit other regions; the geographical survey was extended to include the cluster initiatives in the regions of Dalarna and Gävleborg, which, together with Värmland, have established a closer cooperation on cluster development within the EU’s structural fund area North-mid Sweden (Sölvell, 2009).

One of the other regions that have fully taken advantage of the triple helix potential is Västra Gotaland with the cluster programmes: »Industrial Dynamics« and »DISTRICT«. Both programmes have been completed by now. Like other programmes, these were strongly orientated towards helping industrial SMEs and supporting R&D in the region. The former programme was financed by the EU structural funds and the national public budget. The latter was part of an Interreg IIIC programme joining four regions in Europe and was financed from the EU regional funds.

Another region consisting of several smaller counties is Ostra Mellansverige with one project common to the entire region which was named »TOWER«, and which was also part of an Interreg IIIC programme from 2005 to 2007. Similarly, the programme was 50% financed by the EU regional funds. It was based on the triple helix model and aimed at small and medium-sized businesses, and designed to increase the interregional cooperation in all issues concerning economic growth. Support to clusters takes place mainly through cooperation with science parks in the individual regions, the establishment of environment centres focusing on the triple helix, and the participation of regional authorities in major cluster development projects.

Skåne takes pride in strong clusters and regional growth programmes. However, it directs its efforts more towards new companies and entrepreneurs than cluster development. The Blekinge and Skåne regions have together been involved in an EU-programme named »TANGO«, a programme aiming to increase the cooperation within the triple helix in certain industrial sectors.

Øresund is a politically constructed international region covering part of Sweden and Denmark, with the capital city of Denmark, Copenhagen, and the third most populated city in Sweden, Malmö. The region is frequently referred to as the metropolitan region Copenhagen-Malmö. The region itself states that it has applied the triple helix cooperation model to improve the interaction of the parties involved. For this purpose, a new organisation called »Øresund Science Region« has been formed. It is a cross-border initiative and an umbrella organisation for a few internationally known “cluster alliances“, among which the »Medicon Valley Alliance« (one of the largest pharmaceutical/biotech industrial clusters in Europe) and »Øresund IT« (the ICT and telecom cluster) are probably the best known.

Cluster models based on the triple helix principle and the bottom-up approach are used alsoin the case of the Region Småland and the islands. This region formerly participated in the »ReFine« programme, supported mainly by regional funds. The programme is currentlyinactive, due to the lack of funds (Dinnetz, 2007).

http://en.wikipedia.org/wiki/Malm%C3%B6


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10.7 Conclusion

In the last ten years, clusters in Sweden have been perceived as one of the drivers in the development of more effective regional innovation systems. They have sought to improve the levels of participation of research organisations, companies and other stakeholders in a joint effort to strengthen innovation capacity and overall improvement in the quality and innovativeness of outputs. Cluster programmes and other cluster-oriented activities within cluster policies in Sweden are aimed at both improving the quality of “soft skills” and the creation and implementation of “hard outputs”.

The Swedish economy has a number of qualities that make it a location conducive to the emergence and functioning of clusters. a high level of trust in society makes collaboration easier and more likely to emerge. The high quality of institutions makes Sweden an environment safeguarded against the misuse and abuse of cluster policies as a tool to introduce market distortions that limit competition.

Despite its many advantages, the Swedish economy also features a number of factors that work against the emergence of strong clusters. The traditional Swedish combination of a strong central government and strong local governments in the largest cities creates complexities for cluster development. And the tendency of regional policies to work against agglomeration instead of enabling the growth of all regions, too, can become a barrier for strong clusters. The Swedish economy has to tackle a number of economic challenges. Cluster policy may be partly the response to them. Promoting entrepreneurship, establishing linkages between R&D and production, creating markets for innovative products and services, developing labour skills, and investing in the infrastructure are amongst the areas where cluster dynamics and cluster initiatives present tools to achieve better economic performance.

Sweden already makes good use of cluster policies and, where cluster policies are used, they are generally well-designed. Many of the Swedish clusters belong to the most competitive clusters not only in Europe, but in the world. The flagship projects for Swedish cluster policy, »VINNVÄXT« and »Visanu«, have become synonyms for successful cluster programmes in theEuropean Union. Of course, even Swedish cluster policy has its weaknesses. Nevertheless, theoperational weaknesses that have been identified are not Sweden-specific and reflect the moregeneral learning process about how to organise cluster efforts most effectively worldwide.a more strategic approach to internationalisation and a more consistent approach to measuringthe impact of cluster policies are two priorities for further policy improvements in Sweden.


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References

[1] BALOG, M. et al. 2013. Inovatívne Slovensko - východiská a výzvy. Slovak Innovationand Energy Agency (SIEA). Bratislava. ISBN 978-80-88823-55-1.

[2] CZECHINVEST. 2013. Overview of the policies beyond the partnership. In: ProjectClusterCOOP. 4/11/2013.

[3] DELGADO, M., PORTER. M. E., STERN, S. 2010. Clusters, Convergence andEconomic Performance, U.S. Census Bureau Center for Economic Studies WorkingPaper 10-34.

[4] DINNETZ, M., Country Report: Sweden. Norway: Oxford Research AS, 2007.[5] FORSBERG, G., LINDGREN, G. 2013. Regional policy, social networks and informal

structures. In: European Urban and Regional Studies. SAGE. Sweden.[6] HOLLANDERS, H., ES-SADKI, N. 2014. Innovation Union Scoreboard 2014,

Maastricht Economic and Social Research Institute on Innovation and Technology(UNU-MERIT). European Union, 2014. ISBN 978-92-79-34662-0.

[7] KEMPINSKY, P. et al. 2005. Diversity as Driving Force. Stockholm: ISA, NUTEK,VINNOVA.

[8] KETELS, C. 2009. Clusters, Cluster Policy, and Swedish Competitiveness in the GlobalEconomy. Västerås: ISBN 978-91-85935-29-1.

[9] KETELS, C. 2012. Sweden’s Position in the Global Economy. Stockholm. ISBN 91-89301-39-0.

[10] LINDQVIST, G. Disentangling Clusters - Agglomeration and Proximity Effects.Dissertation for the Degree of Doctor of Philosophy, Ph.D. Stockholm School ofEconomics. 2009. ISBN 978-91-7258-798-4.

[11] LINDQVIST, G., MALMBERG, A., SÖLVELL, Ö. 2008. Swedish Cluster Maps -a Statistical Inventory of Clusters in Sweden in 2002. Center for Strategy andCompetitiveness - Stockholm School of Economics. Stockholm. ISBN 978-91-977556-0-3.

[12] MELIN, G., HAKANSSON, A., THOREL, N. 2011. Mini Country Report for Sweden,Thematic Report 2011 under Specific Contract for the Integration of INNO PolicyTrendChart with ERAWATCH (2011-2012). Brussels: European Commission, DGIndustry and Enterprise.

[13] OECD. 2007. Competitive Regional Clusters - National Policy approaches. pp. 88-91.ISBN 978-92-64-03182-1.

[14] OECD. 2012. OECD Science, Technology and Industry Outlook. pp. 388-391. ISBN 978-92-64-17039-1.

[15] OXFORD RESEARCH AS. 2008. Cluster Policy in Europe - a brief summary of clusterpolicies in 31 European countries. Norway, pp. 20-23.

[16] SÖLVELL, Ö. 2009. Clusters - Balancing Evolutionary and Constructive Forces. IvoryTower Publishers, Stockholm, ISBN 978-91-974783-3-5.


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[17] SÖLVELL, Ö., WILLIAMS, M. 2013. Building the Cluster Commons - An Evaluationof 12 Cluster Organizations in Sweden 2005 - 2012. Stockholm: Ivory Tower Publishers.ISBN 978‐91‐974783‐4‐2.

[18] TILLVÄXTVERKET - SWEDISH AGENCY FOR ECONOMIC AND REGIONALGROWTH. 2014. Conditions of Enterprises 2014 Report 1. pp. 7-8. ISBN 978-91-87903-04-5.

[19] VINNOVA. 2013. New Paths to Innovation “VINNOVA - Sweden's InnovationAgency“. Stockholm, Sweden. ISSN 1650-3120.

[20] WISE, E., JOHANSSON, C. 2012. Where the cluster winds are blowing in Europe.TACTICS. VINNOVA. PRO INNO Europe initiative.

Chapter 11 Emília Duľová Spišáková

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Chapter 11

Cluster Policy in Switzerland

by Emília Duľová Spišáková University of Economics in Bratislava, Faculty of Business Economy, Slovak Republic [email protected]

11.1 Introduction 11.2 Cluster Policy Legislation 11.3 Cluster Policy Principles, Areas and Objectives 11.4 Cluster Policy and Other Related Policies 11.5 Funding Clusters in Switzerland 11.6 Cluster Policy Centralisation vs. Decentralisation 11.7 Conclusion

References


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11.1 Introduction

The result of ever-increasing globalisation is that regional and local economies worldwide are forced to face growing competition. Therefore, the attention of cluster policy-makers is orientated towards improving competitiveness of individual regional centres.

It is commonly assumed that clusters are one of the key factors for the improvement of regional competitiveness. Cluster development depends on starting companies and other actors coming to a cluster, as the access to capital and positive attitudes to risk-taking are necessary (OECD, 2007).

Cluster policy indicates possible directions for cluster programmes and cluster agencies. Above the level of agencies and programmes in Switzerland is the policy level where plans and strategies are developed in the form of policy documents, directives and legislation, rather than concrete programmes or organisations. Cluster policy specifically outlines how cluster development is to be pursued. In addition, clusters may form a framework in a long range of policy fields. Primarily, this is the case in three key areas:

• Innovation and technology policies.• Regional economic development policy.• Entrepreneurship/SME policy.

In general, clusters are defined as geographically proximate groups of companies operating within similar sectors. However, as Switzerland is a small country with only 7.7 million inhabitants, it can be considered as one big cluster. Therefore, national policy measures (for example, technology policy) without any specific regional focus might be considered as cluster policies.

Cluster policy or cluster programmes as a vehicle of active economic development is not a primary policy issue in Switzerland. There are Swiss cantons which promote the establishment of cluster institutions; however, this is more an additional measure to ensure economic wealth.

According to Strauf and Scherer (2006), it is broadly accepted in Swiss politics that a sound and attractive business environment is a better way of supporting business than too much government support and a number of programmes.

The beginnings of clustering in Switzerland go as far back as to 1996, when the second largest canton in the country – the Canton of Bern – began to support cluster initiatives. The Bio-Valley Basel was also founded in 1996.

In 2001 and 2002, the State Secretariat for Economic Affairs (SECO) commissioned a group of experts to evaluate the existing regional policy in Switzerland and to propose new measures for such policy in the country. Two input papers were formulated concerning clusters. First, »Inputpaper 5«, states that clusters are a fact in Switzerland and that cluster-oriented policymeasures can be successful if certain preconditions apply. Second, »Inputpaper 6«, says thatthe state should not support clusters because that would lead to destruction. The state should


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foster economic growth by establishing sound framework conditions and macroeconomic stability (Bergmann and Weber, 2007).

The Final Report of this group of experts was published at the beginning of 2003, which pointed out that the »New Regional Policy« should support initiatives that aim at supporting clusters and regional value creation systems.

Furthermore, other institutions such as the Institute for Public Services and Tourism at the University of St. Gallen, the University of Applied Sciences North-Western Switzerland, the School of Business (Fach Hochschule Nordwestschweiz, Hochschule für Wirtschaft), and the Swiss Federal Institute of Technology in Zürich contributed to the debate about clusters in Switzerland.


There is no explicit cluster policy at a national level in Switzerland, neither are there any explicit national programmes for cluster development. Some cantons like Bern, Basel, St. Gallen or Valais actively support the emergence and activity of cluster organisations that aim at improving technology transfer and company development in specific sectors.

The Swiss »Law on Regional Policy« of 6th October, 2006 (Gesetz über Regionalpolitik) does not mention the terms “cluster”, “clustering”, nor the phrase of “cluster policy”. However, it states that financial support can be given to initiatives, programmes and projects that support the innovation potential of a region, enhance the utilisation of the regional capability and build up or improve regional value creation systems.

With regard to the missing cluster policy legislation, the following chapters will be focused on the country’s cluster strategy developed by SECO. The strategy uses the concept of “industry clusters”. It understands an industry cluster to be “a geographic concentration of interconnected companies and institutions in a certain branch of the economy” (Hafen, 2003).

Industry clusters, from a broad perspective, consist of intense integration among companies themselves as well as with institutions of knowledge within specific areas of technology or industries. Competitive industrial clusters are accompanied by expanded competency networks, skilled labour markets and functional capital markets. On a small scale, industrial clusters influence competition by increasing the productivity of the companies based in a region. They determine the direction and pace of innovations (Hafen 2003).

In defining clusters, it proved to be problematic to apply scientific definitions to the search for practical guidance for action. As a result, clusters were not defined separately; instead, the clusters defined at the cantonal level were used.

The following framework conditions led to the federal promotion of locations: • »Location Switzerland« assesses specific current and future strengths of Swiss industry

clusters and creates possible synergy benefits on the target markets for companiesinterested in relocating.

• In principle, Switzerland does not have an industrial policy. Promotion, therefore,occurs at locations where the conditions are already favourable, and an industry cluster


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strategy aligns itself to the existing circumstances, especially to the industrial clusters promoted by the cantons.

• Cluster strategy is essentially about new technologies whose promotion leads to thedevelopment of industry clusters, and which keep the cluster distribution in differentindustries in a state of flux.

In contrast to industrial policy, according to Hafen (2003), cluster strategy does not target the promotion of separate aspects of a cluster, but instead targets the interconnectedness of interlinked companies and institutions. On this basis, the State Secretariat for Economic Affairs (SECO) identified six industry clusters in Switzerland as the emphases in the promotion of Swiss regions within the »Location Switzerland Strategy«:

• Biotechnology.• Medical technology.• Microtechnology and nanotechnology.• Information and communications technology (ICT).• Environmental technology.• Shared services (headquarters function).

From the SECO perspective, identifying the clusters listed above was an important step in the direction of a successful cluster strategy in Switzerland. To be successful, however, there must be more intense collaboration than until now, with science and technology promotion at all federal levels and with the economic promoters both within and between the cantons.


The importance of clusters lies in supporting innovation activities, improving productivity and competitiveness of companies, and in accelerating economic development and growth of regions (cantons) and the entire country.

11.3.1 Cluster Policy Principles

The pillars and principles supporting cluster policy in Switzerland are very closely related to its economic pillars. The economic success of the country is based on:

• High productivity together with the high quality of products and services.• Liberal authorities in the country with modest taxes.• Currency and price stability and low capital costs.• State-of-the-art infrastructure and the high quality of life.• Efficient capital market and a highly professional banking system.• An excellent level of education of the workforce as a result of the varied curricula in the

public education and training system.


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• International reputation of Swiss universities, technical colleges and R&D institutes.• Political stability and social peace (Gugler and Keller, 2009).

11.3.2 Cluster Policy Areas

Based on the current data available in the databases of the European Cluster Observatory, clusters in Switzerland are divided into four main areas. Within the individual areas, clusters operate in the following sectors:

• Standard sectors (aerospace and aeronautics, agricultural products, apparel, automotive,building fixtures and building services, business services, chemical products,construction, construction materials, distribution, education and knowledge creation,entertainment, farming and animal husbandry, financial services, footwear, furniture,heavy machinery, instruments, jewellery and precious metals, leather products, lightingand electrical equipment, maritime, media and publishing, medical devices, oil and gas,metallurgy, power generation and transmission, plastics, pharmaceuticals, paperproducts, processing technology, production technology, sporting, recreation andchildren’s services, stone quarries, telecommunications, textiles, tobacco, tourism andcatering services, transportation and logistics).

• Creative and cultural industries (advertising, artistic creation and literary creation,museums and preservation of historical sites and buildings, printing and publishing,radio and television, retail and distribution, and software).

• Knowledge-intensive commercial services (business services, education and knowledgecreation, financial services, and IT).

• Life sciences (biotechnology, medical devices, and pharmaceuticals).


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Figure 11.1 Employment in the standard sectors in Switzerland

Source: Author’s development based on the European Cluster Observatory database (2009b)

The clusters in the standard sectors with the highest employment rate, inter alia, employ nearly 200,000 people in the financial services, followed by the construction sector with over 125,000 employees. In contrast, only eighteen workers are employed in the farming and animal husbandry sector.

The clusters in the creative and cultural industries with the highest employment are the artistic creation and literary creation with 52,153 employees. Fewer than 10,000 people are employed in the radio and television sector and in museums and the preservation of historical sites and buildings sector.

194 423129 289127 742

85 83185 389

76 69765 52964 074

58 33453 45551 720

48 93047 118

43 02538 222

29 63124 021

20 77820 65818 88218 299

14 32113 20312 91511 0538 8687 2376 0896 0505 2295 0043 9253 5662 8651 6401 4301 19494376059018

0 50000 100000 150000 200000Financial services

Construction

Transportation and logistics

Education and knowledge creation

Production technology

IT

Paper products

Pharmaceuticals

Medical devices

Entertainment

Plastics

Instruments

Heavy Machinery

Furniture

Jewellery and precious metals

Construction materials

Apparel

Sporting, recreational and children…

Leather products

Stone quarries

Farming and animal husbandry


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Figure 11.2 Employment in the creative and cultural industries in Switzerland


In the knowledge-intensive commercial services sector, the highest employment rates are recorded in the financial services sector with 194,423 workers. 85,831 employees work in the business services sector, 65,529 workers in the education and knowledge-creation sector, and only 51,720 are employed in IT.

Figure 11.3 Employment in the knowledge-intensive commercial services sector in Switzerland


The last area where clusters operate in Switzerland is the life sciences sector. Clusters in the pharmaceuticals sector employ over 38,000 people. Although Switzerland has recently put greater emphasis on industrial areas such as biotechnologies, microtechnologies, nanotechnologies, medical and environmental technology, there are only 3,566 people working in the biotech sector.

5 772

9 476

13 175

15 844

28 113

38 640

52 153

0 20 000 40 000 60 000

Museums and preservation ofhistorical sites and buildings

Radio and television

Retail and distribution

Advertising

Software

Printing and publishing

Artistic creation and literary creation

85 831

65 529194 423

51 720 Business services

Education and knowledgecreationFinancial services

IT


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Figure 11.4 Employment in the life sciences sector in Switzerland

Author’s development based on the European Cluster Observatory database (2009b)

Three categories of outstanding clusters have been derived with respect to employment and concentration. The following figure shows the “main clusters” operating in Switzerland, divided according to their geographical location. The largest financial clusters are located in the cities of Zürich (1), Lugano (2) and Geneva (3). Metal clusters occur in the regions Northern Jura (4) and Rheintal / Bodensee / Wil (5). An important chemical cluster has been formed in North-Western Switzerland (6). In the Jura Region there is a watches and precision instrument cluster (7). Clusters in the electrical machinery sector are located in Northern Jura-Südfuss / Central Aargau (8) and in the regions of Zug / Zürichsee / Zürcher Oberland (9), Ticino (10) and Lake Neuchâtel (11).

Figure 11.5 Geographical distribution of the main clusters in Switzerland

Source: Author’s development according to Gugler and Keller (2009)

3 566

24 02138 222

Biotech

Medical devices

Pharmaceuticals

Electrical machinery clusters

Watches clusters Chemical clusters

Financial clusters

Metal clusters


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In Switzerland, there are several “employment-intensive clusters”, accounting for an important share of total Swiss cluster employment but being widely dispersed all over the Swiss territory. These include the tourism, machinery, and food and beverage sectors. The significant clusters in the tourism sector are situated in Valais / Berner Oberland (1), Lake Lucerne (2), Ticino (3) and Grisons (4). Food clusters cover the area of Fribourg / Northern Vaud (5), Aargau / Lucerne (6) and North-Eastern Switzerland (7).

Figure 11.6 Geographical distribution of the employment-intensive clusters in Switzerland


In addition, Gugler and Keller (2009) mentioned a group of “specialised clusters” present in Switzerland, characterised by restricted employment but strong clustering in uniquely specialised regions. For example, tobacco, petroleum and coke clusters are limited to a few isolated municipalities. There are textile clusters in Eastern Switzerland (1) and Aargau/ Oberaargau / Lucerne (2), footwear and leather clusters in Central Jura (3) and apparel clusters in North-Eastern Switzerland (4), Aargau / Oberaargau / Lucerne (5) and Ticino (6).

Machinery clusters

Food clusters Tourism


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Figure 11.7 Geographical distribution of the specialised clusters in Switzerland


Clusters in Switzerland are part of three international cluster networks. Together with other countries, they form the »Clusterplast« network and the »European Aerospace Cluster Partnership« (EACP). Besides this, Switzerland is a member of the »ALPlastics« network.

»Clusterplast« is a growing network of polymer clusters in Europe. Originally, it was formedof the four existing clusters in France, Italy, Portugal and Austria and the two emerging clusters in the Czech Republic and Spain. In 2009, other clusters from the Netherlands, Poland, Greece, Finland, Germany, Belgium and Switzerland joined the network (European Cluster Observatory, 2009). Clusterplast aims to improve cooperation between regional authorities, research entities and local businesses, as well as to strengthen knowledge-based economic development and boost competitiveness. Nowadays, the project has also strategic impacts on various fields, such as the sharing of research and technological development infrastructures, fostering entrepreneurship, knowledge transfer, and learning and mentoring. It encourages high value-added research in Europe.

Switzerland is a member of the »European Aerospace Cluster Partnership« (EACP). According to the European Cluster Observatory, EACP currently consists of forty-one clusters from fourteen countries in Europe. The European Aerospace Cluster Partnership (EACP) is a network of European aerospace clusters established in the frame of CLUNET, a PRO INNO EUROPE project that encourages the sharing of experiences and supports the implementation of specific projects regarding cluster innovation and development policies (European Cluster Observatory, 2009a). It aims at strengthening the European position of the aerospace and aeronautics industry clusters in the world markets and at developing a strategic document for long-term trans-national cooperation between clusters and companies, reaching for a stronger and more competitive European position in the world aerospace and aeronautics industry.

Footwear/Leather clusters

Apparel clusters

Petroleum/Coke clusters

Textile clusters

Tobacco clusters


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»ALPlastics« (Alpine Space Polymer Cluster Network) is a network of private/public actorsinvolved in local development policies in five Alpine regions (Switzerland, Germany, Italy, France, and Austria). It is orientated towards the microtechnology and nanotechnology sector. It directs all its activity towards creating proper conditions for open and strategic innovation in the Alpine plastics clusters and regional development. The project creates multi-level instruments for clusters animation and management.

Furthermore, ALPlastics focuses on: • Involving single enterprises in common innovation efforts inside their cluster.• Opening the involved cluster to transnational/international cooperation.• Creating efficient regional public-private partnerships.• Developing collaborative and well-defined innovation policies etc.

Currently, ALPlastics has 1,316 clusters of which 1,058 are enterprises (particularly small and medium-sized enterprises), 161 universities and R&D centres, seventeen public authorities (mainly regional authorities), and eighty other subjects. Apart from Switzerland (Réseauplasturgie), partner companies come from Italy (Proplast, Region Piemonte), Germany (Chemie-Cluster Bayern GmbH), France (Plastipolis, CARMA), and Austria (Clusterland Oberösterreich GmbH, Kunststoff-Cluster).

11.3.3 Cluster Policy Objectives

The Centre for Competitiveness of the University of Fribourg, Switzerland, has developed an empirical strategy named the »Cluster Mapping Project« on Swiss clusters and cluster development in the country. The following six objectives for the Swiss cluster-mapping project have been defined in the strategy (Gugler and Keller, 2009):

• Objective 1: Capture geographical patterns of industry location in Switzerland, inconsideration of the actual economic concentration patterns and industry interlinkages.

• Objective 2: Capture geographical patterns of industry location in Switzerland, inconsideration of the potential for future clusters and cluster initiatives.

• Objective 3: Abide by the elementary strategy of the U.S. cluster-mapping project andthe European Cluster Observatory to allow for comparability.

• Objectives 4 & 5: Provide own cluster definitions based on concentration patternscharacteristic of the actual situation in Switzerland to allow for unique industryinterlinkages on the one hand, and to avoid considering industries, which do not actuallyhave cluster potential in Switzerland.

• Objective 6: Geographically capture the actual extent, the spatial connections and theprecise localization of Swiss clusters.

In order to achieve these objectives, the adopted strategy has introduced the notion of “cantonal key industries”, with a view to finally establishing two complementary and


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interconnected levels of cluster definitions: “broad cantonal cluster definitions” on the one hand, allowing for unique industry interlinkages, and “narrow cross-border cluster definitions” on the other, focusing on maximal geographical precision.

Broad cantonal cluster definitions have then been individually construed for each canton around its key industries, including important local industries. The strengths of a canton in terms of its industry structure can form the basis of a well-designed cluster initiative.

Narrow cross-border cluster definitions have been proposed for the purpose of detailed mapping of cross-border clusters (hence, broad cluster definitions have thus considerably declined in importance). In order to establish the narrow cluster definitions, key industry co-location has been studied at the level of the one hundred and seventy-five Swiss districts (Gugler and Keller, 2009).


As far as relating cluster policy to other policies is concerned, it is useful to define the purpose of a specific cluster programme. When relating cluster policy to regional policy, a cluster programme should focus on less developed, lagging regions, and on smaller rather than larger enterprises. Emphasis is to be put on the engagement of all actors, and industrial and innovation objectives should be published and made available.

Table 11.1 Cluster policy in relation to other selected policies

Type of Policy Impact Strength Old Approach New Approach

Regional policy Low Redistribution from leading to lagging regions

Building competitive regions by bringing local actors and assets together

Science and technology policy Low

Financing of individual, single sector projects in basic research

Financing of collaborative research involving networks with industry and links with commercialisation

Industrial and enterprise policy Low Subsidies to firms,

national champions

Supporting common needs of firm groups and technology absorption (especially SMEs)

Source: Author’s elaboration based on Bergmann and Weber (2007)

When relating cluster policy to science, technology and innovation policy, it would be advisable to promote collaborative R&D instruments to support commercialisation, focus on high technology, and to include both large and small enterprises in collaboration that could further support spin-off start-ups. Relations between the two policies should result in taking advantage of and reinforcing the spatial impacts of R&D investment.

Cluster programmes in relation to industrial and enterprise policy should support industries undergoing transition and thus shedding jobs. Such programmes, if using appropriate instruments, should support the national economic growth, help enterprises to overcome obstacles to technology absorption and create competitive advantages to attract inward investment and brand for exports.


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As there is no explicit cluster policy at the national level in Switzerland, its relation to other policies, such as R&D and innovation policy, business and industrial policy or regional policy cannot be established.

Therefore, a question arises whether or not it is necessary for a country to have an explicit cluster policy. Forming clusters might be a good idea; however, it has not been proved that Swiss governments have ever had explicit programmes for cluster development.

11.5 Funding Clusters in Switzerland

There are programmes set up specifically to promote cluster development in many countries. One of the purposes of such programmes is to help initiate cluster organisations, i.e. the programme provides financing or otherwise promotes the formation of cluster-specific organisations, typically in some form of public-private partnership (Bergman and Weber, 2007).

However, there are no national cluster programmes developed within the frame of cluster policy in Switzerland. There are only regional programmes focused on cluster financing and cluster formation and development in the country. No explicit mention of “clusters” is made in the Law on Regional Policy, only of financial support and aiding for the utilisation of regional innovation potential. a combination of national, regional, corporate and other financial resources is used to fund such programmes. Since Switzerland in not an EU Member State, it is not entitled to use funds from the EU Structural Funds for cluster projects.

The »Nanocluster Bodensee« is the only initiative that has been allocated as a pilot project for financial support from the federal government as part of its national regional policy.


There are four cluster programmes at the regional level in Switzerland: • The Ark.• Cluster Policy of the Canton of Bern.• BioValley Basel.• Nanocluster Bodensee.

11.5.1.1 The Ark Programme

»The Ark Programme« is a long-term regional programme as a successor to the formerlyimplemented project named »Valais – Technologies«. Geographically, it covers and is related to the Canton of Valais. The project has been initiated by the canton of Valais and it is also supported by:

• The Swiss Secretariat for Economic Affairs (SECO).


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• The Communes of Martigny, Monthey, Sierre, Sion, Visp and Brig.• The regions “ARS” (Region of Sion), “ARMS” (Region of Monthey St. Maurice) and

the “Sierre Région” (Region of Sierre).

The programme aims to combine several technology sites, such as the »Bio Ark« in Mothey, »Phyto Ark« in Sion (both the life sciences sector), »Ide Ark« in Martigny, and the »TechnoArk« in Sierre (both information and communication science sector) into the one and sameentity.

The purpose of the Ark Programme is to make the Valais region a true technology park with promise for the future and make it recognised as such in Switzerland and all over the world. It also aims to nurture research and foster the capacity for innovation among existing businesses. Finally, it facilitates the creation of new businesses and the relocation of others in the Valais region (Bergmann and Weber, 2007).

It is important that the programme is focused on small and medium-sized businesses and that services are provided within the programme to accompany entrepreneurs in all phases of development, especially in the first phase.

Among the prioritised areas of the programme are Life Sciences, Computer Sciences, and Engineering Sciences (but also services, tourism, and the environment).

11.5.1.2 Cluster Programme of the Canton of Bern

In the second half of the 1990s, the Canton of Bern designed cluster support measures aimed at strengthening the knowledge exchange through the local and regional networking of companies, research and education organisations. The policy was and has since been oriented towards six clusters:

• »Precision Industry«: it was founded in 2006 with the goal to strengthen the networkwithin the cluster.

• »Telematics/Information Technology«: it was founded in 1996 and currently has twohundred and twenty members.

• »Medical Technology“: it was founded in 1997 and now has fifty members from severalcantons in the Bern area for the purpose of establishing educational programmes tailoredto suit the needs of the cluster at the University in Bern and the University of AppliedSciences in Bern.

• »Services«: it was founded in 2000 and counts six hundred and sixty members from thefields of consulting, finance and insurance, associations and universities.

• »Environmental and Energy Technology«: the Centre for Environmental Technology,one of the competence centres, specialises in knowledge transfer between the scientificand corporate world.

• »Design«: the centre holds events to promote the importance of design in the area(Bergmann and Weber, 2007).


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The Canton of Bern started its cluster policy by the establishment of four cluster organisations (the first four listed) and two centres of competence (the last two listed) with the aim of adding attractiveness to Bern as a location for companies within the selected clusters.

The aforementioned cluster initiatives are public-private partnerships. They are managed by the cantonal centre for technology and knowledge transfer known as »InnoBE«, which is a central contact point for knowledge- and technology-transfer in the Canton of Bern.

Funds for the activities within the cluster come from the Canton of Bern and each cluster receives CHF 80,000. The clusters receive additional funds from InnoBE in a range between CHF 100,000 and CHF 170,000 per cluster and year.

11.5.1.3 BioValley Basel

The regional »BioValley Basel« cluster programme is an international long-term project geographically covering North-Western Switzerland (Basel), part of Germany (South-Baden) and France (Alsace). The programme actors are three associations in Switzerland (BioValley platform Basel), France (Alsace BioValley) and Germany (BioValley Germany).

The programme has been implemented since 1996 and planned for fifteen to twenty years. Funds come from the Interreg II and III programmes, German regional ministries and business associations, Swiss cantons and the Swiss government, and from the French partners.

The intention of the project is to address both pharmaceutical concerns already present in the BioValley area and numerous smaller local enterprises and suppliers. With approximately three hundred life science companies, forty scientific institutions and four universities, the players in the target region have managed to build one of the largest bio-tech regions in Europe.

The programme policy has been to establish linkages among strong actors in the specific sector beyond its geographical boundaries (Biovalley Basel, 2014). The vision of a trinational region, strategically located in the Upper Rhine Valley is to become a European centre for biotechnology. The main objective is thus the promotion of cooperation between companies involved in the biotechnological and biomedical sectors, and the internationally respected scientific institutions associated with the universities in the BioValley area.

11.5.1.4 Nanocluster Bodensee

The »Nanocluster Bodensee« programme originated from a large technological project in the field of nanotechnology which ended in 2003. a number of participants in this project wanted to continue the work and further develop nanotechnological activities in the region. At present, the cluster policy follows the previous science and technology policy.

The new Nanocluster Bodensee scheme was intended for the period of 2004-2007. It was financed mainly by the State Secretariat for Economic Affairs (SECO) and the Canton of St. Gallen. Both contributed equal amounts to the project. Other funds came from membership fees of members of the unincorporated association and projects. The annual budget of the project was CHF800,000.


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Geographically, the cluster covered the territory of several countries: the Canton of St. Gallen (Switzerland), Canton of Thurgau (Switzerland), Southern Baden-Württemberg (Germany), Vorarlberg (Austria), and Liechtenstein (Liechtenstein).

The project targeted companies, research institutions and universities and was aimed at: • Promoting the economical implementation of nano- and microtechnology research

results.• Promoting the international implementation of research results.• Enhancing innovation and competitiveness of companies in the area of Lake Constance

(German: Bodensee).• Creating jobs in the area (Cluster Initiative Bodensee, 2010).


Economic policy in Switzerland can be characterised as being liberal and non-interventionist. As there is traditionally no direct industry support, there is no industrial policy in the country and thus direct (interventionist) cluster initiatives are regarded very critically. Therefore, there is no explicit cluster policy at the national level, and, which is even worse, there is also widely held perception that there is no need for a specific cluster policy.

The fact remains, however, that a number of industries in Switzerland are highly geographically concentrated. These industries exhibit cluster-like characteristics, although they have developed without explicit government support. The number of cantons that actively support cluster development is relatively low compared to the overall number of twenty-six cantons. There are several regional cluster organisations and initiatives in the country (Gugler and Keller, 2009).

According to the »Global Competitiveness Reports«, Switzerland is one of the most competitive countries in the world. Market efficiency is negatively influenced by agricultural policy costs and the prevalence of trade barriers in certain areas. Apart from that, there is no general assessment of competitiveness in Switzerland (European Commission, 2013a).

11.6.1 Cluster Policy Implementation Agencies at National and Regional Levels

As has been mentioned several times above, Switzerland does not follow any cluster policy at the national level. a cluster policy would come close to industrial policy, if the country explicitly followed one, yet it does not. Therefore, there is no ministry department, agency or other governmental organisation primarily responsible for the implementation of cluster policy in Switzerland. Nevertheless, certain fields of economic policy, business promotion and innovation policy indirectly affect cluster development in the country. The following organisations or institutions play a certain role in cluster development (Bergmann a Weber, 2007):

http://sk.wikipedia.org/wiki/Sankt_Gallen_%28kant%C3%B3n%29

http://sk.wikipedia.org/wiki/Sankt_Gallen_%28kant%C3%B3n%29


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• SECO: the Ministry for Economic Affairs in Switzerland, which is the State Secretariatfor Economic Affairs (SECO). Within this ministry, the main department that deals withmatters relating to cluster development is the Directorate for Business and LocationPromotion (Direction für Standortförderung).

• Location Switzerland: as part of the SECO, it generally supports the establishment ofnew enterprises in Switzerland. In this context, it explicitly mentions clusters inSwitzerland in biotechnology, medical technology, ICT, shared services,microtechnology and nanotechnology, and environmental technology as a point ofinterest for foreign investors.

• The Federal Office for Professional Education and Technology (BBT): it supportsinnovative technologies and innovative start-ups. It does not follow a specific regionalcluster policy but offers financial support for innovative activities from universities andresearch institutions and contributes to the development of clusters in Switzerland.

Cluster development is not a specific task of all the above-mentioned organisations. Dealing with clusters is only one of the numerous other tasks they have to perform; therefore, their activity may or may not influence cluster development in Switzerland.

The following table presents the top fifteen clusters in specific Swiss regions according to the number of employees and the European Cluster Observatory star rating.

Table 11.2 The top fifteen clusters in Switzerland Cluster Region Employees Stars Finance Zürich 93,572 *** Transportation Espace Mittelland 59,677 *** Metal Espace Mittelland 52,310 *** IT Zürich 23,685 *** Biopharma Nordwestschweiz 21,741 *** Production technologies Ostschweiz 12,367 ** Production technologies Zentralschweiz 8,569 ** Chemical Nordwestschweiz 8,549 ** Medical Espace Mittelland 6,317 ** Power Nordwestschweiz 5,952 ** Hospitality Ticino 5,675 ** Instruments Zürich 5,362 ** Tobacco Espace Mittelland 2,151 ** Finance Région Iémanique 35,549 * Transportation Zürich 25,399 *

Source: Author’s development based on the European Commission data (2010)

11.7 Conclusion

In Switzerland, as in almost all other European countries, the existence, effects and strategies for promoting clusters have increasingly gained attention. Growing emphasis on cluster development is also a result of the continuously growing number of cluster initiatives and strategies worldwide, not only in Switzerland. These strategies, however, are not based on


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common definitions and analytical methods, or coordinated objectives at a regional or cantonal level.

As has been said above, the beginnings of cluster development in Switzerland date as far back as to 1996, when the Canton of Bern began to support cluster initiatives actively and the BioValley cluster was formed.

There has never been any legislation in the country to regulate cluster policy or cluster formation. Swiss cluster policy is pursued mainly at the regional level.

All clusters in Switzerland are members of the three above-mentioned networks: »Clusterplast«, »European Aerospace Cluster Partnership« (EACP), and »ALPlastics«. Theyoperate in different industrial sectors divided into four groups. The highest employment isregistered in the financial services sector, followed by the artistic and literary creation andpharmaceuticals sectors.

As there is no cluster policy at the national level, there are no or very weak links to other related policies such as R&D and innovation policy, industrial and enterprise policy, or regional policy.

There are four regional cluster programmes in Switzerland: »The Ark«, »Cluster Policy of the Canton of Bern«, »BioValley Basel«, and »Nanocluster Bodensee«. Their activities are financed and supported by three cluster agencies: State Secretariat for Economic Affairs (SECO), Location Switzerland, and the Federal Office for Professional Education and Technology (BBT).


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References

[1] ANDERSSON, T., SCHWAAG-SERGER, S., SÖRVIK, J., WISE, E. 2004. ClusterPolicies Whitebook. Iked. ISBN 91-85281-03-4.

[2] BARSOUMAIN, S., SEVERIN, A., van der SPEK, T. 2011. Eco-innovation and nationalcluster policies in Europe – a Qualitative Review, Brussels. Available from:http://www.clusterobservatory.eu/eco/uploaded/pdf/1315915223865.pdf.

[3] BERGMANN, H., WEBER, W. 2007. The Cluster Competitiveness Group: CountryReport: Switzerland. Oxford Research. Available from: http://www.kooperation-international.de/uploads/media/Cluster.Policies_Country.report.Schweiz.pdf.

[4] BIOVALLEY BASEL. 2014. The life sciences network. Available from:http://www.biovalley.ch.

[5] BRESCHI, S., MALERBA, F. 2007. Clusters, Networks and Innovation. OxfordUniversity Press. ISBN 978-01992-755-64.

[6] CLUSTER INITIATIVE BODENSEE. 2010. Available from:http://www.clusterinitiative-bodensee.de/cluster/nanotechnologie.html.

[7] EUROPEAN COMMISSION. 2013. Innovation Clusters in Europe. a statistical analysisand over view of current policy support. Available from:http://www.central2013.eu/fileadmin/user_upload/Downloads/Tools_Resources/Cluster.pdf.

[8] EUROPEAN COMMISSION. 2013a. Communication from the commission on theEuropean Competitiveness Report 2013. Towards knowledge driven reindustrialisation,Luxembourg: Publications Office of the European Union. ISBN 978-92-79-33267-8.

[9] EUROPEAN CLUSTER OBSERVATORY. 2009. Clusterplast. Available from:http://www.clusterobservatory.eu.

[10] EUROPEAN CLUSTER OBSERVATORY. 2009a. European Aerospace ClusterPartnership. Available from: http://www.clusterobservatory.eu.

[11] EUROPEAN CLUSTER OBSERVATORY. 2009b. Available from:http://www.clusterobservatory.eu.

[12] EUROPEAN CLUSTER OBSERVATORY. 2011. ALPlastics. Available from:http://www.clusterobservatory.eu.

[13] EUROPE INNOVA. 2008. Cluster Policy in Europe. Oxford. Available from:http://www.clusterobservatory.eu/system/modules/com.gridnine.opencms.modules.eco/providers/getpdf.jsp?uid=100146.

[14] EUROPE INNOVA. 2011. Star Clusters in Switzerland. Available from:http://www.clusterobservatory.eu/common/galleries/downloads/Star_clusters_Switzerland.pdf.

[15] GARSON, G. D. 2014. Cluster Analysis: 2014 Edition (Statistical Associates Blue BookSeries 24). Statistical Associates Publishers. ISBN: 978-1-62638-030-1.


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[16] GUGLER, P., KELLER, M. 2009. The Economic Performance of Swiss Regions - Centerfor Competitiveness, pp. 39 - 40. Available from:http://www.clusterobservatory.eu/system/modules/com.gridnine.opencms.modules-eco/providers/getpdf.jsp?uid=100014.

[17] HAFEN, T. 2003. Branchencluster in der Standort promotion der Schweiz. Die Sicht dessecound Überblicküberbestehende Cluster. In: Scherer, Roland, Bieger Thomas (ed.):Clustering - Das Zauberwort der Wirtschaftsförderung. pp. 75-85. ISBN 3-258-06515-2.

[18] KIND, S., MEIER zu KÖCKER, G. 2013. Cluster impact analysis. There AlCluster case.Berlin.

[19] LINDQVIST, G., KETELS, C., SÖLVELL, Ö. 2013. The Cluster Initiative Greenbook2.0 Stockholm: Ivory Tower AB. ISBN 978-91-974783-5-9.

[20] OECD. 2007. Competitive Regional Clusters - National Policy Approaches. ISBN: 978-92-64-03182-1.

[21] PAVELKOVÁ, D. et al. 2009. Klastry a jejich vliv na výkonnosti firem. Prague. ISBN978-80-247-2689-2.

[22] STRAUF, S., SCHERER, R. 2006. Cluster and Cluster strategy in Switzerland. In:Entrepreneurship in economy. IDT-HSG. pp. 173 - 186. ISBN 83-60065-37-3.


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Chapter 12

Cluster Policy in the United Kingdom

by Emília Duľová Spišáková University of Economics in Bratislava, Faculty of Business Economy, Slovak Republic [email protected]

12.1 Introduction 12.2 Cluster Policy Legislation 12.3 Cluster Policy Principles, Areas and Objectives 12.4 Cluster Policy and Other Related Policies 12.5 Funding Clusters in Great Britain 12.6 Cluster Policy Centralisation vs. Decentralisation 12.7 Conclusion

References


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12.1 Introduction

Clusters in the United Kingdom represent geographical concentrations of firms and research institutions. The condition of establishing vast networks does not need to be satisfied. By supporting innovation, clusters increase industrial competitiveness and thus contribute to the increase in overall regional competitiveness.

In the United Kingdom, there are several official ways of defining clusters (Mas, 2007): • The UK Government’s Department of Trade and Industry (DTI) defines clusters as

“concentrations of competing, collaborating and interdependent companies andinstitutions, which are connected by a system of market and non-market links”.

• Invest Northern Ireland defines clusters as “geographical agglomerations of firms in thesame or in closely-related industries”.

• Scottish Enterprise defines clusters as “groups of industries and organisations linked bya common goal or practice”. It is assumed that clusters are national models.

• The Welsh Assembly’s Department of Enterprise, Innovation, and Networks definesclusters as “industries linked through vertical (buyer/supplier) or horizontal (commoncustomer/technology/channels) relationships”.

In the past, it was the Department of Trade and Industry (DTI), a branch in the United Kingdom’s government, which was responsible for cluster policy through its innovation policy at the national level. Subsequently, this department was replaced by two new departments, the Department for Trade, Enterprise and Regulation Reforms, and the Department for Innovation, Universities and Skills. Their activity did not last long; in June 2009 the two departments merged, and the Department for Business, Innovation and Skills was established. It is orientated, inter alia, towards cluster policy development through innovation policy at the national level.

The foundations of the British national cluster policy were laid at the beginning of 2000, after the government’s concept received considerable attention at the end of the 1990s. At that time, the government determined general policy directions and regional developmental agencies developed their own cluster development strategies. Cluster policy in Great Britain was based on and intertwined with the country’s innovation policy.

In 1998, clusters were initially identified as an important area of economic development in the UK Government’s White Paper entitled »Our Competitive Future – Building the Knowledgeable Driven Economy«.

Following the Competitiveness White Paper, the Department of Trade and Industry launched »Innovation Society Initiatives« with a great number of projects. The budget provided by theGovernment was £20 million. In response to the targets set in the Competitiveness White Paper,the DTI established three more targets to be achieved:

• 1.5 million small and medium-sized enterprises (SMEs) to adopt externalcommunications technologies.

• 1 million SMEs to be trading over the Internet.


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• To increase the performance of SMEs to the same level as other companies in G7 inrelation to information and communication technologies (Department of Trade andIndustry, 2001).

The House of Commons was worried about how the new initiatives were to be implemented in line with the existing projects, the proposed »Small Business Service« (SBS) project, new regional organisations (»Regional Development Agencies« (RDA)), and the »Devolved Assemblies«.

The launch dates were later detailed in another Competitiveness White Paper entitled »Implementation Plan« in 1998, which was to monitor the agendas set by the Department ofTrade and Industry (Mas, 2007). The DTI were to follow the progress of implementing the E-Commerce initiatives and indicate how the plans were to be coordinated with regional andnational bodies (RDAs and governments). In addition, it was required that the SBS initiativewas to be included within the implementation plans, and details of how the initiatives were tobe evaluated.


Clusters were identified as one of the important factors of economic development in Great Britain in December 1998 in the White Paper entitled »Our Competitive Future – Building Knowledgeable Driven Economy«. This document is still valid and has continued to be applied to the government policy to this day.

The Competitiveness White Paper can be identified as the first phase of cluster policy in the country. It discussed a study on Biotechnological Clusters and also presented some relevant recommendations for other industrial sectors.

The second phase was marked by the first state-wide cluster mapping project conducted by the »Cluster Policy Steering Group« in May 2000. The group brought the government, RDAs, local government, academia, the private sector and other cluster experts together. The aim was to identify the barriers to the growth and development of clusters and develop appropriate policy solutions to the Cabinet at a national level (Department of Trade and Industry, 2001).

In 2000 to early 2003, this group ran together with a cross-Whitehall officials’ group. The discussions led to the development of the building blocks of the policy framework for clusters. Two of the areas discussed, the planning system and the UK skills level, are now implemented into the cluster policy as cross-cutting themes for cluster development.

The Steering Group worked in consortium with »Trends Business Research« to provide the first UK cluster mapping project. The result was the 2001 publication of a report entitled »Mapping Clusters in the UK – First Assessment«. The report followed Porter on clusters anddeveloped a systematic national map of cluster activity after discussion in the regions. Theprocess has been built upon today and carried out by the RDAs across the UK.

The third phase of cluster policy, working in parallel with the previous phase, was a White Paper entitled »The Opportunity for All in a World of Change«, that was developed and


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published by the Department of Trade and Industry. This revised version of the 1998 White Paper recognised the key role of cluster development for the regional economy (Mas, 2007). On this basis, Regional Development Agencies (RDAs) were to develop the clusters in their regions, at whatever stage of their life cycle, by fostering sustainable growth in the regions’ strengths and capabilities. In 1998, eight of the RDAs were set up under the Regional Development Agencies Act, launched in April 1999. The final ninth agency was established in London in July 2000.

At the start, cluster policy was dealt with by the Cluster Policy Steering Group. Since the group came to a close, the government has taken an active interest in the cluster projects of the RDAs, and continuously worked with the Department of Trade and Industry. The »Review on Innovation« closely examined the cluster projects and created a revised version of the DTI vision and objectives. This led to the examination how improving the UK’s relative innovation performance can close the productivity gap. a focused strategy for increasing innovation was published in 2003, which has since led innovation to become a priority of the cluster initiatives over the United Kingdom (Lagendijk and Charles, 1999).

Since the general elections in 2005, government departments have restated their priorities for RDAs, primarily in context of reviewing the regional economic strategies. The Regional Development Agencies were to increase focus on strategic outcomes and to ensure that government departments and RDAs work together on regional policies and national interests. This has encouraged the agencies in the development of the existing clusters and in the formation of new clusters in regions while taking advantage of their natural abilities.


Clusters are important as they can increase innovation, productivity and competitiveness of companies, and thus boost regional and national economic growth. Cluster policy is one of the core means for economic development, as indicated by the fact that cluster policy is embedded in a number of regional economic development strategy documents.

12.3.1 Cluster Policy Principles

Cluster development in Great Britain feeds on start-ups and small firms moving into the cluster. Clusters foster innovation, increase productivity and competitiveness of firms, and strengthen the regional and national economic growth. Clusters grow because firms share and create knowledge and specialised labour, and because of the presence of a network of support services and a complex fabric of social relationships.

The fundamental cluster policy principles underlying the UK cluster policy are to: • Concentrate on activities and groups of products and services rather than sectors.• Support clusters that have a long time-frame – decades rather than years.• Use a range of policy tools, not a one-policy-fits-all situations approach.• Use qualitative and quantitative evaluation tools to measure cluster performance.


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• Use coherent and consistent language and terms.• Better coordinate cluster policy among national and regional policy-makers (Andriani

et al., 2005).

The final principle of cluster policy rests in tailoring policies to fit the individual phases of the cluster life cycle by looking at:

• Entrepreneurship, capital provision and skills development for triggering clusters.• Physical, human and network capacity, information dissemination for encouraging

embryonic clusters to mature.• Intervention to remove barriers to growth when required.

12.3.2 Cluster Policy Areas

The research carried out in the United Kingdom, based largely on data up to 1999, has identified a total of one hundred and fifty-four clusters located in all British regions (representing between eight and eighteen per UK region). The clusters identified include both manufacturing and service industries, and cover a very wide range of sectors and technologies, including agriculture and food processing, metals, automotive, ICT, biotechnology, financial services, tourism and Internet services (European Cluster Observatory, 2009b).

Based on the data available from the European Cluster Observatory databases, clusters in the country are divided into four categories operating in the following sectors:

• Standard sectors (aerospace and aeronautics, agricultural products, apparel, automotive,building fixtures and building services, business services, chemical products,construction, construction materials, distribution, education and knowledge creation,entertainment, farming and animal husbandry, financial services, footwear, furniture,heavy machinery, instruments, jewellery and precious metals, leather products, lightingand electrical equipment, maritime, media and publishing, medical devices, oil and gas,metallurgy, power generation and transmission, plastics, pharmaceuticals, paperproducts, processing technology, production technology, sporting, recreation andchildren’s services, stone quarries, telecommunications, textiles, tobacco, tourism andcatering services, transportation and logistics).

• Creative and cultural industries (advertising, artistic creation and literary creation,museums and preservation of historical sites and buildings, printing and publishing,radio and television, retail and distribution, software and others).

• Knowledge-intensive commercial services (business services, education and knowledgecreation, financial services, and IT).

• Life sciences (biotechnology, medical devices, and pharmaceuticals).

Clusters in the business services sector are those with the highest employment in the standard sectors, employing a remarkably greater number of workers than all other sectors (over 1.5


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million people). The business services sector is followed by the financial services sector with nearly 965,000 employees. In contrast, only 504 workers are employed in the tobacco sector, 2,610 in the leather processing sector, and 4,787 in the footwear manufacturing sector.

Figure 12.1 Employment in the standard sectors in the United Kingdom


1 543 108964 876

798 515798 449

629 121528 745

415 887364 450

324 120290 617289 927289 624

250 621206 103195 175

132 107104 53598 77184 43784 13665 70963 30762 42658 24656 06950 30449 75240 80438 77429 78222 29921 58120 68916 01013 50211 3179 2506 1904 7872 610504

0 500000 1000000 1500000 2000000Business services

Education and knowledge creation

Construction

Processed food

Metal manufacturing

Entertainment

IT

Building fixtures, equipment and services

Production technology

Chemical products

Furniture

Textiles

Instruments

Lighting and electrical equipment

Medical devices

Apparel

Construction materials

Oil and gas

Jewellery and precious metals

Footwear

Tobacco


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Figure 12.2 Employment in the creative and cultural industries in the United Kingdom


Clusters in the creative and cultural industries with the highest employment are those operating in the printing and publishing sector, with 304,142 employees. Fewer than 100,000 employees have been registered in the advertising, museums and preservation of historical sites and buildings sectors, and the retail and distribution sector.

Figure 12.3 Employment in the knowledge-intensive commercial services sector in the United Kingdom


The business services sector employs most people out of all knowledge-intensive commercial services. The employment in the financial services sector is 964,876 workers,

88 339

111 942

96 863

80 049

211 113

304 142

242 061

0 50 000 100 000150 000200 000250 000300 000350 000

Museums and preservation of historical sites andbuildings

Radio and television

Retail and distribution

Advertising

Software

Printing and publishing

Artistic creation and literary creation

1543 108

964 876

798 515

250 621Business services

Education and knowledgecreationFinancial services

IT


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followed by the education and knowledge creation sector with 798,515 employees, and the IT sector with 250,621 employees.

Figure 12.4 Employment in the life sciences sector in the United Kingdom


The last category of cluster operation in the United Kingdom is the life sciences sector, including three industries. The pharmaceutical industry registered the employment of 63,000 people. The biotech industry has recently become more popular in the UK, with 22,299 employees.

Nowadays, clusters in the United Kingdom are partners of two international cluster networks: »Clusterplast« (European Cluster Observatory, 2009) and »European Aerospace Cluster Partnership« (EACP) (European Cluster Observatory, 2009a).

12.3.3 Cluster Policy Objectives

Policy-makers, and researchers, believe that the existence of clusters makes a difference when it comes to regional and national competitiveness. Companies located in a cluster can achieve greater productivity than their non-cluster counterparts. Cluster membership also helps them achieve their own corporate objectives.

The increase in productivity comes from several sources. Increased efficiencies are the most important source of increased productivity in clusters. An important source of these efficiencies is knowledge spill-over, i.e. the transfer of ideas or information from one organisation to another or from one individual to another. Knowledge is a key asset. It feeds directly into innovation, and thus into productivity and competitiveness. From the perspective of the UK economy, regional productivity further stimulates national economic development and growth, and ultimately, the country’s global competitiveness.

63 307

38 774

22 299

Biotech

Medical devices

Pharmaceuticals


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According to Lagendijk and Charles (1999), regional cluster policies generally pursue two sets of objectives. The first set of objectives includes:

• Supporting business development through the creation of a favourable businessenvironment.

• Tailoring and customising pre-existing business support delivery.• Brokering networks among businesses.

The other set of objectives is the improvement of the regional economic structure, through explicit or implicit forms of targeting.

Whatever mix between these two levels is chosen, the cluster agenda should address systematic and market failures observed in the regional economy, and take account of government failures showing up in existing forms of business support and technology policy. Because cluster policies rely on public-private interaction and often evolve around certain hubs, a critical issue is the extent to which policies are manipulated by dominant economic or political players at both regional and national levels.


A country’s cluster policy is to a great extent related to other policies, and their mutual interaction contributes to its regional and national development. In the United Kingdom, there is a strong link between cluster policy and R&D and innovation policy, cluster policy and regional economic development policy, and finally, between cluster policy and industrial and business policy.


R&D and innovation policy in the United Kingdom is less decentralised than economic development policy. The UK Department of Trade and Enterprise, via its Office of Science and Innovation, is responsible for innovation and technology policy. It is also responsible for funding basic research in the country allocated via the Research Councils.

The Research Councils are the main public investors in fundamental research in the UK, covering a wide range of disciplines, including biomedicine, particle physics, the environment, and engineering, economic and social research. The Research Councils work to support the UK’s finest academic researchers to ensure the best investment of public money in scientific research excellence. There are eight research councils in the country (Mas, 2007):

• The Biotechnology & Biological Science Research Council.• The Council for the Central Laboratory of the Research Councils.• The Engineering & Physical Sciences Research Council.• The Economic & Social Research Council.• The Medical Research Council.


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• The Natural Environment Research Council.• The Particle Physics & Astronomy Research Council.• The Arts and Humanities Research Council.

The Office for Science and Innovation has the following policy orientation: • Investing with the Research Councils in research, research infrastructure, training,

careers, and knowledge transfer.• Promoting international partnerships in research, science and technology which help

achieve UK policy objectives.• Improving the use of scientific and R&D outputs.• Preparing for the future through horizon scanning and foresight.• Working to create a society that is confident about the development, regulation and use

of science and a diverse science workforce.

Cluster policy plays a minor role in science and technology framework, and it is due to the fact that cluster policy is executed by the aforementioned regional development agencies, while the science and technology policy is mostly a national affair. In regional economic strategies, there tends to be a focus on clusters that could benefit from improvements in research and development.


Regional economic development policy is conducted by regional economic development agencies that act in line within a framework outlined by the Department of Trade and Industry. There are several agencies in the United Kingdom whose main role is to formulate and implement cluster policies in the individual regions and work towards achieving policy objectives. In England, for example, there are:

• Advantage West Midlands.• East Midland’s Development Agency.• East of England Development Agency.• London Development Agency.• Northwest Regional Development Agency.• One Northeast.• South East England Development Agency.• South West of England Development Agency.• Yorkshire Forward.

Some UK regions put greater emphasis on cluster policy than others. West Midlands, Yorkshire and Humber, for example, focus on cluster strategies more intensely than Northern Ireland, where cluster policy is an integral part of science and innovation policy. There are


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a relatively large number of clusters in London and the South East, which may simply reflect the size of their regional economies.

Clusters in the North of the UK tend to be manufacturing-based (e.g. automotive, textiles and heavy industries) and those in the South more service-based (e.g. R&D, software, business services etc.) (Department of Trade and Industry, 2001).

There are a number of unique clusters in the country, which are found in only one region or area. These include nuclear fuel processing in the North West, motor sport in the South East, ceramics in the West Midlands, and the marine engineering and technologies along the south coast.

Apart from the unique clusters above, there are a number of clusters in the United Kingdom that cross regional boundaries such as financial services, aerospace, information and communication technologies, and furniture. Although these clusters share the same focus, they greatly differ in practice. They have different core industries and the strength of linkages and interdependencies on other clusters also vary (Department of Trade and Industry, 2001a). The distribution of clusters by region in the United Kingdom is illustrated in the table below.


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Figure 12.5 Distribution of industrial sectors and clusters by region in the United Kingdom

Source: Author’s development based on the data from Department of Trade and Industry (2001)

• Agriculture / food• Automotive, Tourism • Financial services• Furniture manufacture• ICT/electronics• Instrumentanion• Marine Technology• Pharmaceuticals• Printing and paper • Research and development• Software development

• Agriculture / Food• Biotechnology,

Chemicals, Construction • Finance, ICT• Knitwear• Oil/gas/offshore services• Shipbuilding• Tourism • TV activities• Whisky• Wood and paper products

• Agriculture / Food• Automotive, Chemicals, Clothing• Electrical industrial equipment• Electronics, Plastics• Furniture manufacture• Metal processing, Ship repair and industrial equipment

• Aerospace• Agriculture / food• Clothing / linen / carpets• Construction, ICT • Quarrying equipment, Shipbuilding • Wood and paper products

• Aerospace• Agriculture / food• Automotive, Chemicals,

Electronics• Environmental industries• Finance, Furniture

manufacture • Household textilies and

clothing• Leisure software• Metals• Nuclear fuel processing • Paper and paperboard• Pharmaceuticals, Plastics• Shipbuilding • Tourism

• Aerospace, Agriculture / food • Automotive, Clothing • Concrete and plaster products• Footwear manufacture• Furniture manufacture• Machinery and industrial

equipment • Metals, Plastics• Perfumes / toiletries• Web design / internet services

• Agriculture / Food• Chemicals, Metals, Wollens• Construction and construction products • Financial services, Furniture manufacture• Leisure software, Web design / internet

services• Medical / surgical equipment

• Aerospace• Agriculture / food• Antique dealing• Automotive• Biotechnology • Clothing, Electronics• Industrial equipment• Metals, Plastics, Opto electronics• Tourism, Toys and games, Wood /furniture

• Aerospace, Antique dealing• Automotive, Agriculture / food • Direct marketing services, Financial services • Environmental industries• ICT, Instruments• Leather goods, Marine industries• Tourism, TV/digital media

• Aerospace, Antique dealing• Automotive, Environmental industries• Ceramics• Domestic appliance manufacture• Furniture manufacture• Industrial equipment • Metal, Plastics• Rubber products/ tyres

• Agriculture / food, Antique dealing• Consultancy / Business services• Environmental industries• Financial services, Publishing • ICT / electronic equipment• Industrial machinery, Instrumentation• Leisure software, Marine Technologies • Motor sport, Perfumes / toiletries• Pharmaceuticals / Biotechnology • Research and development activity• Software / computer services• Web design / internet services

• Advertising, Antique dealing• Biotechnology • Business services• Clothing, Jewellery• Computer related services• Financial services• Leisure software• Music industry• Oil/gas• Pharmaceuticals• Photography • Property and real estate• Publishing • Travel, entertainment,

tourism • TV, film, radio, Web design


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Clusters provide regions with many job opportunities. In some regions, such as London, the proportion of a total region’s employment accounted for by the clusters is 43%, while in North West, it is only 15%. The low proportion of employment covered in some regions may not be necessarily indicative of weakness. For example, clusters in the North West are relatively small employers and are not capital-intensive. This may simply mean that they do not require a great amount of workforce and by no means has a negative impact on their competitiveness.

There are also a number of clusters where employment has been declining in the recent years. Examples of such clusters that are also described as mature and shallow include shipbuilding in Northern Ireland, agriculture in Wales, and clothing in the North East (European Commission, 2010).

The ceramics cluster in West Midlands is a good example of a deep and globally- competitive cluster, although it is currently losing employment and perceived to be gradually in decline.

On the other hand, there are several embryonic clusters in the United Kingdom, including TV/digital media in the South West, biotechnology in Scotland and Wales, and clusters in the creative sectors in a number of British regions (Europe Innova, 2008).

The following table presents the largest and most significant clusters located in specific regions in the United Kingdom, ordered according to the number of employees and the European Cluster Observatory star rating.

Table 12.1 The top fifteen clusters in United Kingdom Cluster Region Employees Stars Finance Inner London 254,760 *** Business Services Inner London 186,696 *** Transportation Outer London 117,606 *** Business Services Outer London 105,373 *** Business Services Berks, Bucks and Oxon 73,865 *** Business Services Surrey, East & West Sussex 66,558 *** Education Berks, Bucks and Oxon 61,200 *** Business Services Greater Manchester 54,394 *** Business Services Beds and Herts 53,807 *** Business Services Hants and Isle of Wight 50,972 *** Business Services Gloucs, Wilts & North Som 50,581 *** IT Berks, Bucks and Oxon 45,071 *** Education East Anglia 38,150 *** Automotive West Midlands 37,913 *** Education East Scotland 35,846 ***

Source: European Commission (2010)


Cluster policy plays a very minor role in industrial policy in the United Kingdom. It can be concluded that cluster policy and industrial policy run separately and independently. However, because of a strong industrial tradition in the UK, especially in the northern regions, many of


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the cluster initiatives coincide with industrial sectors, or some objectives of both policies coincide.

In contrast to the previous statements, cluster policy in the United Kingdom is strongly based on enterprise policy although it has a weak infrastructure for business networking to take place. In northern England there are some examples of cluster development through business network policy. The likely reason for their success is due to the industrial and business networking tradition of the region. The best example of clusters developing business networks is in several industry clusters in Newcastle.

Enterprise policy is closely related to FDI attraction policy. The UK Trade&Investment is a national agency responsible for promoting enterprise policy through attracting direct foreign investment. The agency uses clusters as a marketing tool to attract FDI in specific sectors from abroad. It is particularly focused on the automotive, chemicals, the environment, renewable energy, food and drink, telecommunications, software and IT services, hardware and electronics, life sciences, healthcare & medical, financial services, aerospace and aeronautics clusters (Mas, 2007).

An important role in creating conditions for foreign investors in the UK is played by regional development agencies which, similarly to the UK Trade & Investment, use clusters as a tool to attract FDI in sectors that the region is specifically interested in development.

12.5 Funding Clusters in Great Britain

National and regional programmes to support cluster policy in the United Kingdom have been established to start and develop clusters in the country. These programmes are typically co-financed from national and regional sources, the EU funds, corporate or other budgetary allocations.

12.5.1 National Cluster Programmes

Between 1996 and 2000 cluster policy in the UK has been regulated by the national programme named »Innovation Society Initiative« (Mas, 2007). The overall budget of £68 million came from several sources such as ministries, EU structural funds, regional budgets and other sources.

The programme was initiated by the UK Department of Trade and Industry and the initiative cooperated with other government departments, across sectors, and with the EU, G7 and OECD. The programme focused on strengthening science and technology policy in the country.

One of the stated objectives of the initiative was to ensure that small and medium-sized enterprises in all sectors within the UK economy could improve their competitiveness by utilising effectively all elements of information society.

Another long-term national programme with no time horizon is »UK Business Clusters – a First Assessment« (Mas, 2007). It is focused on reinforcing regional policies. The programme


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is carried out by the Cluster Policy Steering Group. It is financed from the national budget, more specifically, from the budget of the UK Office of Science and Technology.

In the implementation of the programme, the Steering Group cooperates with other UK government institutions, development agencies, academics, local government officials, the private sector, and cluster experts.

The programme identified one hundred and fifty-four clusters in the United Kingdom situated in single British regions. Because it is a generally mapping report, it encompasses a wide range of types of clusters, and it does not identify particular areas that are to be worked on and developed. This activity has been left by the Steering Group to regional development agencies.


There have been a number of regional programmes in the United Kingdom which vary in their purposes, objectives, actors and sources of financing. Among the cluster policy development programmes that have been completed are:

Table 12.2 Completed cluster programmes in the United Kingdom

Programme name

Time horizon Financial sources Budget Geographic

coverage Policy focus Life cycle of cluster

The Medical Technologies Opportunity

Group

2006 -2008

Regional sources (West Midland

Region) £1,089,000 West Midlands

Industrial and

Enterprise Policy

Embryonic cluster

London Life Sciences Strategy and Action Plan

2003- 2007

Regional sources (London

Development Agency Funds, EU Structural

Funds)

Not stated London

Industrial and

Enterprise Policy

Embryonic cluster

Production Industries in

London, Strategy and Action Plan

2006 - 2008

Regional sources (London

Development Agency Funds)

£15 million London Regional Policy

Declining cluster

The Regional Innovation Strategy for

Northern Ireland

2004 - 2006

National sources (UK Department of Enterprise and

Trade)

Not stated Northern Ireland

Science and Technology

Policy

Embryonic cluster

Micro & Opto Electronics,

Cluster Review & Strategy

1999 - 2010

Enterprise sources (Scottish

Enterprise) Not stated Scotland Regional

Policy Mature cluster

Food and Drink Cluster for Yorkshire Forward

2006 - 2010

Regional sources (region Yorkshire

and Humber) Not stated

Yorkshire and Humber Region

Industrial and

Enterprise Policy

Mature cluster


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North East Chemicals Vision and Action Plan

2004 - 2012

Regional sources (Region One North East)

Not stated North East England Region

Industrial and

Enterprise Policy

Mature cluster

Supporting Technological Development and Business Innovation

2007 - 2013

EU Structural Funds

£362 million

East Midlands Region with a focus on

Nottingham, Derby,

Leicester, Lincoln,

Lincolnshire, Derbyshire

Peak District, North

Nottingham and North Derbyshire

Industrial and

Enterprise Policy

Declining cluster

Source: Mas (2007)

Among the cluster programmes currently in progress in the United Kingdom, focused on promoting cluster policy and cluster development, are:

Table 12.3 Cluster programmes currently in progress in the United Kingdom Programme

name Time

horizon Financial sources Budget Geographic


Northwest Regional Economic Strategy

2006 – 2026

Regional sources

(Northwest Region)

£45 billion Northwest Region Regional Policy Mature cluster

The priority areas: biomedical, energy and environment, advanced engineering, food and drink, digital and creative industries, business and professional services.

The main objective: to create a dynamic, sustainable international economy which competes on the basis of knowledge, advanced technology and an excellent quality of life for all.

Programme name

Time horizon

Financial sources Budget Geographic


Scottish Tourism: The Next Decade

2006 – 2016

Regional sources

(Scotland) Not stated Scotland Regional Policy Mature cluster

The priority areas: innovation, product development, destination development, and business leadership.

The main objective: to keep pace with global trends over the next ten years through economic and environmental sustainability, to create a tourism research network involving the industry, culture, and heritage organisations, enterprise agencies, academics, local authorities, and to create a development and training action plan.

Programme name

Time horizon



Chemicals Northwest

from 2000

onward

Regional sources

(Northwest Regional

Development Agency)

Not stated Northwest Science and Technology

Policy Mature cluster


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The priority areas are: innovation, sustainable development, skills and image.

The main objective: to improve the long-term sustainability of the industry by improving skills, sustainable development, innovation and image.

Programme name

Time horizon



Yorkshire Regional Economic Strategy

2006 – 2015

Regional sources (region

Yorkshire and Humber) and EU Structural

Funds

£331.65 million (of

which £107.78

million is destined to

driving business

innovation, enterprise, and growth

of key clusters)

Yorkshire and Humber Regional Policy

Clusters of all stages of

development

The priority areas: digital industries, food and drink, advanced engineering and metals, chemicals, bioscience, environmental technologies, and healthcare technologies.

The main objective: to create more businesses that last, especially competitive businesses, to increase the number of skilled people benefiting business, to connect people to good jobs, to develop transport, infrastructure, and environment, and to build stronger cities, towns, and rural communities.

Programme name

Time horizon



One Northeast, Regional Economic Strategy

2006 – 2016

Regional sources

(region One Northeast)

Not stated North East England Regional Policy

Embryonic cluster and declining

cluster The priority areas: chemicals and pharmaceuticals, automotive, defence and marine, food and drink, energy, knowledge intensive business services, commercial creative, tourism and hospitality, and health and social care.

The main objective: to make North East England a region where present and future generations have a high quality of life and where the region exceeds/reaches the UK average gross value added per head by 2016.

Programme name

Time horizon



The Innovation

and Technology

Council

from 2004

onward

Regional sources

(Region West Midland

Not stated West Midland

Science and Technology

Policy


development

The priority areas: innovation activities

The main objective: to help businesses to continue innovating and developing products, to increase the number of businesses that are investing in innovation and exploiting R&D intensive opportunities.

Programme name

Time horizon



The East Midlands Clothing

and Textiles Cluster

from 2002

onward

Regional sources (East

Midland Regional

Development Agency)

Not stated East Midland

Industrial and Enterprise Policy Mature cluster


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The priority areas: global trading, fast-turn/niche markets orientation, textile innovations.

The main objective: to house dynamic, flexible, market-led and internationally competitive clothing, textiles and footwear cluster.

Programme name

Time horizon



East of England Regional Economic Strategy

2004 – 2021

National, regional

sources, EU Structural

Funds and others

Not stated East of England Regional Policy

Embryonic cluster and

mature cluster

The priority areas: sectors that are important in delivering the vision of the regional economic strategy and sectors that are otherwise important for the strength of the regional economy.

The main objective: to build on the region’s comparative advantage on research and development.

Programme name

Time horizon



Regional Economic Strategy for South West of England

2006 – 2015

Regional sources (South

West of England

Assembly)

Not stated South West of England Regional Policy


development

The priority areas: business productivity, new enterprise encouragement, skills delivery for the economy, global economic competition, innovation.

The main objective: to have an economy where the aspirations and skills of the people living in the region combine with the quality of physical and cultural environment in order to provide a high quality of life and sustainable prosperity to everyone.

Source: Mas (2007)


Cluster policy implementation is very important at both national and regional levels. The UK Department of Trade and Industry recognised that clusters have a significant role in motivating economic development in localities, cities and regions, and aims to establish a consistent policy that encourages cluster development and thus actively contributes to increasing the innovation performance of the United Kingdom (Department of Trade and Industry, 2001a).

The UK government plays a significant role in removing barriers to the emergence of new clusters and the growth of existing clusters in the country, for example, by addressing restrictive planning laws, ensuring a modern infrastructure, the supply of highly skilled workers, and addressing barriers to capital movement.

Furthermore, the UK government has put in place a number of measures to actively support the rebalancing of the economy, empower local communities and address barriers to growth. Other measures, inter alia, include (Department for Business Innovation and Skills, 2011):

• Planning: the Government is currently consulting on proposed changes to the currentplanning legislation with a new emphasis on supporting economic growth.


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• Infrastructure: the Government introduced Infrastructure Plans in the 2011 NationalInfrastructure Plan and it is investing in improved transport links and a modern digitalinfrastructure.

• Skills: the Government is making the skills system more business driven and locallyresponsive, which will ensure that employers can access the skills they need to supportthe growth of their business and the wider cluster.

• Fiscal incentives: the UK Government seeks to ensure that the UK has the mostcompetitive Corporate Tax Regime in the G20. The Government has also put forwarda range of measures to develop enterprise zones and make them attractive places to dobusiness.

• »Launchpad«: the Government’s measure to support new and emerging clusters inspecific technology areas and geographical locations in other parts of the UK, such asBristol (media), Manchester (media), Edinburgh (software), Northeast (renewableenergy), Cambridge (med-tech), Southampton (photonics and software), and in theMidlands (light machinery).

A cluster in a particular sector or a group of interrelated sectors may be deemed significant at the regional level (for example, in terms of its share of regional employment); however, in national terms it is not significant (as the employment within a cluster accounts for only a small proportion of the national employment). This raises an issue of scale and significance, leading to another issue of “national” and “regional” clusters. National clusters are identifiable in national terms and have one or more significant regional localisations. Regional clusters are those groups of companies which are important in local or regional terms. In some cases, these may be small local concentrations that are not significant in terms of scale, but which development agencies at the regional or local level may wish to develop for strategic or other reasons (OECD, 2007).

Although there are neither national regulation for implementing cluster policy in the country nor nationally managed cluster programmes per se, the Department of Trade and Industry supports a range of cluster initiatives that are further implemented by regional development agencies. The Department has delegated most of its powers to regional authorities.

The British regions develop and prioritise strategies for clusters, as part of their regional economic strategy. Finance for the regions comes from the public sector combining funds provided by the central government departments: the Department of Trade and Industry, the Department for Communities and Local Government, the Department for Education and Skills, and the Department for Environment Food and Rural Affairs.

The RDAs have the power to reinforce a development strategy that corresponds to their region’s strengths, capabilities and requirements, for change. Therefore, there are regional variations in the strategies across the RDAs. Nevertheless, the key aspects to cluster strategies are:

• Mobilisation: generating an interest and participation in the cluster.• Diagnosis: identifying and defining the cluster and establishing the strengths and

weaknesses of the cluster.


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• Collaborative strategy: identifying the actions required to provide the development ofthe cluster.

• Implementation: implementing the actions.• Assessment: monitoring and evaluating the strategy (Department of Trade and Industry,

2001a.)

Regional development agencies were created to design and manage regional economic strategies to:

• Foster regional competitiveness.• Lead regeneration projects.• Deal with regional employment (Department of Trade and Industry, 2001).

12.7 Conclusion

Clusters are geographical concentrations of interconnected companies, knowledge institutions and specialised suppliers. They manifest a high level of innovation and cooperation, lower the risk involved in developing and commercialising new and emerging technologies, and promote generating and disseminating knowledge and exploiting it commercially.

The main document underlying the development of cluster policy at the national level in the United Kingdom was the 1998 Competitiveness White Paper entitled »Our Competitive Future – Building the Knowledgeable Driven Economy«.

Networks built around clusters include academics, technologists, qualified workers andinvestors, who develop their knowledge and experience on strengths and new technological opportunities, and the potential risks involved. Clusters situated in the country are members of two internationally recognised cluster networks: »Clusterplast« and »European Aerospace Cluster Partnership«.

Clusters participate in job creation in standard sectors, creative and cultural industries, knowledge-intensive commercial services, and life sciences.

The UK Government’s cluster policy is to generate stable conditions that foster the development of clusters, but not to artificially create them, which is facilitated by national innovation and enterprise policies. The government allocations come in the form of general business support, for example, in grants, and in services supporting innovation (e.g. creating laboratories and/or science parks). The country has a number of national and regional cluster programmes funding cluster activities from national and regional sources, the EU funds, corporate or other sources.

The UK Department of Trade and Industry is, among other responsibilities, responsible for the implementation of cluster policy in the country (Department of Trade and Industry, 2001). However, much of the responsibility of the DTI has been transferred to regional authorities, i.e. to nine Regional Development Agencies.


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At present, the United Kingdom is a home to a number of world-leading clusters. For example, the »Cambridge Network« is a membership organisation based in the vibrant high- technology cluster specialising in IT and life sciences. It has given rise to several renowned companies such as ARM Holdings, Autonomy, Cambridge Silicon Radio and a number of innovative start-ups. The cluster is appealing to investors as well, for example, to Takeda and Pfizer (OECD, 2007).


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References

[1] ANDERSSON, T., SCHWAAG-SERGER, S., SÖRVIK, J., WISE, E. 2004. ClusterPolicies Whitebook. Iked. pp. 266. ISBN 91-85281-03-4.

[2] ANDRIANI, P. et al. 2005. The Cluster Effect. How cluster policy can make the UK morecompetitive. pp. 20 - 21. Available from: http://www.aimresearch.org/uploads/File/Publications/Executive%20Briefings%202/The_cluster_effect.pdf.

[3] BARSOUMAIN, S., SEVERIN, A., van der SPEK, T. 2011. Eco-innovation and nationalcluster policies in Europe - a Qualitative Review, Brussels. Available from:http://www.clusterobservatory.eu/eco/uploaded/pdf/1315915223865.pdf.

[4] BRESCHI, S., MALERBA, F. 2007. Clusters, Networks and Innovation. OxfordUniversity Press. ISBN 978-01992-755-64.

[5] DEPARTMENT FOR BUSINESS INNOVATION AND SKILLS. 2011. Innovation andResearch Strategy for Growth. TSO Publishing. ISBN 978-0-10-182392-0.

[6] DEPARTMENT OF TRADE AND INDUSTRY. 2001. Business Clusters in the UK -a First Assessment. Volume 1, Main report. pp. 22 - 23. Available from:http://webarchive.nationalarchives.gov.uk.

[7] DEPARTMENT OF TRADE AND INDUSTRY. 2001a. Business Clusters in the UK -a First Assessment, Volume 3, Technical Annexes. pp. 40 - 41. Available from:http://webarchive.nationalarchives.gov.uk.

[8] EUROPEAN COMMISSION. 2013. Innovation Clusters in Europe. a statistical analysisand overview of current policy support. pp. 64 - 65. Available from:http://www.central2013.eu/fileadmin/user_upload/Downloads/Tools_Resources/Cluster.pdf.

[9] EUROPEAN CLUSTER OBSERVATORY. 2009. Clusterplast. Available from:http://www.clusterobservatory.eu.

[10] EUROPEAN CLUSTER OBSERVATORY. 2009a. European Aerospace ClusterPartnership. Available from: http://www.clusterobservatory.eu.

[11] EUROPEAN CLUSTER OBSERVATORY. 2009b. Available from:http://www.clusterobservatory.eu.

[12] EUROPE INNOVA. 2008. Cluster Policy in Europe. Oxford. pp. 34. Available from:http://www.clusterobservatory.eu/system/modules/com.gridnine.opencms.modules.eco/providers/getpdf.jsp?uid=100146.

[13] GARSON, G. D. 2014. Cluster Analysis: 2014 Edition (Statistical Associates Blue BookSeries 24). Statistical Associates Publishers. ISBN: 978-1-62638-030-1.

[14] KIND, S., MEIER zu KÖCKER, G. 2013. Cluster impact analysis. The real cluster case.Berlin.

[15] LAGENDIJK, A., CHARLES, D. 1999. Clustering as a new growth strategy for regionaleconomies? a discussion of new forms of regional industrial policy in the UK. In. OECD


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(ed)., Boosting Innovation. The Cluster Approach, Paris: OECD. pp. 127 - 153. ISBN: 978-926-41-70-803.

[16] LINDQVIST, G., KETELS, C., SÖLVELL, Ö. 2013. The Cluster Initiative Greenbook2.0 Stockholm: Ivory Tower AB. pp 66. ISBN 978-91-974783-5-9.

[17] MAS, G. 2007. The Cluster Competitiveness Group: Country Report: United Kingdom.pp. 46 - 48. Available from: http://www.kooperation-international.de/uploads/media/Cluster.Policies_Country.report.Grossbritannien.pdf.

[18] OECD. 2007. Competitive Regional Clusters - National Policy Approaches. ISBN: 978-92-64-03182-1.

[19] PAVELKOVÁ, D. et al. 2009. Klastry a jejich vliv na výkonnosti firem. Prague. ISBN978-80-247-2689-2.

[20] PORTER, M. E. 1990. Competitive advantage of nations. New York: Free Press. ISBN0-684-84147-9.

[21] PORTER, M. E. 1998. Clusters and Competition: New agendas for companies,governments and institutions, In: Porter, M. E. (ed.): On Competition. Boston, Mass.:Harvard Business Review Books, pp. 197-287. ISBN: 978-0875847955.

III. Cluster Policies in North America


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Chapter 13

Cluster Policy in the United States of America


13.1 Introduction 13.2 Cluster Policy Legislation 13.3 Cluster Policy Principles and Basic Areas 13.4 Cluster Policy and Other Related Policies 13.5 Funding Cluster Policy in the United States 13.6 Cluster Policy Centralisation vs. Decentralisation 13.7 Conclusion

References


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13.1 Introduction

Despite sluggish economic performance in recent years due to the financial crisis, the United States remains the world’s largest economy with a nominal GDP of $14.7 trillion, which accounts for 20% of the world’s gross domestic product. In 2010, the economy grew by 2.9% (driven mostly by consumption), which represented 70% of the economy (Kowalski and Homan, 2011).

The United States’ economy has evolved from one largely driven by the manufacturing sector to a service-based economy. For instance, during the 1940s manufacturing accounted for 38% of the economy, in contrast to 10% for services. Today, 79.6% of real GDP is generated by services. Even the clusters growing most rapidly include service clusters like business services, financial services, hospitality, and tourism (Alcazar et al., 2011).

Cluster policy in the United States is to a great extent derived from the U.S. innovation policy, which is quite complex. The American innovation policy is characterised by its ability to lure top scientists from all over the world, and thus creates ideal conditions for continuous growth in the national competitiveness as well as the competitiveness of individual states.

Innovation and cluster policies in the United States of America provide key tools for building national and regional competitiveness in the country. It was an American professor, Michael Eugene Porter, who was at the beginnings of modern cluster theory, in 1990, when he published his book entitled »The Competitive Advantage of Nations«, and has been intensively dealing with this subject at the Institute for Strategy and Competitiveness (ISC) up to now. The ISC is a non-profit research, education and policy organisation founded by Professor Porter and based at the prestigious Harvard Business School in Boston, Massachusetts.

Also, the United States has long been home to the best-in-class scientific and technological organisations, including probably the most significant cluster in the world, »Silicon Valley«, the most well-known centre of computer and technology industry. Silicon Valley greatly contributes to the development of the region, the state of California, and the entire country. Silicon Valley was, and in the majority of cases, still is, home to a number of world-famous technological companies such as Apple, Google, Facebook, Intel, Cisco, Adobe, Oracle, Yahoo, eBay and many others.


Cluster policy in the USA derives from innovation policy, which is rather complex. The U.S. has a highly decentralised and diverse innovation system, involving multiple actors, including branches of federal and state governments, public agencies, universities, the private sector, and non-profit and intermediary organisations. The system combines a high-level of R&D with basic research sponsored particularly by federal government agencies, and a strong orientation towards applications and the market. The U.S. innovation policy is characterised by its ability to attract scientists from all over the world, especially due to the Fulbright Program of highly


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competitive, merit-based grants for international educational exchange for students, scholars, teachers, professionals, scientists and artists, who may become eligible for scholarships to study, conduct research, or exercise their talents, and the high quality legislative framework for technology transfer from R&D institutes (the Bayh–Dole Act or Patent and Trademark Law Amendments Act). Additionally, the United States has very strong intellectual property protection and regulatory environment, supported by laws including the Sherman Antitrust Act of 1890, Clayton Act 1914, Robinson-Patman Act 1936, and the Celler-Kefauver Act 1950. This legal framework strongly supports the US’s strong commitment to competition and free market values. Lastly, there are the world’s best higher education institutions, which have enabled an ample supply of highly-qualified scientists, engineers and managers – key elements in building knowledge-intensive clusters.

The Bayh–Dole Act was most probably the most influential legal regulation with an impact on patent and trademark law, and intellectual property rights in the 20th century. Named after two senators, Birch Bayne of Indiana and Bob Dole of Kansas, the Act was adopted in 1980. The key change made by Bayh–Dole was in ownership of inventions made with federal funding. Before the Bayh–Dole Act, federal research funding contracts and grants obligated inventors (wherever they worked) to assign inventions they made using federal funding to the federal government. Bayh–Dole permits a university, small business, or non-profit institution to elect to pursue ownership of an invention in preference to the government. Prior to the enactment of Bayh-Dole, the U.S. government had accumulated 28,000 patents, but fewer than 5% of those patents were commercially licensed. The Act altered the grounds for the protection of intellectual property rights and became a special instrument to support technology transfer for universities, non-profit organisations and small firms that carried out and funded their research programmes from federal sources.

The Act has inspired other countries, for example, Germany, Austria, Denmark, Norway, Japan and South Korea, which have also reformed the rules and regulations of funding research from public sources, and the rights and procedures regarding the utilisation of research outcomes (Kačírková, 2014).

13.3 Cluster Policy Principles and Basic Areas

An essential feature of clusters in the U.S. is their openness, communication, knowledge sharing, creativity and dynamics in collaboration of subjects in the entrepreneurial, education, research and public sectors in the implementation of common projects leading to removing barriers to the development of the given sector and the achievement of new strategic goals.

Regional economies constitute a fundamental pillar of the U.S. competitiveness. The national capability of creating high value-added products and services depends on the creativity and position of key regional actors in particular industrial sectors.

Regional innovation clusters are a key component of national competitiveness. The United States of America develops functional innovation policies, where responsibility is divided among regional governments and the federal government. The Federal Government wanted to


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undertake the main role in the cluster policy area. Barack Obama, the American President, required approximately $100 million within the annual 2010 budget for the U.S. Department of Commerce's Economic Development Administration (EDA), under the U.S. Department of Trade, in order to promote regional innovation clusters. This support was necessary for clusters in order to effectively use their potential and boost their strengths, even though many of them had been successful beforehand.

U.S. companies have been clustering for decades, or even centuries. As a matter of fact, metallurgical companies formed clusters along the Connecticut River Valley as early as in the 18th century and the end of the 19th century. Manufacturers in big cities clustered to learn from one another – the clothing manufacturers in Philadelphia, plastics manufacturers in Massachusetts, furniture manufacturers in Grand Rapids in Michigan, jewellers in Providence on Rhode Island, and the industrial machinery manufacturers in Cincinnati. In the first half of the 20th century, the film-making industry concentrated in the Los Angeles area, finances in New York, and the automotive industry in Detroit. And, for decades, Silicon Valley has been a symbol of a successful high-tech cluster.

Delgado et al. (2012), and Delgado and Stern (2014), on the basis of their own research studies, pointed to the significance of clusters in the U.S. for a number of reasons. They all argue that clusters contribute to:

• The growth of existing industries: industrial sectors within strong clusters are associatedwith higher growth in wages, numbers of innovations, and higher levels of employment.At the same time, the authors assume that there is a correlation between the level ofinnovation in a cluster and its impact on regional employment.

• The creation of new industries: new industrial sectors or subsectors are more likely toemerge if sectoral activities can be integrated into the existing cluster, or, if strongclusters with similar scopes of activity merge.

• The overall growth of the region: industries that are part of a stronger cluster registerhigher levels of job growth, which suggests that strong clusters enhance opportunitiesfor job creation in other activities in the region.

Delgado et al. (2012), and Delgado and Stern (2014) also provided a large body of evidence that clusters have positive effects on various facets of regional industry and regional performance. Clusters facilitate related economic diversification in (cooperating or supporting) regions, thereby reducing the region’s economic vulnerability. Regions at all stages of development benefit from the presence of strong regional clusters. The authors also concluded that, in a cluster environment, the level of start-up establishments is higher, the start-up firms are usually successful, and they achieve higher levels of start-up employment and innovation than firms emerging from a non-cluster environment. Therefore, the presence of clusters in a region directly or indirectly becomes a positive factor that affects the success of surviving start-up firms.


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The U.S. cluster policy is very closely related to R&D and innovation policy, regional policy, and industrial and enterprise policy in the country. This is due to the fact that the U.S. has long been working to become the most innovative country in the world, which is supported by strong clusters and by the country itself being the largest economy in the world. Apart from that, the vast area of the United States of America has made the country highly decentralised, which resulted in extraordinarily strong and resistant clusters supported more frequently from the state level than from the national, federal level.


The level of interconnection between technological innovation and clusters is very high, even higher than in the majority of other highly-developed countries in the world. The most famous cluster in the world is the American Silicon Valley, which is often referred to as a symbol of innovation in the U.S. and all over the world.

An important institution for the promotion of R&D and innovation in the United States is the National Science Foundation (NSF). It is an independent federal agency created by Congress in 1950 “to promote the progress of science; to advance the national health, prosperity, and welfare; and to secure the national defense…” With an annual budget of approximately $6.9 billion in 2010, the agency was the major source of federal backing.

In 1982, Congress established the »Small Business Innovation Research« (SBIR) programme to support scientific excellence and the development of new innovative technologies in private companies. The programme budget amounted to approximately $2 billion in 2004. The SBIR programme is not a grant or loan; it is contracts support, the investment of federal research funds in the development of technologies in critical government priorities to build a strong national economy. The programme has undergone a relatively long-term evolution and has been successfully re-authorised twice. Working as a catalyst to R&D, it enables small businesses to explore their technological potential and provides the incentive to profit from its commercialisation. Since 1982, the programme’s contributions have enhanced the nation’s defence, protected the environment, advanced health care, and improved the country’s ability to manage information and manipulate data. Products made within this programme have found wide application in biology, medicine, and education. Currently, the SBIR programme is implemented through as many as eleven federal agencies. The most important among them is the U.S. Department of Defense, which allocates almost half of all the project resources. The second largest is the National Institute of Health (NIH) with its headquarters in Maryland. These agencies designate R&D topics in their solicitations and accept proposals from small businesses. Awards are made on a competitive basis after proposal evaluation. The funding covers 100% of all costs and a small profit for the participating company. Small businesses that win awards in these programmes keep the rights to any technology developed, and the federal government does not require any form of repayment of

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the funds invested. The businesses are even encouraged to commercialise the technology thus turning new ideas into successful products in the market. Various research studies have emphasised the fact that the SBIR businesses are creating several times more job opportunities than other companies. At present there are ongoing discussions not about the necessity of the programme, but about making it more effective.

A similar programme, almost a mirror image of the SBIR, is the »Small Business Technology Transfer« (STTR) programme, aiming at supporting technology development and transfer based on collaboration between non-profit R&D laboratories and private companies. In comparison to SBIR, only five federal departments and agencies are required each year by STTR to reserve approximately $200 million of their R&D funds for award to small business/non-profit research institution partnerships. The funding scheme is analogous to that of the SBIR programme (Balog, 2007).

There are some federal (national) programmes in the U.S. which promote economic development and sometimes contain cluster initiatives. For example, the Economic Development Administration (EDA), under the U.S. Department of Commerce, has supported a number of research reports on the significance of clusters and regional innovation systems for the national economic development (OECD, 2007). All in all, it can be concluded that before Barack Obama’s ascent to the presidency in 2009, cluster policy and economic development agenda had been strictly the responsibility of individual states.

13.4.2 Cluster Policy, Regional Policy and Industrial and Enterprise Policy

Since 2012, the relations between cluster policy, regional policy, and industrial and commercial policy in the United States have been closely dealt with in the »U.S. Cluster Mapping Project« mapping clusters and cluster initiatives in the U.S.A. The U.S. Cluster Mapping Project is a national economic development initiative that has brought together researchers, practitioners, and policy-makers to design, develop and test a robust and transparent cluster mapping tool with the aim of providing an open interactive platform for better understanding clusters, innovation, and supporting innovation and cluster policies in the United States. The project was launched in 2012 and led by Harvard Business School Professor Michael Porter through the Institute for Strategy and Competitiveness. Several prestigious American universities and supporting organisations are participating in the project, with support from partners around the country and a federal grant from the U.S. Commerce Department’s Economic Development Administration (EDA).

The following figure shows a U.S. map of the most significant clusters the United States by state and sector.


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Figure 13.1 Distribution of the most significant clusters in the USA by state and sector

Source: The U.S. Cluster Mapping Project (2014)

In 2015, the authors of the U.S. Cluster Mapping Project focused on determining a significant comparative regional indicator – “cluster strength”. The term was specifically defined for the first time in a document entitled »Clusters and Entrepreneurship« (Delgado et al., 2010) and has been used within the U.S. Cluster Mapping Project research several times for comparing the levels of potential of individual U.S. states as regards the formation and successful functioning of strong clusters. Industries within stronger regional clusters (in the individual states within the U.S. federation) have been continuously associated with higher growth of start-up activity, higher level of start-up activity including new start-up establishments, and higher level of employment in surviving start-up firms. Industries within strong regional clusters also frequently register new spin-off establishments and improve survival chances for new firms in their critical post-establishment phases (Delgado et al., 2010; Institute for Strategy and Competitiveness, Harvard Business School, 2015).

Furthermore, the research project has indicated that “cluster strength”, i.e. the most favourable conditions for the emergence and existence of strong and successful clusters in the United States, are in Texas, Nebraska, Maryland, New Jersey, Georgia, California, Arizona

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and Florida. These countries are marked the darkest colour in the figure. On the contrary, Hawaii and Vermont are the states that are the least suitable for cluster formation in the whole country. In both cases, these are the smallest states in terms of area and population.

Figure 13.2 Cluster strength in individual U.S. States in 2012 in %

Source: U.S. Cluster Mapping Project Institute for Strategy and Competitiveness, Harvard Business School (2015)

Table 13.1 Cluster strength by state in the U.S. in 2012 in %

Rank State Cluster Strength (2012) Rank State Cluster Strength

(2012) 1. Texas 65.16% 26. Massachusetts 40.40% 2. Nebraska 62.37% 27. South Carolina 39.38% 3. Maryland 62.06% 28. Alabama 36.77% 4. New Jersey 61.40% 29. Wyoming 36.22% 5. Georgia 61.16% 30. New Hampshire 36.00% 6. California 61.12% 31. Missouri 35.98% 7. Arizona 59.17% 32. New York 35.88% 8. Florida 58.55% 33. Oregon 35.83% 9. Colorado 56.39% 34. West Virginia 34.59%

10. Nevada 54.74% 35. Indiana 33.51% 11. Utah 54.51% 36. Ohio 30.08% 12. Iowa 53.57% 37. Alaska 28.58%


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13. Connecticut 49.63% 38. Oklahoma 27.50% 14. Virginia 48.66% 39. Michigan 25.67% 15. Kansas 48.51% 40. North Dakota 24.46% 16. New Mexico 47.48% 41. Washington 22.02% 17. Arkansas 46.95% 42. Minnesota 20.33% 18. Tennessee 46.88% 43. Delaware 19.90% 19. Louisiana 46.55% 44. Maine 19.33% 20. Wisconsin 45.30% 45. Idaho 17.30% 21. North Carolina 43.52% 46. Montana 13.82% 22. Mississippi 42.44% 47. South Dakota 12.87% 23. Kentucky 42.23% 48. Rhode Island 11.48% 24. Illinois 41.95% 49. Hawaii 3.85% 25. Pennsylvania 41.09% 50. Vermont 0.14%

Source: U.S. Cluster Mapping Project Institute for Strategy and Competitiveness, Harvard Business School (2015)

13.5 Funding Cluster Policy in the United States

Unlike the majority of other countries, the United States did not long have a common regional policy at its federal level, mainly due to the federal administration of the country and the country’s vast area. Until 2008, political instruments and financial resources for cluster promotion and economic development had been regulated from state levels. Programmes at the federal level directly supporting regional specialisation and clustering were fairly rare and, if any, they were able to allocate very limited funds and used to focus on lagging regions.

A number of institutions and agencies at the individual state levels promote regional economic growth by providing stimuli and implementing measures that aim to promote clusters today. The Economic Development Administration (EDA) within the aegis of the U.S. Department of Commerce has sponsored several research projects that emphasised the significance of clusters and regional innovation systems, and brought the agenda of regional development to attention. This attitude has manifested itself in the unification of programmes giving priority to regional economic development by fostering innovation and entrepreneurship. Lagging regions have an opportunity to increase their competitiveness and participate in the national economic growth.

As has been previously stated, in 2010, the U.S. federal government first decided to introduce a common national cluster policy for regions on which basis the »Regional Innovation Clusters Initiative« was launched, and a new national framework for national economic activities boosting regional development was established. This programme started very slowly, but since its inception has been growing year by year. In its first year, in 2010, the U.S. administration required a budget of only $50 million which was divided among small regional cluster initiatives and research centres. Initiated by President Obama in 2010, there were the following federal government assistance programmes supporting clusters throughout the United States:


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Table 13.2 Federal government assistance programmes supporting clusters in the U.S. launched during Barack Obama’s Presidency

Name of Institution

Name of Programme Programme Description

Economic Development Administration (EDA)

»RegionalInnovation ClustersProgram«

The framework for the »Regional Innovation Clusters Program« was set by the Economic Development Administration (EDA). The main objective of the programme is to provide funds for well-developed regional strategies, giving priority to institutional collaboration and utilising the region’s main strengths.

Economic Development Administration (EDA)

»I6 Challenge«

»I6 Challenge« is implemented under the aegis of the EconomicDevelopment Administration (EDA) in cooperation withthe National Institute of Health and the National ScienceFoundation. The programme promotes entrepreneurship ininnovation of regional ecosystems.

Small Business Administration (SBA)

»RegionalInnovation ClustersProgram«

The »Regional Innovation Clusters Program« is managed and implemented by the Small Business Administration (SBA). The programme focuses on business education training, technology transfer, counselling and other services for small-scale regional clusters.

Small Business Administration (SBA)

»Advanced DefenseTechnologyProgram«

The »Advanced Defense Technology Program« is managed by the SBA. The main objective of the programme is to promote small business growth in regional innovation clusters in the advanced robotics sector, computer security and other important defence systems designed for the U.S. Department of Defense.

U.S. Department of Energy (DOE)

»Energy EfficientBuilding SystemsRegionalInnovation Cluster«(E-RIC)

The »Energy Efficient Building Systems Regional Innovation Cluster« (E-RIC) programme provides funding for regional research centres aimed at the development of new energy efficient technologies for the construction industry and the promotion of regional energy clusters.

U.S. Department of Agriculture (USDA)

»Rural InnovationInitiative«

The »Rural Innovation Initiative« is governed by the U.S. Department of Agriculture and it calls for pilot strategic planning to join lagging rural areas and developed metropoles.

National Science Foundation (NSF)

»NSF InnovationEcosystems«

The »NSF Innovation Ecosystems« programme is implemented within the aegis of the National Science Foundation. The programme aims to promote innovation-driven regional clusters situated in the close vicinity of universities.

Source: Muro, Katz (2010)

As Sallet et al. (2009) have it, the United States spends over $150 billion per annum to support R&D, of which only approximately $651 million is allocated for programmes that can be described as directly or indirectly supporting regional innovation clusters. Regional innovation policy has remained to be a locally-organised process; however, the federal government, due to the implemented changes, has gained an important role in financing and coordinating the development among the federal (national), state and regional levels. In this respect, the federal government has become a major source for the future growth of regional innovation clusters and has built a missing link in the American chain of promoting innovation.


In 2007, the OECD stated in its research study that the United States has no cluster policy at the national (federal) level and that the individual states within the U.S. pursue their own cluster


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policies at the state levels. a real change came when Barack Obama assumed his presidency at the beginning of 2009, when the first cluster promotion initiatives and programmes were proposed at the national level, and clusters promotion became balanced and quite complex (President's Council of Advisors on Science and Technology, 2011).

13.6.1 Federal Support for Clusters

1996 was a historic year, when the United States first realised the need for analysing the presence of clusters in the country. a response to continuous efforts of individual states came from the federal government; although, compared to the national cluster-development initiatives of other nations, U.S. federal programmes tended to be rather uncoordinated.

The federal government has become far more engaged in the past few years. In 2007, concerns that the U.S. was ceding global leadership in technology and innovation competitiveness prompted Congress to address clusters in legislation such as the »America COMPETES Act« (in full: »The America Creating Opportunities to Meaningfully Promote Excellence in Technology, Education, and Science Act of 2007«). Cluster building took on greater urgency in the wake of the financial crisis of 2008 and the deep recession that followed. Reauthorisation of the Act by President Obama in 2010 showed genuine interest of the federal government in the national innovation policy. The Act continued a robust investment in basic research and education and preserved the essence of the original Act by increasing the investment focus on science, technology, engineering, and basic research and education as national priorities. The Departments of Energy, Commerce, Defense, Agriculture, Labor, and Education now all have programs devoted to regional innovation clusters.

New federal programmes include, for example, the »Energy Regional Innovation Clusters« (E-RIC) programme, in which the Department of Energy is leading several other federal agencies in cooperation with local governments, universities and the private sector in order to help U.S. regions develop innovation zones. Another example is the »Energy Innovation Hubs« programme, which allocated approximately $2 billion under the American Reinvestment and Recovery Act (ARRA) for multidisciplinary teams to deploy new clean-energy technologies at scale, and supported, among others, a strong cluster in Michigan. The Economic Development Agency (EDA) of the U.S. Department of Commerce received $50 million for a project under the Recovery Act to promote regional cluster initiatives and to help create business incubators; and to map cluster activities across the country, develop evaluation metrics, and spread best practices in cooperation with Harvard University. Apart from these, the U.S. Small Business Administration (SBA) is supporting efforts to develop robotics clusters in Michigan, Virginia, and Hawaii with the help of state agencies and the Department of Defense and the National Science Foundation (NSF), and together they are supporting regional innovation clusters by helping faculty and students to commercialise innovations, form industry alliances, and launch start-ups. Moreover, states and regions can compete for funds to support cluster development through programmes implemented by the National Institute of Standards and Technology (NIST) (Wessner, 2011).


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A perfect example of federal support is fifty-six clusters funded by the U.S. Small Business Administration (SBA). In the autumn of 2010, the SBA provided funds for the first three clusters with the help of some other federal agencies. These clusters were localised in a wider area of the city of Philadelphia, and in Florida and Ohio. Similarly, in an open competition of one hundred and seventy-three applicants in the autumn of 2011, the SBA selected and awarded ten more pilot cluster projects.

In September of 2011, the Obama’s administration launched a multi-agency initiative entitled »Jobs and Innovation Accelerator Challenge« that brought public and private sectors together to build on America’s regional strengths and create local jobs in the key industries of the future. a total of $37 million was allocated to as many as twenty clusters. In the spring of 2012, another group of thirteen clusters were co-financed by a number of federal agencies and offices within the framework of the »Rural Jobs and Innovation Accelerator Challenge« initiative to support rural partnerships with the same objectives as the previous initiative in rural areas. The budget for this initiative was $15 million and the SBA provided technical support for the project. »The Advanced Manufacturing Jobs and Innovation Accelerator Challenge« was another competitive multi-agency grant process announced in May 2012 to support initiatives that strengthen advanced manufacturing at the local level, improve the competitive position of American manufacturers on the global market, and provide targeted solutions to foster innovation in key American industries. Ten clusters were awarded a total of $20 million to fund their initiatives (SBA, 2012; SBA, 2014).

13.6.2 State Support for Clusters

Since 1990, a number of authors led by Michael Porter have developed theoretical frameworks explaining the role that industry clusters play in fostering economic development. Fulton (1997) believes that the 21st century is the right time to perform cluster-based economic development analyses. The governments in the states of New York, South Carolina, Texas, California, and some others, started to formulate large-scale cluster-based strategies (Waits, 2000; Kossy, 1996).

The missing co-ordination of federal cluster efforts until 2008 has exerted extraordinary pressure on states and local governments in the U.S. to work collaboratively with universities, invest in R&D centres, award grants to companies focused on manufacturing, and to provide initial funds for newly-established businesses. Federal agencies were required to harmonise their resources with existing regional cluster initiatives (Mills et al., 2008; Porter, 2011; and Sallet et al., 2009).

Today, a growing number of state and regional governments are developing comprehensive strategies to nurture new concentrations of growth industries. State and regional supporting initiatives frequently include reinforcing cooperative efforts between the private and public sectors that can be grouped under the rubric of public-private partnerships, in which the U.S. corporations, universities and governments combine their resources in order to create R&D centres, train workforces, develop supply and support industries, and provide venture capital to start-up companies. Such public-private partnerships take place at several levels. State and local


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governments actively promote domestic industries, mainly those capable of competing outside the local markets. Some states in the U.S. have gone even further by creating programmes promoting the growth of innovative high-tech firms and research-driven clusters. The crucial element in the public-private partnerships in the United States of America is cluster support through the research facilities or science parks with universities or national laboratories at their nucleus. The fact that firms cluster with the aim of profiting from shared services and professional knowledge has aroused interest in promoting industry clusters as potential engines of regional development. Clusters may be the right solution for industries, universities and government agencies at the federal, state and local levels, which will combine seemingly uncombinable elements into a single well-functioning system (Wessner, 2011; Wessner and Wolff, 2012; and Kenney, 2000).

13.6.2.1 Silicon Valley in California - An Example of Successful Cluster

California has no specific cluster promotion programme at the state level at the moment. Instead, it has attractive natural and social conditions that act as a magnet for people seeking self-fulfilment in the region, such as favourable geographic and climatic conditions, a strong endowment of natural resources, and qualified and abundant human capital. These conditions have gradually transferred into the important regional assets including prestigious innovation-driving universities, research centres, national laboratories, talented people, technology entrepreneurs, corporate culture, networks in a variety of sectors, and vibrant city centres.

California has put a great deal of sustained effort in commercialising ideas and knowledge, establishing new firms and creating additional job opportunities by investing aggressively and sustainably in R&D, developing technology, and private-public partnership.

Silicon Valley presents the southernmost part of San Francisco’s coast in Northern California with the capital of San José. Today, the »Silicon Valley IBS Cluster« is probably the most famous hub of the computer and technology industry in the world. It has significantly promoted the regional and national economic development. Numerous world-leading technological firms such as Apple, Google, Facebook, Intel, Cisco, Adobe, Oracle, Yahoo, eBay, and many others, have come into existence in the region. The growth of Silicon Valley has been promoted by the development of legal infrastructure boosting formation, funding and expansion of high-tech companies. a number of national and international legal advisory groups have opened their subsidiaries in San Francisco and Palo Alto since 1980, offering their legal services to emerging companies. There are very important governmental agencies in Silicon Valley such as Moffett Federal Airfield, NASA Ames Research Center, Onizuka Air Force Station and some twenty-nine universities including, for example, Stanford University, the University of California-Berkeley, Silicon Valley University, or San Francisco State University. The all have had vast impact on attracting and further developing prime talent from around the world.

Out of the companies operating in Silicon Valley, Cisco Systems – a world-leading company in data, voice and image transfer, and in LAN/WAN networks – is the greatest R&D spender.

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Almost all Internet-based services in the region are provided using products manufactured by Cisco Systems.

Aoki (2000) hypothesizes that the success of the Silicon Valley model can be attributed to its organisational rather than technological aspects. In his view, Silicon Valley is perceived as a method of culture of establishing business contacts resulting in a product that is ultimately perceived as technology. Silicon Valley may be compared to other clusters such as »Hollywood«, the entertainment cluster in Los Angeles, while the factors that have affected andmaximised their success include a stable social and political environment, access to foreigntalents, and the risk-taking behaviour. Yet, research studies into successful clusters have notprovided any well-proven method or universal casual mechanism in the formation ofa successful cluster. a number of reasons can be provided for the notable success of theseclusters, one of them being the method how the film-making industry is organised in the caseof the Hollywood cluster. Extremely important factors explaining the success of Silicon Valleyare a vast pool of talent, dense network of suppliers, unrivalled access to venture capital froma variety of sources, and tremendous educational opportunities provided by researchinstitutions. Large private universities, such as Stanford, act as a magnet for the world’sbrightest and most visionary innovators from abroad that create over half of start-up firms inSilicon Valley. The proximity of universities, for example, Stanford, the University ofCalifornia at Berkeley, Santa Cruz, Los Angeles etc., and of research institutes, for example,Xerox’s Palo Alto Research Centre, have been mentioned among the important factors for theclusters’ success distinguishing the area from others. The areas around Palo Alto serve as a hubfor R&D companies attracting fresh graduates from Stanford University. The efforts to imitatethe Silicon Valley model can be seen in other countries such as Singapore and Malaysia(Wessner and Wolff, 2012; Klein, 2005).

Although the conditions stated above have created a supportive environment for the operation of the Silicon Valley Cluster, there is another equally important factor – the participation of the federal government:

• The U.S government substantially invests in the development of human capital in theregion.

• The U.S government is a main provider of physical infrastructure.• The U.S government holds decisive powers over commercial activity in the region.• The U.S government, in many cases, directly funds R&D projects in Silicon Valley.

Table 13.3 Factors of success of the Silicon Valley IBS Cluster

Factors of success Description

Standford University

American universities are the backbone of the country’s technological leadership and constitute an integral part of sustainable dynamic regional economy. Research at universities fosters local economies, mainly due to the capacity of qualified workforce and the strength of the innovation sector. The role of Stanford University in the Silicon Valley case was emphasised by the former Dean, Fred Terman, and its active effort to lure companies into the region, provide initial funding, and to establish a dialogue between firms and academia. His role was also in finding R&D opportunities in the defence sector, thereby making it possible for R&D organisations to draw abundantly from federal financial resources. The university’s ability to cultivate knowledge of the workforce in the region and to satisfy the market needs


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is a means that makes the University a strategic partner in the region. As a result, R&D organisations in Palo Alto keep recruiting graduates from Stanford University (Bresnahan and Ambardella, 2004).

Foundations

Private foundations play the role of a catalyst in the development of local innovation clusters. a distinguishing feature of the Silicon Valley is also traditional philanthropy. Foundations concentrate their resources in specific locations or in specific sectors. Such philanthropic foundations frequently reflect the interests of their donors, for example, the interest of the Moore Foundation in providing investment in healthcare with the purpose of human capital development.

Innovation Funds

Despite the fact that there is no cluster-specific programme at the state level in California aiming at commercialising ideas and knowledge in the market, there are large innovation funds providing financial support for R&D partnerships.

• »University of California Discovery Grants« (1996). The U.S. Government investedin universities to fund joint projects with private partners. The objective of theprogrammes is to promote community-related activities and activities that might bringnew commercial activities. It resembles the above-mentioned SBIR programmepromoting the transfer of laboratory projects into the first phase of development.

• California Institutes for Science and Innovation (2000). Four institutes were formed atthe University of California that shared a total of $400 million of federal investment.The Innovation Funds, the U.S. government and the private sector jointly collectedfunds amounting to some $1.2 billion.

Source: Author’s elaboration according to Kenney (2000), Lécuyer (2006), Moore and Davis (2004) and Alcazar et al. (2011).

Successful innovation activities do not always result from cooperation with universities. Similarly, it sometimes does not hold true that successful technological firms need to depend on cluster membership. Bio-technology is concentrated in two areas in California: San Francisco and San Diego. One of the largest independent biotechnology companies is AMGEN, situated in Thousand Oaks, which is geographically isolated and typical of its reluctance to cooperate with universities (Wessner, 2011).

13.7 Conclusion

The United States of America has proven to be one of the world’s most developed countries in terms of cluster policy implementation, given its attractive and innovation-fostering business environment and the presence of strong and highly-recognised universities. In the last decades, California Institute of Technology (Caltech), Massachusetts Institute of Technology (MIT), Harvard, Stanford, Princeton, Berkeley, and Yale have steadily been ranked among the top-ten universities in the world.

Although the U.S. ranks amongst the most successful countries regarding the implementation of cluster policy, it was as late as 2010 when the U.S. government first decided to launch a common national cluster strategy for regions. Before that, competences in the cluster policy area had been decentralised within the hands of individual states. By partially supporting clusters from the national (federal) level, the system became more balanced and complete. The implementation of cluster approach into the federal policy has linked the federal, state and regional economies more closely and effectively.


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The U.S. Cluster Mapping Project has been carefully mapping clusters, cluster initiatives, sectors and regions in the U.S. since 2012. The project is led by M. E. Porter with the aim of providing an open and interactive platform for the better understanding of and promoting of regional clusters, spurring and supporting innovation and cluster policies in the country. Several prestigious American universities and supporting organisations participate in the project. The project was developed to serve the needs of national and state governments, economic analysts and forecasters, and companies regardless of their size. It is to map out and improve the condition of competitive environment for a large range of industries. Currently its database contains as many as 50 million items of information on industry clusters and regional business environments in the U.S. Its main goal is to boost economic growth and the national and regional level of competitiveness. The project is carried out under the umbrella of the Harvard Business School, Institute for Strategy and Competitiveness, in cooperation with the U.S. Department of Commerce and the Economic Development Administration (EDA) under this Department.

Apart from a large body of other findings, the mapping project has found a positive relationship between the employment growth of regional industries and the strength of their clusters during the whole business cycle. Moreover, it has also indicated that cluster strength, i.e. the most favourable conditions for the emergence and existence of strong and successfulclusters in the United States, are in Texas, Nebraska, Maryland, New Jersey, Georgia,California, Arizona and Florida. In contrast, Hawaii and Vermont are the weakest states interms of cluster formation in the country. In both cases, these are the smallest states both in areaand population.


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[18] OECD, 2007. Competitive Regional Clusters - National Policy Approaches. ISBN 978-92-64-03182-1.

[19] PORTER, M. E. 1990. The Competitive Advantage of Nations, New York: Free Press,ISBN 0-684-84147-9.

[20] PORTER, M. E. 2001. Clusters of Innovation: Regional foundations of U.SCompetitiveness. Washington D.C.: Council on Competitiveness. 2001. ISBN 1-889866-23-7.

[21] PORTER, M. E. 2011. South Carolina Competitiveness: State and Cluster EconomicPerformance, Harvard Business School.

[22] PRESIDENT'S COUNCIL OF ADVISORS ON SCIENCE AND TECHNOLOGY.2011. Report to the President on Ensuring American Leadership in AdvancedManufacturing.

[23] SALLET, J., PAISLEY, E., MASTERMAN, J. 2009. The Geography of Innovation, TheFederal Government and the Growth of Regional Innovation Clusters.

[24] THE U.S. CLUSTER MAPPING PROJECT. 2014. Cluster: a regional concentrationof related industries. Available from: http://www.clustermapping.us/cluster.

[25] THE U.S. CLUSTER MAPPING PROJECT. 2015. Regions - Cluster Strengthby State. Available from: http://www.clustermapping.us/region.

[26] U.S. SMALL BUSINESS ADMINISTRATION. 2012. SBA Invests in Over 40 ClustersThroughout the US.

[27] U.S. SMALL BUSINESS ADMINISTRATION. 2014. Regional Cluster Initiative.[28] WAITS, M. 2000. The Added Value of the Industry Cluster Approach to Economic

Analysis, Strategy Development, and Service Delivery. Arizona State University. In:Economic Development Quarterly, 14(1).

[29] WESSNER, W. C. 2011. Growing Innovation Clusters for American Prosperity:Summary of a Symposium. Washington, DC: The National Academies Press. NationalResearch Council. ISBN 978-0-309-15622-6.

[30] WESSNER, W. C., WOLFF, W. A. 2012. National Research Council. Rising to theChallenge: U.S. Innovation Policy for the Global Economy. Washington, DC: TheNational Academies Press.

IV. Cluster Policy in Australia and Oceania


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Chapter 14

Cluster Policy in Australia

by Miriam Brašková Košice IT Valley, Slovak Republic [email protected]

14.1 Introduction 14.2 Cluster Policy Legislation 14.3 Cluster Policy Tools and Measures at National and Regional Levels 14.4 Cluster Policy Principles, Areas and Objectives 14.5 Cluster Policy and Other Related Policies 14.6 Funding Cluster Policy in Australia 14.7 Cluster Policy Centralisation vs. Decentralisation 14.8 Conclusion

References


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14.1 Introduction

Australia has a very specific position within the world: as the smallest permanently inhabitable continent (7.7 million km2), it is also an independent state organisation. Australia’s specific geographic and natural conditions have influenced the country’s direction in the process of clustering.

The first settlers of Australia were the Aborigines, who migrated there at least 40,000 years ago from Southeast Asia, well before the first Europeans started to explore Australia in the 17th century. Dutch, Portuguese, Spanish, and British ships first sighted Australia in the 17th century, but it was not until 1770 that Captain James Cook charted the east coast of Australia for Great Britain; the whole island was proclaimed to be the British territory in 1829 by establishing the colony of Western Australia. a British penal colony was set up in 1788, and English convicts were transported to Australia and forcibly settled there. At the turn of the 18th and 19th centuries, free settlers and former prisoners who had elected to stay established six colonies: New South Wales, Tasmania (then Van Diemen’s Land), Western Australia, South Australia, Victoria, and Queensland. The six colonies later became states and in 1901 federated into the Commonwealth of Australia. The efficient exploitation of the country’s abundant natural resources helped to rapidly develop agriculture and the related processing industry, which considerably helped the Allies during World War i and World War II several years later. In the last few decades, Australia has become a globally competitive country with a developed market economy (Ministry of Foreign and European Affairs of the Slovak Republic, 2014).

Australia is the driest inhabited continent on Earth, which makes it extremely vulnerable to climate change. Australia’s population density, 2.8 inhabitants per square kilometre, is amongst the lowest in the world.

The capital of Australia is Canberra. The country is administratively divided into six states: New South Wales, Victoria, Queensland, Western Australia, South Australia, Tasmania, and two major mainland territories: the Northern Territory and the Australian Capital Territory.

Australia has a population of over 22 million (2013), which is heavily concentrated in and around large cities such as Sydney, Melbourne, Adelaide, Brisbane, Darwin, Hobart and Perth. The indigenous population – Aborigines – was counted at 2% of the total population in 2013. The dominant population is the European immigrants, still mainly of British or Irish origin (90%), followed by immigrants from Asia (7%) or those of other origins (The Ministry of Foreign and European Affairs of the Slovak Republic, 2014).

The modern Australian history has been closely related to the history of Great Britain. The relation was established by the discovery of the continent by Captain James Cook, when Great Britain established another of its overseas colonies there. Due to its isolated position and very harsh living conditions, it became a suitable location for a British penal colony. Along with the convicts, military units and a small civilian population came to inhabit the new continent. Gradually, Australia began to separate and, in 1901, the Commonwealth of Australia as a dominion of the British Empire was established. Today, Australia is a constitutional monarchy with a federal division of powers with Elizabeth II, the British monarch, at its apex. The Queen resides in the United Kingdom and is represented in Australia by the Governor-


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General at the federal level and by the Governors at the state level. Australia is a member of the British Commonwealth of Nations and remains economically and politically linked to Great Britain.


With regards to the Commonwealth of Australia, it is necessary to consider several facts that lead to certain differences from the European continental perception of the role of state in the life of its citizens:

• Firstly, Australia is a federation of the Anglo-American type, which means thatindividual states within the federation have decision-making powers in a number ofclearly determined policy areas, which is reflected in a wide diversity of legalframeworks.

• Secondly, the Anglo-American law system is applied in Australia, where judges havethe authority and duty to make law by creating precedent when deciding legalcases. Thereafter, the new decision becomes precedent, and will bind future courts andhave precedential effect on future cases. This is called “common law” (also knownas case law or law of precedent) and means that consistent principles applied to similarfacts yield similar outcomes.

• Thirdly, the Commonwealth of Australia is a constitutional monarchy with the Britishruler at its apex; however, upon mutual agreement, the country enjoys a high degree ofautonomy.

• Lastly, Australia is a very sparsely-populated territory (the average of approximatelytwo inhabitants per square kilometre), which, together with the specific climate (thegreater part of the continent is desert or semi-arid), greatly affects the country’s life(population patterns, transport, economic growth, industry location, etc.).

All the above-mentioned factors have direct or indirect impacts on the country’s cluster policy.

14.3 Cluster Policy Tools and Measures at National and Regional Levels

The capital city of the Commonwealth of Australia, Canberra, is the country’s administrative centre. It came into existence when a compromise was reached between the two largest rival cities of Sydney and Melbourne. Australia became an independent nation in 1901 when the British Parliament passed legislation allowing the six Australian colonies to govern in their own right as part of the Commonwealth of Australia. The Commonwealth of Australia was established as a constitutional monarchy. “Constitutional” because the Commonwealth of Australia was established with a written constitution, and “monarchy” because Australia’s


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head of state was the British Queen. The Constitution created a “federal” system of government. Under a federal system, powers are divided between the federal government and the governments of the six “states”. Specific areas of legislative power were given to the federal government, including trade, economy, taxation, defence, foreign affairs, immigration, and citizenship. The federal government also has power to make laws for Australia’s territories. The states have retained legislative power over all other matters that occur within their borders, including police, hospitals, education and public transport. The wording of the law has often created situations where both the federal government and the states claim the authority to make laws over the same matter. Cluster policy in Australia does not form an explicit item of the government policy agenda. It is distributed among several federal policies, the major issues being dealt with within the innovation policy. The central institution responsible for R&D and innovation in the country is the Department of Industry, Innovation and Science, which, apart from economic matters, supports science and innovation as part of its portfolio (The Ministry of Foreign and European Affairs of the Slovak Republic, 2014).

The Commonwealth Scientific and Industrial Research Organisation (CSIRO), a government agency for science and industrial research, is one of the largest and most diversified research agencies in the world. The research at CSIRO is conducted within the framework of the »National Research Flagships« programme, and the agency has committed an increasing proportion of its resources to addressing major national challenges and opportunities through the programme, for example:

• Climate adaptation.• Future manufacturing.• Mapping undersea mineral deposits.• Energy transformation.• Food futures.• Light metals.• Preventative medicine.• Sustainable agriculture.• Water for a healthy country, etc.

The Commonwealth of Australia consists of six federal states and two major mainland territories. By total area, Australia is the world’s smallest continent but one of the largest countries. In addition, there are several island territories, which are partly inhabited.


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Figure 14.1 Political map of the Commonwealth of Australia

Source: Author’s elaboration based on d-maps.com (2015)

The individual federal states constituting the Commonwealth of Australia, with their capital cities, are:

• New South Wales (Sydney).• Queensland (Brisbane).• South Australia (Adelaide).• Tasmania (Hobart).• Victoria (Melbourne).• Western Australia (Perth).

Amongst the major mainland territories are: • The Northern Territory (Darwin).• The Australian Capital Territory (Canberra).

The individual states and territories have maintained certain independent legislative powers within the Commonwealth that fall outside the scope of powers of the federal government. In the event that discrepancies occur between the federal and state statutory regulations, the federal level eventually prevails over the state levels (OECD, 2012).

At the regional level, the following government agencies and institutions support science, R&D and innovation, thus indirectly promote clusters:

• The Department of Innovation, Industry and Regional Development in Victoria.


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• The Department of Employment, Economic Development and Innovation inQueensland.

• The Department of State and Regional Development in New South Wales and theGovernment Agency for Industry and Investment under its aegis.

• The Department of Trade and Economic Development in South Australia.• The Department of State Development in Western Australia.

There are significant differences in public policy support for clustering at all levels of government within and between the states. South Australia and Queensland are the two states that have strongly embraced the clusters framework, whereas New South Wales, Victoria and Western Australia have chosen to pursue a policy to support small and medium-sized enterprises to stimulate industry development. The concept of clustering has been basically ignored by the major metropolitan areas of Melbourne and Sydney (McPherson, 2002).


With abundant resources and cutting-edge technology, Australia is a leader in the global mining industry. Many different ores and minerals are mined throughout the country. The world’s largest deposits of lead, ilmenite, rutile, zircon, nickel, tantalic and zinc ore can be found in Australia, the second largest deposits of bauxite, copper and silver, and the third largest deposits of gold and iron ore. Australia is also a major supplier of energy, including coal, natural gas and uranium. Minerals and agricultural products account for almost two thirds of Australia’s exports. Along with the industrial sectors such as mining, metallurgy, machinery and automotive, the service sector has been growing recently and, in the last years, the ICT sector has gained a prominent place as well (the Ministry of Foreign and European Affairs of the Slovak Republic, 2014; Department of Foreign Affairs and trade of the Commonwealth of Australia, 2014).

Over the past century, Australia has facilitated numerous clusters; many relied heavily upon traditional rural extractive industries such as meat, wool, wheat, sugar, raw materials, steel aluminium, but others stemmed from manufacturing industries such as motor vehicles. However, Australian industry clusters had reached their peak by the 1970s (McPherson, 2002). The change in Australian economic policies in the 1980s and 1990s accelerated the decline. The combined effects of national economic reforms and globalisation have produced a gradual hollowing out of core elements of many old clusters. Many of the old industry clusters have been replaced by globally integrated business networks run by major multinationals. Networking and innovation have since emerged as important platforms of public policy, in an effort to integrate Australian industries more into global business structures.

The concept of clustering was first introduced in the »Australian Manufacturing Report« (although not in the exact terminology), by proposing regional industry partnerships involving core local industries working with other regional industries to strengthen networks, encourage innovation and development, and technology transfer. Clustering as a basis of industry and


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economic development was also recommended for Australia by the McKinsey Report »Lead Local, Compete Global« in 1994 (McPherson, 2002).

The Australian government has taken a laissez faire approach, thus it tends to let cluster policy evolve independently, and changes arise and are applied according to verified market demands and relevant partners (McPherson, 2002; Maguire et al., 2007). Although there are some instances of local and state support for clustering initiatives, there is no nationally accepted cluster policy (McPherson, 2002). Policy-makers have paid scant attention to clusters in Australia (Roberts et al., 2004). This is partly due to the still-ongoing fundamental philosophical debate between policy-makers on whether clustering should be left to industries to drive, or whether governments should actively stimulate clustering and support initiatives to facilitate the development of local and regional industry networks and clusters (Roberts et al., 2004; McPherson, 2002). Nevertheless, some typical features of cluster policy (support for networking, innovation and SMEs) are noticeable at both federal and state levels, mainly in the form of:

• Promoting productivity and growth of industries through fostering innovation.• Introducing tax allowances for R&D activities.• Supporting new businesses and promoting linkages between industry and the public

sector, R&D institutions and universities through a variety of special programmes andbuilding partnership networks.

• Co-funding partnership activities and facilitating the process of public procurement.

Cluster programmes in Australia are governed by local governments, community-based organisations, and regional authorities (DIIRD, 2003) but are not governed from the federal level. Lowe et al. (2006) have indicated the presence of several related policies that directly or indirectly support clustering as a process of cluster formation.

The occurrence of clusters in Australia and their orientation has been mapped several times. According to various resources (Johnston, 2003; DIIRD, 2003), there were some sixty to one hundred clusters in Australia at the beginning of the 21st century, or structures exhibiting cluster signs (Johnston, 2003). Johnston has further listed and characterised clusters in Australia by state and sector.

Table 14.1 List of industry clusters in Australia by state and sector

Cluster type Number

New South Wales

ICT and Services / Telecommunications 4 Financial Services 1 Electronics 1 Culture / Film Services / Multimedia / Creative Industry 2 Transport/Logistics 1 Manufacturing 3 Legal / Accounting 1 Agriculture / Food 4 Building / Construction 1 Forestry 1


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Equine 1 Health 2 Tourism 2

Victoria Automotive/Motor Vehicles 1 Aerospace 1 ICT and Services / Telecommunications 2 Culture / Film Services / Multimedia / Creative Industry 2 Biotechnology 1 Sport / Surf Supplies 1 Food / Food Machinery 5

Queensland Mining 2 Tourism 2 Film / Music / Electronic Games / Creative Industry 3 Marine Industry 1 Food Processing 1 Biotechnology 1 Electronics 1 E-Security 1 Training 1 Fishing 1

South Australia Food / Wine 1 Defence 1 Water 1 Horticulture 1 Spatial Information 1

Western Australia Marine Engineering 1 Tourism and Food / Wine 2 Mining Services 2

Tasmania Marine Industries 1 Gourmet Food 1 Total 63

Source: Johnston (2003)

The occurrence of clusters in Australia in relation to its geo-political map clearly indicates their uneven distribution over the Australian territory.


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Figure 14.2 Distribution of industry clusters in Australia

Source: d-maps.com; Johnston (2003)

Cluster policy and cluster initiatives are inevitable for the establishment of well-functioning partnerships among firms, industry leaders and public organisations (TCI, 2014). As Johnston has it (2003), many clusters have been identified in Australia and their number is rising. They usually emerge as bottom-up initiatives where local industry representatives and/or the demand-supply chain participants feel the need to cooperate more closely and build mutual information sharing links. Such initiatives are uncontrolled and evolve independently. Although there are clusters in Australia, it cannot be concluded that the country has, and pursues, a national cluster policy. Clusters are supported indirectly, mainly by:

• The fostering of innovation and R&D partnerships (by setting up the support conditionsto actually make the participating subjects to collaborate).

• The provision of support for regional governments, which is directed towards a specificindustry, or economic life area, where, again, one of the conditions to be met is thecollaboration or establishing collaborative initiatives between the participants.

• The export promotion, where the government stimulates pro-exporting efforts of theAustralian industries (again, by setting up the support conditions to actually make theparticipating subjects to collaborate).

In fact, the federal government does not promote cluster policy per se, nor do regional governments, yet clustering is a side effect of the policies they support.


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First and foremost, it is clusters that play an essential role in a number of policy areas in Australia (Department of Foreign Affairs and Trade of the Commonwealth of Australia, 2014).

Based on the OECD study (2012) »Cluster Policy and Smart Specialisation«, Australia’s cluster development support policies and specialisation patterns are as follows:

• In creating and consolidating clusters, Australia concentrates on promoting networkstructures, supporting services for entrepreneurs and start-up initiatives, and on co-ordinating clusters.

• In networking platforms, Australia supports industry-science networks, most commonlyin the form of public-private networks.

• There is a high degree of technology specialisation, especially relative specialisation inenvironment-related technologies.

• Clusters in Australia are not internationalised.• Australia’s innovation strategy, cluster policies and other relevant policies are directed

towards smart specialisation.


Innovation aspects have been particularly highlighted in the context of clusters and cluster policy. The Australian economy has recently shown to be very resistant and prosperous, partly due to the growing global trade in commodities where Australia has long been holding leading positions.

Innovation in Australia is closely connected with scientific and R&D activities fervently supported by industrial partners. Innovation policy in the country is the policy mostly characteristic of cluster policy and, in many aspects, it replaces the cluster policy in the country.

There are two large and several small government agencies at the federal level in Australia which promote science, research and development, and innovation:

• The Commonwealth Scientific and Industrial Research Organisation (CSIRO), whichencourages R&D cooperation in the implementation of many national prioritystrategies, such as adaptation to climatic change, future manufacturing, or energytransformation.

• The Defence Science and Technology Organisation (DSTO), which specialises insupporting scientific and industrial projects in defence and related industries.

One of the objectives of R&D promotion is establishing networks to bring industry and researchers together in order to establish strategic research and development directions, and to fund projects that provide industry with the innovation and productivity tools needed to compete in global markets. In recent years, Australia has adopted a hybrid model for developing specialisation precincts and hubs to build on areas of existing research strengths,


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while also funding national collaborative research infrastructure networks. These precincts allow Australia to take advantage of the clustering of research infrastructure and collaboration, and national collaborative networks allow researchers to take advantage of the best expertise and infrastructure, wherever it may be physically located (Department of Foreign Affairs and Trade of the Commonwealth of Australia, 2014).

The core document regarding innovation, and clustering, is »An Innovation Agenda for the 21st Century« (2009-2020), which was outlined by the Australian government in 2009 and in which the government clearly articulates its national priorities and aspirations to:

• Promote public research.• Foster R&D-industry cooperation in conducting world-class research and fuelling the

innovation system with new knowledge and ideas, supported by government policiesthat minimise barriers and maximise opportunities for the commercialisation of newideas and new technologies.

• Internationalise R&D-industry cooperation.• Enhance the quality of human resources.• Improve the legal framework for such activities.

Australia is not a world leader in innovation. Although improving Australia’s innovation performance is a national priority, more innovation-centred approaches to regional development, however, are emerging at the state scale. Innovation policies for cities and regions tend to be a secondary consideration at the federal level (Tomaney, 2010).


Australia is the most urbanised society in the world, by conventional measures, with its settlement structure dominated by the state capital cities. Some 70% of the population lives in the metropolitan regions of Sydney, Melbourne, Brisbane, Perth and Adelaide (Tomaney, 2010). On the other hand, the country has also vast areas outside the densely-populated metropolitan regions and its highly distinctive settlement patterns mean that these areas are practically uninhabited, or inhabited very sparsely. The Australian climate (very hot and arid in the outback) along with large distances between inhabited areas does not provide a good ground for regional policy-makers.

Australia, as suggested by Tomaney (2010), can be divided into several regions respecting statistical data, state and local boundaries, but also internal economic relationships, such as:

• Core metropolitan regions: essentially the state capitals and their metropolitan regions,identified as centres of the Australian knowledge economy.

• Lifestyle regions: regions related to the knowledge economy principally via tourism andretirement migration from the metropolitan areas.

• Dispersed metropolitan regions: regions whose relationship to the knowledge economyis via a nearby metropolitan area, whether by commuting or by business relationships.


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• Non-metropolitan city regions: regions whose relationship to the global knowledgeeconomy is mediated through an independent city which does not have coremetropolitan status.

• Resource regions: regions in which mining and related transport, mine support, andmineral processing account for a substantial proportion of employment.

• Rural regions: regions dependent on agricultural and pastoral production.

This regional specialisation indicates a growth disparity and diversity of economic conditions between and within regions in Australia. That obviously affects cluster policy, which has to appropriately respond to both federal Commonwealth trends and to state priorities as a result, and take into account capacities of specific regions to meet the defined objectives.


There is an elaborate system of entrepreneurship promotion schemes in the country, yet, they do not seem clear and easily applicable. The most comprehensive system is that which is administered by the Department of Industry, Innovation and Science (formerly the Department of Industry), which focuses on providing the right economic incentives to promote the development of the automotive industry, tourism, and small and medium-sized enterprises. As the system has been severely criticised by the Australian business community for being subjective, great amounts of funds are not actually spent every year (Andersson et al., 2004).

When pursuing its enterprise policy targeting clusters, the government’s agenda is primarily concerned with:

• Economic settings and incentives to enable small and medium-sized businesses to grow(special supporting schemes, information databases to foster entrepreneurship).

• Equipping businesses and employees with skills to succeed (training programmes toimprove business skills).

• Promoting the formation of start-up companies.

The efforts made by the federal and state governments are directed towards general support of the business environment, ranging from providing information to networking. The Australian economic policy is undergoing structural change. a series of microeconomic reforms have been introduced (boosting effectiveness, lowering costs, etc.), the situation on the job market has improved, and tax incentives have been created to encourage investment in the country. The idea central to the approach of the federal government since 2007 has been the renewed emphasis that “innovation policy is industry policy” (Smith, 2012), which clearly shows the accelerating trend for research-industry cooperation and spillovers, and for the promotion of partnerships and business networks. Current cluster supporting programmes in Australia indicate that businesses are willing to collaborate and enter into partnerships so as to jointly increase their competitiveness on the global market (DIIRD, 2003). Clearly, the global dimension of many industries is very important. Australia can no longer sustain the high


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standard of living of the Australian people unless companies focus on expanding exports, although this is a fact that had been of little significance until recently. On the one hand, this trend requires a geographic critical mass in research, production and technology, on the other, it has created opportunities for businesses, which had long been constrained by low level of innovation and small local markets (Garett-Jones, 2004).

The Commonwealth government has defined its priorities for industry development. The Department of Industry and Science has four key objectives: supporting science and commercialisation; growing business investment and improving business capability; streamlining regulation; and building a high performance organisation. By promoting innovation and competitiveness it focuses on the following sectors:

• Food manufacturing and agribusiness.• Mining a mining machinery, gas, petroleum, and energy.• Product processing.• Health technologies.• Pharmaceuticals (The Department of Industry and Science of the Commonwealth of

Australia, 2014).

14.6 Funding Cluster Policy in Australia

Similar to other countries, there are three possibilities of funding clusters in Australia: • Public funding – allocations to cover 100% of the volume of costs.• Combined private and public funding sources.• Private sources and income generated by the cluster organisation alone.

So far, the “right” approach is still unknown (Hantsch et al., 2013) and it is widely agreed that individual approaches are the best in seeking a solution. However, it is considered that a certain part of the budget of the cluster organisation should come from private sources in order to provide a better financial sustainability for the medium and long-term future.

It is innovation policy that comes closest to clusters and cluster support in Australia. Its framework, both conceptual and financial, is determined by a national innovation strategy (OECD, 2012). As far as innovation is concerned, Australia offers a range of financing options, such as:

• Grants and financial assistance.• Debt financing.• Innovation vouchers.• Public procurement opportunities - government contracts and tenders.

The Australian system of promoting innovation by offering attractive innovation schemes, programmes and incentives to firms, motivates domestic and foreign entrepreneurs to develop their innovation projects in Australia.


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Australia indirectly supports cluster initiatives by providing funds for: • Start-up companies.• Business skills training programmes.• Small and medium-sized enterprises.

As stated in the »Science, Technology and Industry Outlook« (OECD, 2012), the Australian government has implemented a number of policies and instruments in the field of innovation in recent years. Australia’s R&D intensity is slightly below the OECD average but higher than that of the EU27. The share funded by industry increased (to 62 % over the decade to 2008), while the share of government funding declined (to 34% over the same period). Funding from abroad also decreased. Apart from common grant schemes and subsidies, the government encourages business innovation through indirect measures, for example, by a R&D tax incentive scheme based on a tax credit.

Funding clusters in Australia takes place indirectly. Clusters are not directly funded by the federal or regional levels. Funds are not earmarked for specific cluster activities; clustering is more or less a by-product of funding in another areas. Still, there are a few national supporting programmes, namely for:

• Research and development in defined priority areas (the strategic agent being CSIRO).• Defence-related and military sector activities (the strategic agent being DSTO).• Boosting Australian exports.

The same indirect principle applies to funding clusters at a regional level. Funds are targeted at certain priorities such as:

• Promoting investment, regional business, and entrepreneurship.• Facilitating innovation, science, research and technology.• Fostering regional development.• Promoting regions and enhancing their reputation abroad.• Boosting exports, thus improving market access for Australian goods and services.

The Commonwealth Scientific and Industrial Research Organisation’s »Strategy 2001-2015« is underpinned by five success pillars with aligned strategic objectives, one of these being “Deep Collaboration and Connection”, which is the activity directly referred to as one of the strategic objectives. The other four success pillars do not address clusters directly; however, when looked at more closely, they also exhibit some characteristics of promoting collaboration and connection (for example, the conditions of establishing strategic research-industry partnerships or multi-partnerships for grant applications). The purpose of deep collaboration and connection is to build strong connections with and among the best partners in Australia, and the world, to complement the country’s science capability and accelerate impact delivery (CSIRO, 2011).

The Defence Science and Technology Organisation (DSTO) is an organisation which, similarly to CSIRO, supports research and development, but with a special focus on defence.


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In addition to its internal activities, DSTO targets at promoting cooperation among universities, industry and R&D communities, thereby multiplying Australia’s opportunities and innovation potential.


A basic feature of the Commonwealth of Australia is that of its being a federation and a constitutional monarchy. As a federation, it has two levels of public administration: federal and local, which regards individual states and regions within the federation. The individual federal states have their own legislative and decision-making powers over the matters for which the federal government has not assumed responsibility. Yet the federal level is responsible for business, economy, taxation, defence, external relationships, immigration, and citizenship. Other aspects fall within clear sole or prime responsibility of individual states.

Clustering approaches considerably vary state by state. a common innovation strategy has been developed at the federal level that is now being implemented in a large-scale manner; however, its impacts on individual states or regions vary as well. This is because the approach taken by each state towards innovation as a regional priority has been very different. Cluster support occurs as a by-product of innovation policy in Australia.

The locus of power of innovation organisation and policy is moving towards the Australian regions. State (or even local) governments are becoming more closely involved in initiating support programmes for firms and the local technological community, and/or delivering programmes in cooperation with federal agencies in order to establish partnerships. This clearly shows the gradual decentralisation trend in Australian R&D and innovation policy. Management of public R&D in Australia is thus moving in halting steps away from the top-down model and towards a range of bottom-up networks, cooperative arrangements and local clusters (Garett-Jones, 2004).

The focus of regional policy in Australia is unambiguously on identifying the development potential of regions and further strengthening it by using decentralised tools. An in-depth look at clustering and/or networking activities in Australia clearly reveals that the majority of cluster supporting activities are decentralised, managed by specific regions (Enright et al., 2001).

It is well-known that the conditions for city and regional development in Australia are different to those in Europe. They are determined by the interplay of a very specific geography and climate and make Australia a very unique country in comparison to other parts of the world. Quite logically, they continue to be embodied in public policy and indirectly affect its centralisation/decentralisation, including cluster policy. Industrial and business activities vary, and natural population shifts occur, depending on the geographic variation of the territory. As a result, each state or region in the Commonwealth of Australia is very specific and on an individual basis appears somewhat more consistent than the country as a whole. With regards to cluster policy, this means that each state or region has its own natural assets and priorities, and thus supports region-specific industrial sectors, innovation, and export, for example:

• Regions with large deposits of minerals support mining and processing industries.


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• Agricultural regions specialise in viticulture and support wine-making industry, etc.

The new approaches tend to emphasise the identification and mobilisation of endogenous potential, that is, the ability of regions to grow drawing on their own resources. Therefore, regions are playing an increasing role in the selection of clustering instruments, and decentralisation seems to be a necessary means to promote regional development in Australia.

14.8 Conclusion

Australia, the youngest and smallest inhabited continent in the world, is not as detached from cluster policy as it may seem at first sight. Following its discovery, the country became a British colony with a specific purpose: to serve as a penal colony. In 1901, Australia became independent and the Commonwealth of Australia, comprising of six states and two major mainland territories, came into existence. Australia has never really broken its ties with Great Britain; it is officially a constitutional monarchy headed by the British ruler.

Clusters have prospered in Australia since their first emergence. Despite very complicated natural conditions (arid and very hot central Australian regions) and low population density, which could seemingly prevent clustering and networking, a number of strong and successful cluster were formed in Australia in the first half of the 20th century. The specialisation of clusters in Australia has copied the specialisation of the Australian economy. Mining and metallurgy were the most flourishing sectors in the country, followed by machinery manufacturing and agriculture. The Australian economy declined in the 1970s and experienced a major programme of deregulation in the 1980s, which triggered large-scale industrial restructuring, resulting in a further decline of manufacturing and growth of services. Since the 1990s, however, there have been increasing tendencies to foster innovation, R&D, develop small and medium-sized enterprises, and entrepreneurship in general.

Australia is a federation made-up of individual states that enjoy a certain degree of autonomy. This is reflected in innovation, R&D, and in promoting entrepreneurship. Some states are more actively involved in local and regional development through the provision of infrastructure, incentives to industry and funding for training and skills development, whereas others do not assign so much importance to it.

Australia does not have an overarching industry cluster policy. Support for regional industry clusters comes partly from innovation policy, SME policy, and R&D policy. The latter two policies closely approximate to cluster policy. Australia tends to adapt the innovative policies and strategies of other countries rather than develop them itself (The Department of Industry and Science of the Commonwealth of Australia, 2014). The Department has made a decision to change the status quo and has therefore brought together a range of functions that are critical to improving the competitiveness of Australian industry.

The efforts of the Department are directed at key initiatives, including: • Creating networks and linking the existing infrastructures, thereby motivating industrial

actors to join such networks.


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• Implementing key measures that will foster innovation and entrepreneurship.• Putting in place arrangements that improve the economic infrastructure: providing

enterprises (especially SMEs) with key market information, opportunities to expand orexport, and assistance with management and business skills.

• Improving skilled employment opportunities on the market.

In summary, although there are some instances of local and state support for clustering initiatives in Australia, there is no specific or nationally accepted cluster policy, or direct cluster support. However, cluster policy instruments are widely used in innovation and R&D policy, technology transfer, and in entrepreneurship promotion in the country. In Australia, the government has really taken a laissez faire approach.


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[1] ANDERSSON, T., SCHWAAG-SERGER, S., SÖRVIK, J., WISE, E. 2004. ClusterPolicies Whitebook. IKED-International Organisation for Knowledge Economy andEnterprise Development.

[2] CSIRO. 2011. CSIRO Strategy 2011-2015. Available from:http://www.csiro.au/~/media/About/Files/Strategy/CSIROStrategy2011-15_28pager-WEB_150224.pdf?la=en.

[3] ENRIGHT, M. J., ROBERTS, B. H. 2001. Regional Clustering in Australia. AustralianJournal of Management Vol. 26. Special Issue. The Australian Graduate School ofManagement.

[4] GARRETT-JONES, S. 2004. From citadels to clusters: the evolution of regionalinnovation policies in Australia. R&D Management, 34: 3–16. Blackwell Publishing. doi:10.1111/j.1467-9310.2004.00318.x.

[5] HANTSCH, S., KERGEL, H., LÄMMER-GAMP, T., MEIER zu KOCKER, G.,NERGER, M. 2013. Clusters Management Excellence in Germany: German cluster incomparison with European peers. European Secretariat for Cluster Analysis. Availablefrom: http://www.cluster-analysis.org/downloads/CountryReportGermany2012.pdf.

[6] JOHNSTON, R. 2003. Clusters: a Review. Prepared for Working Group “MappingAustralia's Science and Innovation System”, Department of Education, Science andTraining. Australian Centre for Innovation. Available from:http://www.aciic.org.au/assets/Publications/2003/ClusterReportrev.doc.

[7] LOWE, J., THOMPSON, H., LYNCH, D., BRAUN, P. 2006. a Case Study of Clusteringin Regional Australia: Public Policies and Private Action. ANZRSAI 30th AnnualConference 2006 Refereed Proceedings.

[8] MAGUIRE, K., DAVIES, A. 2007. OECD Reviews of Regional Innovation. CompetitiveRegional Clusters - National Policy Approaches. OECD. ISBN 978-92-64-03182-1.

[9] McPHERSON, L. 2002. Cluster Policy: a Future Strategy for Australia. Department ofIndustry, Tourism and Resources. Commonwealth Government of Australia. In:Innovation: Management, Policy & Practice. Volume 4. Issue 1-3.

[10] DEPARTMENT OF INNOVATION, INDUSTRY AND REGIONALDEVELOPMENT. GOVERNMENT OF VICTORIA. (DIIRD). 2003. Clusters.Victorian businesses working together in a global economy. Department of Innovation,Industry and Regional Development. working paper. Victoria. Australia. Available from:http://www.tci-network.org/media/download/2703.

[11] DEPARTMENT OF INDUSTRY AND SCIENCE. AUSTRALIAN GOVERNMENT.2014. Australian Innovation System Report 2014. Commonwealth of Australia. ISBN978-1-925092-43-1.

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925092-50-9. Available from: http://www.industry.gov.au/industry/Office-of-the-Chief-Economist/Publications/Documents/Australian-Industry-Report.pdf.

[13] DEPARTMENT OF INDUSTRY AND SCIENCE. AUSTRALIAN GOVERNMENT.2014. Industry Growth Centres Initiative National Roadshow. Commonwealth ofAustralia.

[14] MINISTRY OF FOREIGN AND EUROEPAN AFFAIRS OF THE SLOVAKREPUBLIC. 2014. Commonwealth of Australia - consular information of Ministry ofForeign and European Affairs of the Slovak Republic.

[15] DEPARTMENT OD FOREIGN AFFAIRS AND TRADE, AUSTRALIANGOVERNMENT. 2014. About Australia. Australian Government, Department ofForeign Affairs and Trade. Available from:http://www.dfat.gov.au/facts/legal_system.html.

[16] OECD. 2012. Cluster Policy and Smart Specialisation. Technology and Industry Outlook2012. OECD. Available from: http://www.oecd.org/sti/outlook/e-outlook/stipolicyprofiles/interactionsforinnovation/clusterpolicyandsmartspecialisation.html.

[17] ROBERTS, B. H., ENRIGHT, M. J. 2004. Industry Clusters in Australia: Recent Trendsand Prospects. European Planning Studies. Vol. 12. Nr.1. pp. 99-121.Taylor and Francis.Doi: 10.1080/09654310310001635706.

[18] SMITH, R. 2012. Economic Geography and Innovation Clusters. Working paper.Department of Industry, Innovation, Science, Research and Tertiary Education.

[19] WORLD ECONOMIC FORUM. 2014. Global Competitiveness Report 2014-2015,World Economic Forum. Available from: http://www.weforum.org/issues/global-competitiveness.

[20] TCI NETWORK. 2014. How Clusters can reinvigorate Australian regions and industry.TCI press release.

[21] TOMANEY, J. 2010. Place-base Approaches to Regional Development: Global Trends andAustralian Implications. Australian Business Foundation. ISBN 978-0-9804138-8-5.

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Chapter 15

Cluster Policy in New Zealand

by Viliam Kováč Technical University of Košice, Faculty of Economics, Slovak Republic [email protected]

15.1 Introduction 15.2 Cluster Policy Legislation 15.3 Cluster Policy Principles, Areas and Objectives 15.4 Cluster Policy and Other Related Policies 15.5 Funding Cluster Policy in New Zealand 15.6 Cluster Policy Centralisation vs. Decentralisation 15.7 Conclusion

References


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15.1 Introduction

Subtle signs of cluster policy in New Zealand can be traced back to the early 1990s, mainly as those of growing interest in regional linkages and relationships within geographical concentrations.

In the last decades of the 20th century, the economy in New Zealand was under-performing compared to other countries of the Organisation for Economic Cooperation and Development (OECD). Domestic firms frequently lacked critical mass, with the absence of trust and linkages at the all-important local level. In the mid-1990s there were “clumps” of co-located firms in specific regions in New Zealand, rather than interactive working relationships among firms. Interaction of such networks was minimal or completely non-existent. Obviously, this affected their overall performance and the benefits they could derive were virtually unmeasurable. As the subjects involved barely communicated with each other, collaboration did not come easily, despite the fact that space for it was wide-open at that time. There were no real clusters in New Zealand and any effort to initiate cooperation would have meant great benefit.

The situation changed at the end of 1990s, when the relevance of clusters started to be seen in sectors dealing with modern technologies. The new economy was all about speed, quality, flexibility, innovation, networks, and the building of critical mass.

Today, this new style of doing business demands a team approach at a very local level, which acts as an initial springboard for greater cooperation: a clustering approach. Clusters are particularly important to young industries. Cluster building is already an accepted tool in economic development. As Professor Michael Porter has emphasised, “clusters are building blocks of a productive, innovative economy” (Porter, 2001).

For certain regions in New Zealand, cluster development has become the cornerstone of their economic development strategies. The springboard was the cluster programme entitled »New Zealand Trade and Enterprise« that encourages all regions to adopt a cluster-based approach and provides support for cluster facilitation.


In 2003, the Parliament in New Zealand passed the New Zealand Trade and Enterprise Act 2003 (New Zealand Parliamentary Counsel Office, 2005). The act substituted the previous 1988 New Zealand Trade Development Board Act that regulated cluster policy in the country. It was an institution that was responsible for the development of business environments in regional terms, therefore it built solidarity between small and medium-sized enterprises by providing assistance in legislative matters. Later, the International Trade Centre was established (International Trade Centre, 2008), a government’s business development and trade promotion agency, which is frequently referred to as Tradenz (later renamed Trade New Zealand or Trade NZ). It offers strategic advice, access to networks and influencers, research and market intelligence, and targeted financial support to help businesses on their international journey, and works to promote and support the growth of New Zealand business overseas. Over time,


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due to the external global trade influences, the institution changed its focus to the activities orientated more towards developing cluster initiatives and providing assistance to emerging clusters (Ministry of Justice, 2013).

The above-mentioned New Zealand Trade and Enterprise Act 2003 was last amended in 2014. The Act was drastically modified by numerous minor adjustments.

The whole Act is divided into three sections: • Preliminary Provisions.• New Zealand Trade and Enterprise.• Miscellaneous Provisions.

The preliminary provisions contain five parts that deal with preliminary matters, including the purpose of this Act, its interpretation and application, including a concise glossary of terms.

The core of this Act has sixty-eight paragraphs divided into sixteen sections: • Establishment of New Zealand Trade and Enterprise.• Membership, Role, and Accountability of Board.• Minister’s Role.• Special Advisers.• Delegation by Board.• Committees.• Chief Executive of New Zealand Trade and Enterprise.• Employees of New Zealand Trade and Enterprise.• Superannuation.• Corruption and Bribery, and Corrupt Use of Official Information.• Protections from Liability of Members and Employees.• Dealings with Third Parties by New Zealand Trade and Enterprise.• Financial Provisions.• Planning: Statement of Intent.• Reporting: Annual Report.• Review of New Zealand Trade and Enterprise’s Operations and Performance.

The miscellaneous provisions at the end present twelve sections dealing with formalities concerning the application of the regulations in question. They are divided into five sections:

• Dissolution of Former Agencies.• Transitional Provisions.• Application of Public Records Act 2005.• Consequential Amendments.• Repeals.


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Despite the fact that the Act captures several areas of application to cluster policy, the individual provisions are not specific enough so as to be applied without further legal instruments.


Any cluster programme needs to be adapted to the context in which it shall work. Based on the specifics of the New Zealand case, five factors are emphasised as important for analysing the context. Each factor thus needs to be described and analysed for each cluster programme. They are as follows:

• The scale of the business environment.• Proximity to markets.• The industrial structure.• Partners.• Policy framework for cluster building (Andersson et al., 2004).

In building clusters there are two parties involved: clients taking part in a cluster programme and having certain ideas or needs which they want to push forward, and organisations or funders bringing and providing resources such as funds and organisational/legal assistance.

The rationale of a successful programme is a strategic fit between the client’s needs and the funding body’s objectives. Objectives, client needs and outcomes are highlighted as key factors for reaching a strategic fit.

When formulating the objectives, the most important thing is to prioritise and know exactly what the main goal is, which is dependent on the business context. Client needs are important to take into consideration in the early phases of a cluster programme. Outcomes indicate the importance of evaluation in order to determine the success of a cluster programme, while measuring success is coupled with the initial objectives. Another issue is what happens if the cluster does not fulfil its function and is not a success according to the evaluation criteria. In New Zealand, success is measured in the number of active clusters with private sector engagement. How strict the evaluation is, for example, is given by the fact that just a handful of universities and government agencies are regarded as failures. It has been concluded in New Zealand that company involvement is the best measurement criterion.

15.3.1 Cluster Programme Design

After taking into account the context and the strategic fit (client’s needs and funder’s objectives), a cluster programme can be designed. In New Zealand, programme design is articulated by four key factors:

• Elements.• People.


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• Budget-setting principles.• Resources (Andersson et al., 2004).

First, “elements” are needed to bring a programme together so that the objectives set can be met. Elements include funds, support, management, and a “practical manual” database, which is accessible for all those involved in the cluster programme. Interestingly, there were funds available for starting forty-five successful cluster initiatives in six months in New Zealand, which only proves the fact that there are strong medium-sized enterprises in the country.

The second factor is “people”. In New Zealand’s cluster programmes, 97% of the funding was spent on people. Coordinators, developers, promoters, designers, and organisers - all these functions should be offered to people who are able to do their jobs efficiently. The opinion articulated from the New Zealand case is that clusters are all about people. The money was spent on cluster facilitators, and thus not on research.

The third key factor, “budget-setting principles”, addresses the important issue of financing cluster programmes. As funds are an essential element in the implementation of the objectives included within the cluster programme, this factor deserves appropriate attention (Clusters Navigators, 2001).

Finally, the fourth factor is “resources”, which is directly linked to the previous factor. Resources should take into account the possibility of getting access to funding for the design of the cluster programme and its successful implementation.

15.3.2 Cluster Programme Implementation Issues

In New Zealand, four aspects are also emphasised to be central for a good cluster programme implementation:

• The people issue.• Anticipation and disappointment, so-called “anticipointment”.• Top-down strategy vs. bottom-up strategy.• The cluster boundary (Kuah, 2002).

The people issue is the first and most important aspect that should be strongly emphasised when putting a cluster programme into practice. New Zealand’s first cluster programme can serve as a good example. It started up in 1990, however, not much development took place in the cluster area in New Zealand for the following five years and the programme did not evolve any further. There was much focus on the theory presented in Michael Porter’s book, rather than on people (Såmūndsen, 2012; Porter, 1998; Porter, 2000). Then another five years passed without much action, since there was a lack of policy framework. These two phases of the programme can be clearly referred to as two “mistakes”; nevertheless, the New Zealand cluster programme has stepped into the third phase. Forty-five investments were made in six months. This third phase is dubbed “Spray and pray, seed and grow”, and it actually means an unusual beginning of the programme’s successful development. The cluster programme implementation


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has reached a phase when cluster initiatives are evaluated whether or not they are successful, and more than half of them have proved to be viable. In the end, based on this evaluation, twenty-two of the clusters shall be further supported.

The almost 50% viability of the cluster programme may seem to be a success at first sight. On the other hand, it also means that twenty-three clusters will thus not get continued support – at least not to the extent that was originally anticipated. “Anticipation” refers to the positivismthe cluster initiative is coloured by during the participants’ work in writing an application andwhen the application possibly is sponsored. “Disappointment” means the phase of receiving noor no more funds. This aspect reflects the idea that a cluster initiative is, in other words, notonly about supporting people but also about the opposite, about causing people’s displeasure.

The third aspect of the successful implementation of the cluster programme is about the competition of two applicable strategies: “top-down strategy vs. bottom-up strategy”. The experience from New Zealand indicates that the top-down strategy works to a certain point. This approach means that a complex system is broken into smaller subsystems, which is some kind of decomposition of the cluster programme into smaller elements whose objectives are more easily attainable. On the contrary, there is the bottom-up approach. The bottom-up strategy in New Zealand is needed at the regional level in order to get the regions interested in clusters and extend the scope of their operation.

The fourth aspect for the successful implementation of the cluster programme in New Zealand is where to draw the cluster boundary – the determination of what is in and what is not in the cluster. In New Zealand, the cluster was first defined very vaguely and too widely to receive applications. It is clear that geographical closeness in clusters is an invaluable contribution; however, it does not mean that distant actors cannot have close relationships. Obviously, the greater the distance, the higher the costs of collaboration (Gough, 2001).

The practical implementation of the cluster programme in New Zealand shows that the crucial factor is to define the main goal and set priorities. Both parties involved, the financing organisation and the initiator, need to be clear about what they want to achieve. In New Zealand, the main goal was to build capabilities for small and medium-sized enterprises to participate in global value chains. The formulation of the goal is highly dependent on the business context; New Zealand’s industrial structure consists mainly of small and medium-sized enterprises (Ministry of Economic Development, 2011).


Even a cluster policy that is elaborately designed may not be beneficial for clusters and cluster participants. a cluster programme which is to be feasible must be coordinated with other related policies such as R&D and innovation policy, regional policy, and industrial and enterprise policy.


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Close relation between cluster initiatives and R&D centres is a very good start for further cluster development. In 1988, the Parliament in New Zealand passed the New Zealand Trade Development Board Act, by which the New Zealand Trade Development Board was established (International Trade Centre, 2008). Today, its commercial and more popular name is Trade NZ (formerly Tradenz). It is a government body responsible for and primarily established to foster the development and expansion of New Zealand’s foreign exchange earnings.

Trade NZ’s role is to reduce the country’s economic vulnerability, by moving the export balance away from commodities into added value products and services. To this end, the agency:

• Promotes New Zealand’s exports.• Advises new exporters on how to export, and takes action to encourage them to enter

foreign markets.• Presents businesses with new possibilities for markets, and provides competitive market

intelligence.• Assists the existent exporters and industry groups in order to boost their global reach.• Helps export communities to exports goods and services directly, and presents them

with new possibilities for markets.• Points to new opportunities for businesses to export, and promotes the concept of

bringing together go-to-market, business-led coalitions.

Although largely government funded, the agency has a board of directors with a predominantly private sector background. The board’s role is to guide the allocation of resources. Trade NZ operates both nationally and internationally: it has offices in nine New Zealand cities and is represented in over sixty key export locations around the world. Within the territory of New Zealand, it has offices in Auckland, Dunedin, Hamilton, Christchurch, Napier, Nelson, Palmerston North, Tauranga, and Wellington. It employs a total of three hundred and twenty-six workers, one hundred and thirty-five of which work in New Zealand, and the remaining one hundred and ninety-one in foreign representation offices.

The organisation structure is as follows: • Board of Directors on the top of management.• General Director who supervises all the seven general managers.• General Managers who have separate fields of activities.

General Managers operate in the following fields: • General manager for Asia and Middle East.• General manager for Europe, Americas, South Africa, Australia and Pacific Ocean.• General manager for client services.• General manager for operations support.• General manager for corporate services.


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• General manager for human resources.• General manager for information services.

Trade NZ works individually with firms and collectively with groups of firms. Through a synergic effect, firms can more effectively distribute their expenditure by working jointly on specific projects. This method has been particularly adapted to small and medium-sized enterprises (SMEs). Trade NZ has developed two concepts with this aim, namely »Joint Action Groups« and »Hard Business Networks«.

The objective of the export-focused »Joint Action Groups« programme was to establish business networks to draw together larger exporters within the same export sector. Some thirty-five of these action groups are currently active. The participants have committed themselves to intensifying export efforts by joint strategic planning and action on the markets.

The »Hard Business Networks« was the concept of establishing profit-making alliances, consisting of small firms with similar and complementary capacities and activities concentrated in close proximity within the same region. These national networks focus on coordinated action towards enhancing the effectiveness of using current opportunities and seeking new challenges for further development.

Trade NZ is very active in publishing; it publishes annual reports, educational and promotional materials, and annual statistics.

It has approximately sixty corporate representations on offshore markets that are targeted at: • Advising clients on how to export and providing competitive market intelligence based

on market intelligence reports, surveys, country profiles and statistics.• Advising suitable market strategies.• Seeking and identifying business contacts such as importers, distributors, and retailers.• Analysing market competition of goods and services.• Monitoring markets and market opportunities.• Analysing opportunities in terms of import tariffs, duties and taxes.• Facilitating the organisation of visits for New Zealand entrepreneurs in the venue of

their operation.• Organising seminars and promotional campaigns.

The successor to Tradenz is New Zealand Trade and Enterprise (NZTE), an organisation officially established in 2003 by the New Zealand Trade and Enterprise Act (International Trade Centre, 2008). It was a merger of the two organisations: Tradenz and Industry New Zealand. Later, in 2004, the Crown Entities Act was passed, which further determined the existence of this newly-established organisation. New Zealand Trade and Enterprise is a government-funded international economic development agency managed by the Board of Directors consisting solely of people working in the private sector. In 2008, the institution was awarded as the-best-of-the-best trade promotion agency from amongst all the developed countries in the world by the World Trade Promotion Organization (International Trade Centre, 2008). Based on its own memorandum, the purpose of the agency is to improve the economic performance


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of New Zealand and to raise the standard of living of its people by promoting growth of the business sector and by endorsing domestic cluster initiatives in the waters of international competition (New Zealand Trade and Enterprise, 2014).

In 1995, The New Zealand Way Limited was set up as a joint venture of Trade New Zealand (the government’s international trade promotion agency mentioned above) and the New Zealand Tourism Board to restore the fragmented image of New Zealand in global markets by promoting national brands. By the 1990s there had not been any organisation in New Zealand performing the same or similar task. a vast campaign, entitled »Brand New Zealand«, was launched as an integrated long-term marketing strategy providing exporters and travel agents with benefits of an easily recognisable national brand: a common identity for all national products. In addition, the goal was to strengthen the position of domestic businesses in key international markets and present them as modern, innovative, environmentally responsible producers of top-quality products (Kuah, 2002). The New Zealand Story Group took part in the campaign, which works closely with public and private sector stakeholders (The New Zealand Story Group, 2014).

Besides the direct impact on the business sector, New Zealand Trade and Enterprise holds an official position in the Foreign Direct Investment Advisory Group as one of its co-founders. The Group acts as an advisory body to the Prime Minister and the New Zealand Treasury, advising them on investment policy. The key objective is to promote public awareness of investment and the risks involved. Specific areas of work undertaken by the Foreign Investment Advisory Group include:

• Acting as an investment coordinator between the public and private sectors.• Assisting the Minister of Foreign Affairs and Trade in investment marketing.• Collaborating with New Zealand Trade and Enterprise.• Supervising the regulatory framework regarding foreign investment.• Identifying barriers to investment in New Zealand.


Regional clusters, by their standard interpretation, constitute one of the fundamental elements of building a microeconomic environment suitable for the growth of the business sector and the necessary infrastructure. They are usually facilitated by regional authority, most commonly by local government. However, cluster boundaries are driven by commercial factors, not by political decisions. Therefore, the geographical boundaries of a regional cluster do not always need to correspond to the regional boundaries of administrative units in which they operate. Clusters may cover only a part of a local government region, or transverse two or more regions. Despite operating in a specific region, the regional cluster may be initiated from outside the regional boundaries. Good examples of regional clusters in New Zealand are »Engineering Taranaki«, »Defence Palmerston North«, »Film Wellington«, or »Nelson Seafood« (Pavlovich and Akoorie, 2005).


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Regional policy tools of the central government need to be tailored to regional characteristics and to the strengths and needs of specific sectors in the region. In New Zealand, due to the country’s administrative division, there is no specific cluster policy at the regional level. New Zealand, although a unitary state, is divided into sixteen regions for devolved local government. Eleven are administered by regional councils (the top tier of local government), and five are administered by territorial authorities (the second tier of local government) that also perform the functions of regional councils. Correspondingly, standard cluster policy is applied on the two main islands – the North Island and the South Island – in compliance with the above-mentioned national regulatory framework. So far, no special cluster policy or scheme has been developed for the remaining territories. This is partly due to the regions being underdeveloped, but partly due to the challenges the remote regions have to face such as their geography, highly-dispersed population, etc. Many of these regions are not permanently inhabited and the natural conditions are unsuitable for the development of human habitation.

15.4.3 Cluster Policy and Industry and Enterprise Policy

In the early 1990s, working partnerships with industry were orchestrated by Tradenz under the »New Zealand Trade Joint Action Groups« which were representative groups of export businesses within a defined industry, endeavouring to enhance their exports through joint strategic planning of marketing activities. The programme was launched nationally and aimed at coordinating cluster initiatives in New Zealand. The membership was free of charge and the programme open to all businesses willing to join. Amongst the very active members were some industrial or trade associations, and different commercial boards. The main goal of the project was to provide additional support to enterprises targeting off-shore markets and export-promoting associations. Moreover, the programme aimed at interconnecting small cluster initiatives and government. Small emerging clusters were able to turn to it for help in case of trouble. The positive results were yielded in regions lacking critical mass. The assistance was provided for several cluster initiatives; for example, the Forest Industry Council, the Seafood Industry Council, the Food & Beverages Exporters Council, the Wine Institute, the Tanners Association, the Wellington Chamber of Commerce, the Taiwan-New Zealand Chamber of Commerce, and the Japan Business Council.

Synergies appear in cluster policy. Alliances created of smaller clusters of small enterprises can flexibly respond to change and enjoy greater powers in the business environment. As a rule, such clusters have a strong commercial aspect. The government in New Zealand has developed a number of successful assistance programmes for SMEs. One of them is »Technology New Zealand« helping small technology firms to find a niche in the market by integrating them into clusters and providing further assistance in the building of critical mass so that they can compete for customers in a considerably more effective way. Other examples of cluster alliances in New Zealand include »Natural Hazards«, »Five Boutiques«, and »Canterbury Wineries«.


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15.5 Funding Cluster Policy in New Zealand

New Zealand Trade and Enterprise supports and advises all businesses and business communities to accommodate their activities, regarding their economic development, to the principles of cluster initiatives. The institution provides professional help and funding for cluster development.

Funding cluster initiatives takes place at two levels: • Government level.• Local level.

A small amount of funding for interest groups comes directly from national resources. For a cluster, such subsidy means only the initial funding necessary to cover the costs incurred in its formation, most commonly the bureaucratic administration costs. The reason to subsidise is to help businesses to overcome initial obstacles created by regulatory provisions (Kuah, 2002).

Local support comes from local authorities. This is direct financial support intended for taking a series of steps towards fulfilling the objective of a cluster initiative. Although such funds are allocated from the local level, they may or may not be provided directly from the local government’s budget. There are many organisations collaborating with local councils in order to co-fund clusters and interest groups in the area.

There are as many as 324,000 enterprises in New Zealand, one fifth of which are farms. This fact plays a crucial role, as farms are financed differently from research and development centres or other institutions directly linked to the manufacturing sector (Carayannis et al., 2008).

The New Zealand Trade and Enterprise Act 2003, which has been amended several times, contains specific provisions regarding funding and the management of funds in the organisations in question. It is stated in the first section that New Zealand Trade and Enterprise must create a detailed report on cluster policy for the government and arrange for the report to be delivered to the Minister. The second paragraph describes the contents that must be delivered. The last, third, section, assigns the government the duty to deliver the report to the relevant authorities and institutions (New Zealand Parliamentary Counsel Office, 2005).

Funding cluster policy in New Zealand is not quite clearly defined in other legal standards. As a result, there is no mention of funding or of founding resources in cluster programmes implementation schemes. These issues are partly dealt with in strategy planning, which, unfortunately, can be regarded as insufficient and unconceptual.

The portfolio of managing the cluster funding policy falls within the responsibility of the New Zealand Trade Joint Action Groups, an institution that supervises the interaction of cluster programmes and the national industry and enterprise policy. It primarily concerns the supply chain relationships. Providing that this agenda and public procurement were managed electronically, the procurement costs for cluster programmes would substantially drop and therefore so would the budgeted costs of clusters.


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Cluster policy in New Zealand is applied at more levels, and it is centralised only to the extent of the common legal framework for the regulation of all levels of potential cluster programmes carried out by the clusters in the country.

15.6.1 National, Regional and Commercial Clusters

In order to understand the cluster policy structure more easily, it is necessary to define the two levels of cluster classification:

• Horizontal classification.• Commercial classification.

Horizontally, clusters in New Zealand can be classified by geographical operation as follows:

• National clusters.• Regional clusters.• Commercial clusters.

National clusters are groups of companies and organisations which collaboratively address development issues for the cluster. Typically, they address policy, infrastructure and scale-related issues. For example, the »Health IT Cluster« is a typical national cluster.

Figure 15.1 Location of national clusters in New Zealand

Source: The New Zealand Story Group (2014)


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Regional clusters are the classic Porter-type clusters, based on the premise that an industry will increasingly prosper within a specialised, networked environment. They focus on building a supportive environment for the cluster participants, and extending the linkages between participating firms, their suppliers, and related and supporting organisations. They create and foster the appropriate microeconomic environment. a standard example of regional cluster is the »Waitakere Marine Cluster«, with stakeholders including yacht builders, component manufacturers, and equipment importers.

Figure 15.2 Location of regional clusters in New Zealand


Commercial clusters are, in principle, consortiums of companies which have chosen to collaborate in a number of areas. They are membership-based, with the fee structure often supporting a dedicated support person, for example, the »Waipara Wine Cluster« of New Zealand, putting together wine producers in the region (Dana and Winstone, 2008).


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Figure 15.3 Location of commercial clusters in New Zealand


According to Akoorie (2001), commercially, clusters in New Zealand tend to fall into three main categories with no firmly-set boundaries:

• Hard business networks.• Soft business networks.• Business clusters (Carayannis et al., 2008).

15.6.2 Regional Innovation System

Regional development had not long been an important part of policy at the central government level. Key challenges emerged in the late 1990s. The concept of »Regional Innovation Systems« (RIS) was introduced to support clusters in their embryonic stage. The resources were pooled from the network which the emerging cluster member was to join. This system of support was perfectly comprehensible and the poorly functioning parts of the cluster programme were thus easily identifiable. As an example of this model’s benefits, good economic prospects for the geographical region have been accentuated, arising from the interconnection of innovative methods in production and rising exports from the region, which is referred to as “dual tendencies of processes of globalisation and localisation”. This model is applied to building up the knowledge database. New Zealand was amongst the countries which began to embrace the concept of regional development and introduce it into the country’s innovation policy in the late 1990s. The institutionalist perspective on regional development, also known as “new regionalism”, tends to favour bottom-up and region-specific policy actions, based on regional governance. Importantly, it conceptualises regional development policy as a policy of innovation where a government takes a modernised pro-active role (International Trade Centre, 2008).


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15.7 Conclusion

Despite relatively poor cluster policy in New Zealand, cluster initiatives have become a significant part of the country’s economic development structure. There have been noticeable impacts of the interaction of clusters and enterprises, especially in small and medium-sized enterprises in regards to the growth of global trade of domestic and foreign companies operating in New Zealand.

Continued viability of cluster initiatives in New Zealand has stimulated further emergence of similar organisations. The chain effect and the mutual influence of clusters within the economy in New Zealand have brought a second wind into the business environment. This leads to greater competition between companies, which eventually produces better economic performance.

There are several important lessons to be learnt from the New Zealand case that affect cluster policy development and decision-making. Firstly and most importantly, the context affects what objectives are possible to formulate, and consequently, what criteria are appropriate for evaluation. The second point to remember is the fact that clusters are all about people. It is absolutely necessary to get the different stakeholders involved. The third aspect is the development of the right strategy that emphasises the importance of action, rather than extensive planning; the regional actors need to be involved and the bottom-up approach applied. Hence, based on the facts presented and the experience of New Zealand, cluster policy is all about finding the right people for facilitating cluster initiatives and about taking the right steps at the right time (Andersson et al., 2004).

For the specific case of the market in New Zealand, it is necessary to find reasonable harmony between the relevance of the business context and the four central aspects considering the groups of factors that considerably affect the effectiveness of cluster initiatives. The classification of the relevant factors into elements, people, budget-setting principles and resources is a method frequently applied in the design of a new cluster initiative. The fact that a certain degree of unification of emerging clusters appears means, on the one hand, smaller variability of their potential operability, but on the other, stronger competition among cluster initiatives and between standard enterprises and newly-established clusters.


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References

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[2] CARAYANNIS, E. G., ASSIMAKOPOULOS, D., KONDO, M., ZIEMNOWICZ, C.,JUNEAU, T., KWAK, Y., ANBARI, F., CAMPBELL, D., SIPP, C., ALEXANDER, J.2008. Innovation Networks and Knowledge Clusters - Findings and Insights from the US,EU and Japan. Basingstoke, United Kingdom: Palgrave Macmillan. ISBN 978-1-4039-4245-6.

[3] CLUSTERS NAVIGATORS. 2001. Cluster Building: a Toolkit. Cluster Navigators.Available from: http://www.vaxtarsamningur.is/Files/Skra_0023777.pdf.

[4] DANA, L. P., WINSTONE, K. E. 2008. Wine cluster formation in New Zealand:operation, evolution and impact. In International Journal of Food Science andTechnology, vol. 43, n. 1, pp. 2177-2190. ISSN 1365-2621. Hoboken, United States ofAmerica: Wiley-Blackwell.

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http://story.newzealand.com/about-us

Conclusion

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Conclusion

Although the “modern” cluster theory is not by far as old as numerous other theories, clusters have found a firm place in the theoretical canon, and have become a tool for boosting the regional competitiveness and economic performance of many developed countries. The current level of cluster policy development and cluster promotion in the world is high: clusters are believed to be an effective tool for the supporting of regional policies and increasing the competitive advantages of regions and countries. At the same time, cluster policy is closely related to R&D and innovation policy and to industry and enterprise policy in the majority of countries, and all three policies – regional policy, R&D and innovation policy, and industry and enterprise policy – perfectly complement each other in the most developed countries.

Cluster policy promotion in Slovakia, however, is still insufficient and lagging behind all its neighbours (with the exception of Ukraine), and also behind the majority of EU countries. Slovakia can gain an advantage in drawing from other European and non-European countries’ knowledge and their experiences of success and failure in the implementation of cluster policies and cluster programmes, and the application of more or less successful instruments. The previous chapters have presented the countries which place greater emphasis on the description and implementation of cluster policy and cluster policy instruments than Slovakia. Funding systems in those countries vary significantly; nevertheless, it is possible to gain a wealth of information by analysing the systems and to apply the information gained in the design of Slovak national cluster policy or strategy.

A detailed research into the cluster funding systems in the selected countries has shown that there is neither a universally successful cluster funding policy nor a successful guiding principle in the determination of the ratio between the public and private funds for cluster support. Similarly, there is no one-size-fits-all approach to where the funds should come from, a national or regional level. Neither is there an agreement regarding the optimum amounts of funds when co-funding clusters from several sources. Successful cluster programmes differ in the amounts of budgetary allocations and in the lengths of funding periods. This is also due to the fact that clusters in different countries are financed for slightly different reasons: states and regions expect different outcomes when supporting clusters financially and non-financially, and national and regional cluster policies and clusters alone strive for slightly different goals.

Despite all of that, it can be concluded that successful cluster policies have been implemented in many developed countries and considerably increased their regional and national competitiveness. It is a challenge that needs to be addressed by policy-makers in such countries as Slovakia, which do not support cluster development as fervently as other countries and lack a unifying strategy for supporting clusters. Governments can nurture the development of innovative clusters, primarily through the provision of appropriate policy frameworks. The insights into the building and funding clusters in the world, presented in this scientific monograph, may be applied, and valuable lessons learnt from for the future of cluster policy in Slovakia.

About the Authors

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About the Authors

Ing. Peter Burger, PhD. has completed his university studies at the Faculty of Business Economy at the University of Economics in Bratislava at Košice. After his graduation, from 2004 to 2008, he worked as an administrative officer at the Regional Development Department at the Office of the Košice Self-Governing Region. Since 2008, he has been working at the Technical University in Košice: first, at the Institute of Regional and Municipal Development at the Technical University in Košice, then, since 2011, as a university teacher at the Department of Regional Sciences and Management of the Faculty of Economics at the Technical University in Košice.

Peter received a PhD. in economics after having defended his dissertation on »Multi-Source Funding of Industrial Clusters«.

In his scientific research he has worked extensively on issues related to innovation, clusters, funding innovation and clusters, evaluation of cluster performance and effectiveness of cluster policies, regional and local development, regional economy, investment environment, and creative economy. He is a co-ordinator and member of several research teams and R&D and educational projects.

Ing. Miriam Brašková, PhD. has a Master of Science’s degree in Quality Management of Production Processes from the Faculty of Mining, Ecology, Process Control and Geotechnology of the Technical University in Košice. During her studies, she spent a year at the University of Central Lancashire (Great Britain) on the ERASMUS programme. In addition to her scientific work during her doctoral studies, she worked as a teacher at the Faculty and as a project manager for the Carpathian Foundation Slovakia. She has completed an internship programme at the University of Vaasa (Finland).

At the moment Miriam works as a senior co-ordinator of the Košice IT Valley cluster activities. It was also her merit that Košice IT Valley has become the first holder of certificate of quality »Bronze Label Cluster« in Slovakia and, in 2015, it succeeded in the assessment process and was awarded the »Golden Label Cluster« certificate of quality as the first cluster in the V4 countries. Apart from presenting the cluster and its activities at national and international forums, she is frequently invited to act as expert on clusters, innovation, innovation policy, and industry-academia collaboration.

Ing. Emilia Duľová Spišáková, PhD. has completed her graduate and post-graduate studies at the Faculty of Economics at the Technical University in Košice. In 2010, she received a PhD after having defended her dissertation entitled »Analysis of Innovation Activity and Funding Innovations in the Business Sector«. Since 2010, she has worked as a university teacher at the Faculty of Business Economy at the University of Economics in Bratislava at Košice and, since 2011, she is also Secretary/Registrar of the Department of Economics.


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In the recent years, Emilia has worked mainly with innovation policy, possibilities of funding innovation, innovation activity, innovation performance, issues related to regional development and regional disparities, and other issues related to the macroeconomic development of countries. As a coordinator and researcher, she has been actively participating in a number of R&D and educational projects.

Ing. Slávka Klasová, PhD. has graduated from the Faculty of Economics at the Technical University in Košice and received a Master’s degree in Finance, Banking and Investment. After her graduation, Slávka continued studying in her post-graduate programme in Public Administration and Regional Development at the Department of Regional Sciences and Management of the Faculty of Economics at the Technical University in Košice. In 2015, she received a PhD. after having defended her dissertation entitled »Regional Knowledge Databases and Innovation Systems«.

Her scope of professional interest has covered regional innovation systems, localisation of knowledge databases within the innovation systems, synergies of innovation systems, spatial econometrics, and creative economy. Slávka is a member of several research teams at the Department and has been participating in the development of a strategic document entitled »Report on the Status-Quo and Potential of Creative Industry in Slovakia« for the Ministry ofCulture of the Slovak Republic.

Ing. Iveta Korobaničová, Ph.D. completed her university studies in 2001 and received a Master’s degree in Finance, Banking and Investment from the Faculty of Economics at the Technical University in Košice. In 2002, she started her PhD. studies as a part-time student at the Faculty of Economics and Administration at Masaryk University in Brno, the Czech Republic. She successfully completed her doctoral studies in 2012 by defending her dissertation on »Development Trends in Organisational Structures of Large Food Plants in Slovakia« and now holds a Ph.D. in Business Economy and Management.

Since 2001, Iveta has worked as a university teacher at the Department of Regional Sciences and Management of the Faculty of Economics at The Technical University in Košice. As a teacher, she focuses on marketing issues in the public and private sectors, management and management games. As a researcher, her concerns are mainly small and medium-sized enterprises and their support, marketing, creative industry, and life-long and distant education. She is also a co-ordinator and member of several research teams jointly working on a number of R&D and educational projects.

Ing. Viliam Kováč, PhD. has completed his undergraduate and graduate study programmes in Finance, Banking and Investment at the Faculty of Economics of the Technical University in Košice. In 2010, he decided to continue his studies at the post-graduate level, at the Department of Finance of the same university. He completed his doctoral study in 2015 by defending his dissertation entitled »Economic and Financial Aspects of Future Telecommunication Systems« and holds a PhD. specialising in Finance.

About the Authors

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In his scientific research he has worked extensively on issues concerning cognitive radio networks – smart telecommunication systems, and investigates the impact of tax burden on participants in this economic sector. In addition, Viliam analyses trading in international markets from the technological point of view. He is a member of several research teams.

Ing. Janka Pálfyová has graduated from the Faculty of Economics at the Technical University in Košice and received a Master’s degree. Immediately after her graduation, she started her doctoral study at the Department of banking and Investment and specialises in Finance.

Her research activities primarily focus on innovation at the corporate level, methods of measurement and financing innovations, innovation potential of small and medium-sized enterprises, venture capital, clustering and financial investments. Janka is currently working on her dissertation on »Innovation as a Determinant of Performance Growth and Competitiveness of Companies«.

Title: Cluster Promotion and Management: The Current Global Situation

Authors: © Ing. Peter Burger, PhD. - Head of the team of the authors Ing. Miriam Brašková, PhD. Ing. Emília Duľová Spišáková, PhD. Ing. Slávka Klasová, PhD. Ing. Iveta Korobaničová, Ph.D. Ing. Viliam Kováč, PhD. Ing. Janka Pálfyová

First published by: ASERS Publishing, Craiova, Romania, 2015

Number of copies: 100

Number of pages: 332

ISBN-L: 978-606-8689-13-5Print ISBN: 978-606-8689-14-2Online ISBN: 978-606-8689-15-9