Why Are Industrial Clusters Still Effective? Can The Government Create An Industrial Cluster?

Globalization has not eliminated manufacturing clusters, but according to the latest research results from Harvard Business School, industries with too much geographical location must have more survival wisdom.

Gary Pisano, a small business administration professor at Harvard Business School, and Julio Buchuni, a researcher from Venice University (Giulio Buciuni), published his work paper in 2015: can Marshall's cluster survive in a globalized environment? It answers the question of the success or failure of industrial clusters. (Pisano)

In order to study this subject, Professor Pisano and Mr Bu Qiu Ni explored 4 industrial clusters in northeastern Italy.

"Italy is a very suitable research object.

Because of historical origin, the industrial clusters distributed around these specific areas all over the country.

Each region is associated with a particular industry.

"Pisano said.

Cluster is not a new concept.

As early as the early twentieth Century, Alfred Marshall (Alfred Marshall) began to study this concept in Britain and called it an industrial area.

From the wine making industry in northern California to the automobile manufacturing industry in Detroit, manufacturing clusters can appear in any region or any industry.

At the same time, it is easier to establish clusters with abundant natural resources, well educated labor force, and a university or other research institution.

In recent years, some economists believe that

The cluster is disappearing because the importance of geographic location to enterprise success has diminished.

In today's global market, enterprises want to develop, build and sell products.

In the face of this theory of "cluster extinction", Professor Pisano and Mr Bu Chung decided to find out.

"I think people's general idea is right. Now that the market is globalized, we no longer need industrial clusters."

Professor Pisano said.

"And we have come to the conclusion that we need to analyze the situation in detail, which is neither black nor white."

They studied 4 clusters of different destinies on the spot.

Among them,

And the two industrial clusters of wooden chairs are declining, and the two industrial clusters of high-end women's shoes and furniture not only survive but also thrive.

The two shoe industry clusters studied are only 50 kilometers apart, but their development is quite different.

The sports shoe industry cluster in Montebelluna is traceable to the early nineteenth Century when local artisans made mountaineering shoes.

Later, the industrial cluster expanded its production of ski boots and sports shoes and attracted the investment of big brands such as Nordica (Nordica) and Nike (Nike).

Because the number of employees employed in the production process is huge and most of them do not require any technical content, leading enterprises have begun to outsource their production to the relatively cheap economy in Romania and China, separating the company's R & D and production businesses.

They developed soles, molds and other components that can be shipped to all parts of the world.

As a result, the number of local staff dropped by 15% between 2006 and 2012.

"In some cases, you do not need to be adjacent to the production base.

Examples of ski boots illustrate this point.

Once you have made the mold, the boots can be produced around the world, "Professor Pisano said.

Women's shoes cluster also sprouted in the early nineteenth Century.

Production began in the Riviera del Brenta area.

While maintaining local production, the industrial cluster has continuously increased investment in R & D and design.

Today, the world's 90% high-end shoes priced at more than $500 are produced in the region.

Why are industrial clusters still effective?

The success of clusters depends largely on whether leading enterprises can play the role of Pisano as a knowledge integrator.

Knowledge integrators must be rooted in the local market, but at the same time they need to be able to enter the global market.

It is a bridge connecting two worlds, helping the cluster to maintain its competitive advantage.

The skilled workers from the tower area can convert the sketches of international designers into prototype templates, thus promoting local suppliers to continuously improve their production capacity.

Two other cluster research objects, the wooden chair industry in Manzano (Manzano) and the furniture industry in Livenza (Livenza) also show a similar pattern.

Thanks to the proximity effect of raw materials, the two industries originated in the early nineteenth Century and flourished in the 60s of the last century and the 90s of the first century.

In the 90s of last century, 1/3 of the world's chair sales came from Manzano. But today, the industry cluster has fallen to the point of being out of production.

From 2006 to 2012, the total number of employees in the cluster dropped by 44%.

However, one of the enterprises has made great success in establishing global sales outlets and user experience centers through pformation to downstream industries, but the rest of the enterprises have gradually disappeared.

"That area really collapsed," Professor Pisano said.

"They made beautiful wooden chairs at that time, but then the market changed, and people preferred plastic chairs, composite chairs and chairs of different styles, and they didn't have the ability to change themselves."

60 kilometers away, the furniture industry of levy has been thriving.

Professor Pisano said the difference between the two lies in whether they have the leading enterprises that can act as a knowledge integrator.

In this case, the leading enterprise in the cluster is the largest supplier of IKEA (IKEA) in Europe.

The company has developed a technology that can produce high quality curved laminates that are needed by Swedish retail giants, and is constantly innovating in the manufacturing process.

"If you are a large furniture company and continue to invest more in advanced equipment, your actions will undoubtedly push your local suppliers to innovate," Professor Pisano said.

"If you want to continue to be our local supplier, you have to be able to achieve the corresponding quality and flexibility."

Prof Pisano stressed that leading the market is crucial.

In the above case, this helped leading enterprises to increase sales from 20 million euros in 1997 to 500 million euros today.

"They take the initiative instead of being passive," says Professor Pisano.

Another finding of the study is that the manufacturing industry can have the "Stickiness" mentioned by Prof. Pisano.

"Nowadays many people think that manufacturing is moving along with the change of labor costs.

At the same time, you will see some optimistic reports that the manufacturing industry will return to China from China and Taiwan. The reason is that wages there will rise a lot, and we will become more efficient, "said Professor Pisano.

"But it is assumed that the manufacturing industry is highly mobile, and it is biased."

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Sometimes the manufacturing industry does not migrate, because the suppliers or professional skills needed by its technology are rooted in a certain area.

Professor Pisano quoted a bicycle industry case.

When the materials used in the industry changed from steel pipes to carbon fiber pipes, the industrial cluster chose Taiwan as a foothold, because it had the expertise of carbon fiber manufacturing and molding.

"Even if the labor costs are up there, you can't reestablish such professional skills in other places," he said.

Professor Pisano said the trade agreement opened the door to the world economy, and the cost difference of production factors, such as labor costs, became more important.

That's why the low tech clothing manufacturing industry is pouring out of the United States.

"Because nothing can make it sticky," he said.

Can the government create an industrial cluster?

Professor Pisano is skeptical about whether the federal government can create new industrial clusters in the United States.

He pointed out that in the 70s of last century, despite the government's strong opposition, the biotechnology industry still sprung up in the backyard of Harvard University.

Industrial clusters "appear in the form of organic growth, often accompanied by fierce competition," Professor Pisano said.

Projects created by the government advocate cooperation rather than competition.

"All clusters, even those in Italy, are highly competitive."

Professor Pisano suggests that executives in those clusters ask themselves whether their clusters are dynamic and how their businesses can ensure future success.

"In today's world, industrial clusters without vitality and innovation will surely die out," Professor Pisano said.

"This is a challenge brought by globalization.

Clusters in the past were lacking in vitality. "

If there is no innovation, more and more start-ups will create a new industrial cluster in any other region.

Once the cluster is eroded, it will be hard to recover.

"When they start to go down, they will soon fall apart," Professor Pisano said.

When executives make decisions on supply chain, they need to understand that this is more subtle than globalization or localization.

"Sometimes globalization means fragmentation, and nothing must be close to each other.

But in other cases, globalization means that you supply products that are produced in a cluster area to the global market, "Professor Pisano said.

Professor Pisano said the global supply chain is a meaningless term because there are many ways to form it.

"Therefore, there will be many different choices."

This article is compiled from Globalization Hasn 't Killed the Manufacturing Cluster of Harvard Business School, and the original author, Roberta Holland (Roberta Holland), is resident in Boston.