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A University of Sussex DPhil thesis Available online via Sussex Research Online: http://sro.sussex.ac.uk/ This thesis is protected by copyright which belongs to the author. This thesis cannot be reproduced or quoted extensively from without first obtaining permission in writing from the Author The content must not be changed in any way or sold commercially in any format or medium without the formal permission of the Author When referring to this work, full bibliographic details including the author, title, awarding institution and date of the thesis must be given Please visit Sussex Research Online for more information and further details The emergence and development of knowledge intensive mining service suppliers in the late 20th century Osvaldo Urzúa SPRU: Science and Technology Policy Research University of Sussex, UK Submitted in partial fulfilment of the regulations for the degree of Doctor of Philosophy August 2011 Declaration: I hereby declare that this thesis has not been and will not be, submitted in whole or in part to another University for the award of any other degree. Signature:……………………………………… i Acknowledgements: I would like to express my sincere gratitude to my supervisor Prof. Martin Bell for his continuous support to this doctoral research. His patience, encouragement, analytical thinking and knowledge provided invaluable guidance during all the time of research and writing of this thesis. Additionally, I would like to express my warm and sincere thanks to many mates at SPRU. In particular, I owe my most sincere gratitude to Zeeda Mohamed, Rocio Alvarez and Ramon Padilla for the stimulating discussions, their advice, suggestions and their friendship. During this research many people linked to the mining industry in Australia and Chile gave me their precious time. Long interviews with executives and managers of supplier firms and mining companies, civil servants, experts at universities and executives of industrial associations provided important data and information, and also very stimulating conversations. I wish to extend my deepest thanks to them all. This research received financial support from the Chilean Government and from BHP Billiton. I am very grateful for the opportunity they provided through this support. Last but not least I would like to thank my family: My mother Maria Elena for her spiritual support; to my wife Annie for her love, encouragement and endless patience. Without her support it would have been impossible for me to finish this work. My special gratitude to my daughters, Amelia and Matilda, they brought additional colour and renewed sense to life. ii Contents: Chapter 1 – Introduction 1 1.1 The Thesis at a Glance 1 1.2 The Structure of the Thesis 6 1.3 The Mining Industry as a Source of Development and Technological Learning 7 1.4 The Specific Context: The Particular Case of the Chilean Mining Industry and KIMS Suppliers 9 Chapter 2 – Key Features in the Evolution of the Mining Industry in the 20th Century 14 2.1 Introduction 14 2.2 The Transformation of the Global Mining Industry in the Late 20th Century 15 2.3 Technological Rejuvenation in the Global Mining Industry 21 2.4 Change in the Organisation of Production in the Mining Industry 27 2.5 Emergence and Development of an Internationally Competitive KIMS Supplier Sector 28 Chapter 3 – Conceptual Framework, Development Context and Research Questions 32 3.1 Introduction 32 3.2 Learning and the Accumulation of Technological Capabilities in Developing Countries 34 3.3 Innovation and Learning in Knowledge-Intensive Services Sectors 44 3.4 Technological Change Cycles, Rejuvenation and Barriers to Entry 50 3.5 Natural Resources-Based Development and the „Curse‟ of Natural Resource Abundance 57 3.6 Conceptual Framework: A Dynamic Model of KIMS Learning 67 3.7 The Research Questions 77 3.8 Some „initial conditions‟ in Chile and Australia 80 Chapter 4 – Methodology 111 4.1 Introduction 111 4.2 Broad Research Strategy 111 4.3 The Sample of KIMS Firms in Chile and Australia 114 4.4 Clarification of Key Concepts 117 4.5 Data Collection 124 4.6 Data Analysis 130 Chapter 5 – The Development of KIMS Firms and Industries 132 5.1 Introduction 132 5.2 Overview of the KIMS Supplier Sector to the Global Mining Industry 133 5.3 Historical Overview of the Chilean and Australian Mining Industry 148 5.4 KIMS Technological Capability Levels in Australia and Chile 161 Chapter 6 – Industry-Level Factors Shaping the Potential for KIMS Learning and Innovation in Chile and Australia 169 6.1 Introduction 169 6.2 The Scale and Growth of Domestic Mining: Opportunities for the KIMS Sectors in Chile and Australia 170 6.3 The Complexity and Challenges Facing the Mining Industries 183 6.4 The Structure and Organisation of the Mining Industry in Australia and Chile 190 iii 6.5 Overview of the Potential for Learning and Innovation in the Chilean and Australian KIMS Sectors 212 Chapter 7 – Exploiting the Potential for KIMS-Related Learning and Innovation in Chile and Australia 220 7.1 Introduction 220 7.2 The Career Paths and Training Efforts of KIMS Experts 221 7.3 Firm-Level Efforts to Enhance Innovation and Engineering Capabilities 230 7.4 Learning from Interactions between KIMS Suppliers and Mining Companies 235 7.5 Overview of the Learning and Innovation Effort of Chilean KIMS 241 Chapter 8 – KIMS Learning and Innovation in Chile and Australia: An Integrated View and Final Conclusions 247 8.1 Introduction 247 8.2 An Integrated Overview of KIMS Learning and Innovation in Chile and Australia 248 8.3 The Main Research Contributions and Some Limitations 262 8.4 Policy Implications 271 8.5 Further Research 276 References 280 Appendix 1 302 Appendix 2 305 Appendix 3 361 iv List of Tables Table 1.1: Share of the Export Value of the Chilean Mining Industry (2005) 10 Table 2.1: Some Consequences of Rising Innovation-Intensity and Technological Rejuvenation 24 Table 2.2: Changes in Organisation of Production of the Mining Industry 28 Table 2.3: Categories of Suppliers to the Mining Industry 29 Table 2.4: Australian Suppliers of Specialised Services to the Mining Industry 30 Table 3.1: Changing Barriers to Entry and Innovation Potential over the Technology Cycle 52 Table 3.2: The Relative scale of the Chilean and Australian economies: Population and GDP, 1940 – 2000 83 Table 3.3: The changing structure of the Economy, 1900/1 – 1980/81: Australia and Chile (Sectoral production as a percentage of GDP) 85 Table 3.4: Manufactures and „Capital Goods‟ in Australian Exports: 1951/2 – 1971/2 93 Table 3.5: Labour productivity in Agriculture, Mining and Manufacturing: 1861-1990 100 Table 3.6: Employment in different industry branches: 1928-1967 101 Table 3.7: Trade in „Capital Goods‟: Australia and Chile, 1960s to 2000s 103 Table 3.8: Human Capital Indicators: Chile and Australia, 1940 – 2002 106 Table 4.1a: Features of the Sample of KIMS Supplier Firms in Australia and Chile 116 Table 4.1b: Features of the Sample of KIMS Supplier Firms in Australia and Chile 117 Table 4.2: Classification of Levels of Technological Capability 119 Table 4.3: Classification of Levels of Technological Capability 120 Table 4.4: Information about Industry-Level Factors – Process 1 124 Table 4.5: Information about Firm-Level Factors – Process 2 125 Table 4.6: Criteria to Select Key Events on KIMS Firm‟s History 129 Table 5.1: Group of Minerals 135 Table 5.2: Leading Equipment and Input Suppliers to the Mining Industry 138 Table 5.3: Suppliers in Traditional Sector: Numbers in Selected Categories 140 Table 5.4: Number of KIMS Supplier Firms by Country and KIMS Categories 142 Table 5.5: Classification of Levels of Technological Capability 162 Table 5.6: Evolution of KIMS Suppliers Sample‟s Technological Capabilities Level 163 Table 6.1: Copper Mine Production: World, Chile and Australia (1929-2005) 172 Table 6.2a: Iron Ore Mine Production: World, Chile and Australia (1929-2005) 174 Table 6.2b: Gold Mine Production: World, Chile and Australia (1931-2005) 175 Table 6.2c: Nickel Mine Production: World, Chile and Australia (1931-2005) 175 Table 6.2d: Zinc Mine Production: World, Chile and Australia (1943-2005) 175 Table 6.2e: Silver Mine Production: World, Chile and Australia (1930-2005) 176 Table 6.2f: Lead Mine Production: World, Chile and Australia (1929-2005) 176 Table 6.2g: Bauxite Mine Production: World, Chile and Australia (1929-2005) 176 Table 6.3: Number of Mining Investment Projects in Chile and Australia 178 Table 6.4: Number of Mining Investment Projects in Chile and Australia during the 1990s 179 Table 6.5: Evolution of Copper Mines Ore Grade (Average %): 1980-2015 189 Table 6.6: Number of Mining Companies by Type/Size (2000s) 194 Table 6.7: Mergers and Acquisitions by BHP 199 Table 6.8: Percentage KIMS Firms Merging with, Acquiring or been Acquired by other KIMS 204 Table 6.9a: Average Number of KIMS Categories Offered 208 Table 6.9b: The share of KIMS Suppliers that also Provide non-KIMS Products 208 v Table 6.9c: Share of KIMS Firms that Supply Exclusively to the Mining Sector 208 Table 6.10: The Export Intensity of Leading KIMS Suppliers: 1975-2005 210 Table 6.11: The Non-domestic Locations of KIMS Suppliers‟ Offices 212 Table 6.12: Evolution of the Scale and Growth Rate of Mining Production Activity Level 214 Table 6.13: Evolution of the Complexity and Challenges of Mining Production Activity Level 215 Table 6.14: Changes in Structure and Organisation of Mining Industry and KIMS Supplier Sector 217 Table 7.1: Number of Universities with Mining Related Programmes (2005) 227 Table 7.2: The