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Regional Deindustrialization and Re- bundling: Evidence from the Merger of the former German Hoechst and French Rhône- Poulenc Groups
Harald Bathelt & Katrin Kappes
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Citation Bathelt, H.,&Kappes,K.(2008).Regional deindustrialization and re- (published version) bundling: Evidence from the merger of the former German Hoechst and French Rhône-Poulenc groups. European Planning Studies, 16(10), 1329-1352.
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Publisher’s Statement This is an Accepted Manuscript of an article published by Taylor & Francis in European Planning Studies on Dec 2008, available online: https://www.tandfonline.com/doi/abs/10.1080/09654310802420045
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April 4, 2007 ca. 11,000 words (main text and references)
Regional deindustrialization and re-bundling: evidence from the merger of the former German Hoechst and French Rhône-Poulenc groups
Harald Bathelt University of Toronto, Department of Political Science, Sidney Smith Hall, 100 St. George Street, Toronto Ontario, Canada M5S 3G3, E-mail: [email protected], URL: http://www.harald-bathelt.com
and
Katrin Kappes Faculty of Geography, University of Marburg, Deutschhausstraße 10, 35032 Marburg, Germany, E-mail: [email protected]
Paper submitted to European Planning Studies i
Regional deindustrialization and re-bundling: evidence from the merger of the former German Hoechst and French Rhône-Poulenc groups
Abstract. A large part of the work in economic geography and other social sciences has focused on new growth prospects due to the establishment of global production chains and the rise of new clusters of industrial activity. Much less attention has been paid to former growth industries and regions that have recently experienced shrinking processes due to internationalization. This paper will explore the cases of two chemical regions, i.e. southern Hessen, Germany and Rhône-Alpes, France. These two areas have both undergone drastic restructuring since the mid 1990s, due to the merger of the prominent chemical groups Hoechst and Rhône-Poulenc into Aventis. Instead of investigating the development of the core activities at Aventis, we will focus on the operations that were considered less important and consequently split off. In addition to the negative consequences produced by these activities, in our analysis we also emphasize regional opportunities which arise from competence building, reorientation and new firm formation. These processes can be viewed as re-bundling existing and new knowledge bases with other resources to help overcome economic crises and develop a new competitive edge. As such, the paper aims to contribute to a relational understanding of economic globalization and regional restructuring.
Keywords. International mergers, regional deindustrialization, re-bundling, chemical industry, Aventis JEL Classifications. F23, G34, L22, L65, R10
1
1. Introduction
A large part of the work in economic geography and other social sciences has focused on new growth prospects due to international market reach, the establishment of global production chains and the rise of new clusters of industrial activity, as a consequence of international direct investments, acquisitions and mergers. While these are important aspects of the changing international division of labor, much less attention has been paid to those industries and regions that once formed the basis of economic growth and well-being, and have recently been forced to undergo various shrinking processes. This paper will explore the cases of two chemical regions, i.e. southern Hessen around Frankfurt/Main in Germany and the Rhône-Alpes region around Lyon and Grenoble in France. These two areas have both experienced drastic restructuring since the mid 1990s due to the merger of the German
Hoechst and the French Rhône-Poulenc groups into Aventis. As opposed to earlier periods of restructuring, which were limited in terms of their extent and time span, it seems that capitalist economies have now entered a new regime of permanent restructuring (Greco 2004a;
2004b).
This paper aims to contribute to a relational understanding of economic deindustrialization associated with international mergers by focusing on those agents who are negatively affected by such processes. Its goal is to investigate the effects of globalization in the context of industrial restructuring and deindustrialization, and the associated impact on the social division of labor from a micro-scale spatial perspective. The paper analyzes the regional effects, threats and prospects that arise from such processes in the chemical industry, focusing on the Aventis merger which took place in the late 1990s. Instead of investigating the development of what was to become the core of activities at Aventis, as other studies of international mergers have done, we will focus on the operations which were considered less important and consequently split off. These activities were either sold to other companies, or 2 more or less left alone to survive outside the formerly established, integrated corporate environment. In addition to the negative consequences, we will also focus on regional opportunities which may arise from competence building and new firm formation. This can be viewed as a process of re-bundling existing and new knowledge bases with other resources to overcome economic crises and develop a new competitive edge. The analysis will proceed in three stages.
(1.) Changes in the corporate structure and institutional environment of southern Hessen and
Rhône-Alpes will be analyzed, and the regional consequences in terms of employment,
the social division of labor and public response discussed.
(2.) The paper will investigate how regional suppliers and service providers have had to
restructure their activities to remain in business, or find new markets. The degree to
which these firms have been able to develop a specialized knowledge base from their
former relations with chemical firms, enabling them to find new customers inside or
outside the chemical industry, will be explored.
(3.) The question as to whether this has spawned firm formation processes by former
managers and employees who lost their jobs, or by those who were not pleased with
post-merger work conditions, will be addressed using the case of the Frankfurt/Main
region.
The analysis presented in this paper is based on in-depth empirical work concentrated on the restructuring activities of the former Hoechst and Rhône-Poulenc groups in southern
Hessen and Rhône-Alpes. This involved explorative research, fax surveys and structured interviews with chemical firms and their regional suppliers, as well as interviews with industry experts and regional observers of the chemical industry. In southern Hessen, this research began in the mid 1990s (Bathelt 1997) and has continued until today (Bathelt and
Griebel 2002; Kobiela 2003; Kappes 2006). This paper is primarily based on the following 3 research: in August 2000, 106 chemical suppliers in southern Hessen participated in a fax survey on producer–user relations within the chemical industry. In addition, a total of 30 interviews with chemical firms and suppliers, and an additional 15 interviews with industry experts, were conducted between January 2001 and May 2006. The empirical work in Rhône-
Alpes was undertaken between June 2004 and November 2005 (Kappes and Trucchi 2005a;
2005b; Kappes 2006). A total of 65 chemical firms, suppliers and experts in the Lyon and
Grenoble regions took part in interviews and filled out standardized questionnaires. Only those suppliers and service providers were included in the study which already had a supplier relationship with the former Hoechst or Rhône-Poulenc groups prior to their merger. The overall response rate for all surveys was above 40%. The goal of this research is to explore the structure of producer–user relations in the chemical industry and the changes that took place as a consequence of the Aventis merger and global restructuring. This includes questioning the precise type and intensity of interaction, the potential for knowledge transfers and interactive learning, and the structure of purchasing decisions made before and after the
Aventis merger. In addition, this paper builds upon interviews with 15 new firms in the
Frankfurt/Main region which were spun off from Hoechst during the course of the restructuring process (Kobiela 2003).
The paper is structured as follows: section 2 discusses the regional effects of international mergers and acquisitions on industrial core regions. In applying theory to understand regional development that is based on evolutionary economics, it will be argued that the concept of lock-in processes in older industrialized regions only partially fits the incidence of regional restructuring investigated in this paper. Rather than viewing lock-in as a negative process per se, we develop a framework of re-bundling in section 3 which discusses possibilities for new developments that may also be associated with a crisis. This includes a discussion of ways in which restructuring processes may open up new opportunities for re- bundling local assets and combining them with external markets and technology impulses in 4 order to produce new growth. Section 4 describes the changes which have occurred in the economic geography of southern Hessen and Rhône-Alpes due to the restructuring processes of Hoechst and Rhône-Poulenc, while section 5 focuses specifically on the shifts and re- bundling activities in the regional supplier sector. Section 6 shows how these changes have stimulated firm formation processes in the Frankfurt/Main region. Section 7 summarizes the main arguments of the paper and draws some conclusions.
2. Regional development and lock-in
A great deal of restructuring and deindustrialization processes took place in the former core industrial regions in Europe during the 1990s. Many firms aimed to strengthen their core competencies while other operations were terminated, spun out or sold to other firms. This was associated with globalization processes and increased international competition. As a consequence, a number of international mergers and acquisitions occurred during this time, specifically within the chemical industry (Chapman and Edmond 2000, Greco 2004a). Job losses typically accompanied these restructuring processes, which contributed to higher regional unemployment and social problems. Further, regional supplier and service linkages had to be adjusted, as traditional linkages were partially cut and replaced by new ones which had a stronger international orientation. Many of these attributes were also seen in the chemical industry, although the structure of supplier relations is somewhat different from that in other industries. Regional producer–user networks are usually focal in character and often do not involve intensive horizontal and vertical interaction. Suppliers establish close transactional relations with their main customers in the chemical industry, but do not engage in intensive interaction or joint product development. Instead, these relationships often appear to be relatively standardized. They are stable, however, as the firms specialize in the complex production of chemicals that are sometimes dangerous to handle and expensive to transport
(Bathelt 1997; Bathelt and Griebel 2002). 5
One could argue that the chemical industry and its supplier networks in southern Hessen and Rhône-Alpes were already established in the late 19th and early 20th century, and therefore could be viewed as old industrialized regions, similar to the work of Dühr (1998) on the Bitterfeld-Wolfen chemical industry in East Germany or Chapman’s (2005) study of the
Teesside chemical industry in England. It would be tempting to view the restructuring activities and associated problems investigated here as lock-in processes which require breaking up old institutional settings (e.g. Cooke 1995). This type of analysis would be related to an evolutionary perspective which argues that technological development is highly dependent on existing structures and prior technological decisions rather than a process within which optimal decisions are being made. Evolutionary economics supposes that techno- economic change defines a development path which follows particular routines and heuristics
(Nelson and Winter 1982; Dosi 1988). As part of this, the direction of technological change is pre-structured by existing technologies. Decisions about technologies at one point in time initiate processes of selection, mutation, variation and chance, which may take place at a later point building upon existing structures.
Path-dependent development can become a problem however, if existing configurations cannot be easily reversed or prevent necessary adaptations within a technological trajectory or changes toward a new trajectory. Based on the seminal work of David (1985), Arthur (1988) and Setterfield (1995), we know that technological lock-in, or institutional hysteresis, is often related to rigid institutional conditions and externalities. In the literature, such lock-in situations, although they can be a source of high economic returns over a long time, are often associated with negative connotations pointing at a “catch 22” situation, or one in which better technological choices are ruled out (Bathelt and Glückler 2003; Hassink and Shin 2005;
Martin and Sunley 2006).
From a spatial perspective, lock-in situations have been investigated in regional contexts where localized industrial systems have collectively run into problems due to rigid 6 technological and organizational structures. These rigidities, for instance, developed due to the technological choices of the dominant industry, often reliant on a few large firms and their supplier networks. Grabher (1993) explained this by the “power of strong ties” between the economic and political actors in a region, which might block off radically new ideas and alternative developments originating from inside or outside the region. As a result, entire regional economies can lose their competitive edge and run into trouble, as seen in the case of iron and steel production in the German Ruhr (Grabher 1993) or watches in the Swiss Jura
(Maillat et al. 1995). Grabher (1993) distinguishes three types of lock-ins that can threaten regional development: (a) cognitive lock-in which results if the regional actors collectively focus too much on the dominant technological path; (b) functional lock-in, or over- embeddedness (Uzzi 1997), which is related to the existence of input-output relations that are too close and exclusive, often involving a small group of dominant actors; and (c) political lock-in which is an expression of narrow-sided political programs and overly strong bonds between the dominant economic and political cadres (see also Hassink 2005). The result of these structures may well be that the leading regional agents prioritize received status over new knowledge which could threaten existing power structures; power relations consequently do not encourage learning and change (Morgan and Nauwelaers 1999). Due to lock-in processes, one could argue that clusters might eventually lose their openness and become insular, inward-looking systems which are vulnerable to external technological and market changes.
Although the literature on lock-in processes in old industrialized regions provides important insights for the design of regional policies, the goal to overcome technological lock-in does not fit very well with the situation investigated in this paper. On the one hand, the literature on regional lock-in often assumes that a region’s economy and labor market are to some degree dominated by the industry under investigation. In the case of the
Frankfurt/Main and the Lyon and Grenoble regions, this is, however, not the case. These 7 regions cannot be classified as old industrialized regions because they host large high- technology and knowledge-intensive service economies, and are by no means dependent on a single industrial sector. On the other hand, the regional stress observed in these regions is not primarily related to networks of strong ties and overarching institutional inefficiencies; the problems result from industry-specific globalization processes that are not triggered by the regional industry structure in the first place.1 Consequently, lock-in would be too narrow as a starting point for the analysis of the regional consequences of the merger between the former
Hoechst and Rhône-Poulenc groups. As Martin and Sunley (2006) point out, regional lock-in is also a conception which is unclear in many respects. In the next section, we develop an alternative perspective on re-bundling which will form the basis for subsequent empirical analysis.
3. International mergers and regional re-bundling
One problem in much of the literature overcoming lock-in is that it tends to view lock-in as a negative process that will sooner or later create competitive problems due its tendency to prioritize existing structures over change. Although this perspective might be applicable in many cases, lock-in is also a process which greatly stimulates and enables economic interaction and becomes a major source of increasing returns. Agreements about the use of particular sets of standards and technologies are a necessary basis for industries and firms to cooperate efficiently and establish a social division of labor. Technological lock-in thus provides a decisive basis for external and internal economies of scale. As long as this does not exclude necessary adjustments regarding new technologies or coincide with rigid power
1 Although many chemical firms are aiming to shift their focus from mass products toward specialty chemicals, a relocation of standardized mass production of basic chemicals is only partially feasible and cost- efficient. 8 relations in which individualistic interests override collective rationales, lock-in is not a negative process per se.
In the discussion that follows, a broader relational view of regional ruptures and re- bundling is developed, which focuses on the adjustment processes and new challenges for agents involved in a particular regional restructuring setting. Through this, we aim to avoid using an aggregate view of restructuring that treats regions as if they were homogenous collective agents. Instead, our conception focuses on the agents involved, and analyzes their efforts and potential to develop new strategies and start new ventures. Negative adjustment processes in the supplier sector, for instance, are not the only shifts we can observe in restructuring processes; associated changes can also occur which can be viewed as processes of opening up new opportunities for the next round of knowledge generation and innovation.
As shown in previous work (Bathelt and Boggs 2003; 2005), this can be conceptualized as a process of re-bundling. Political and sectoral ruptures strain a regional economy’s social cohesion and disrupt existing transactional networks, releasing resources for alternative uses.
Suppliers and service firms which previously focused on the needs of a dominant sector are now open to new ventures and technologies developed in other sectors and/or other regions.
Ruptures lead to two types of adjustments: geographical shifts, as assets leave the region; and sectoral/technological shifts, as assets are redeployed to the region’s other sectors and technologies. Through sectoral/technological shifts, innovation and talent developed in one sector might filter into another. In addition to the obvious negative consequences, this also creates new opportunities as resources can be mobilized for new creative uses.
Regions begin to recover from a rupture when agents re-bundle the capital at hand (i.e., financial, physical, human and social capital) for a new round of accumulation. Thus, interactive learning through systematic and non-systematic observation, information exchange, feedback, imitation, experimentation and other reflexive social practices enable the regional actors to re-bundle technological trajectories. Sometimes this becomes the basis of a new 9 regional industry core, which may promote a novel development path as new ventures are started, based on experience collected during the previous periods. Not every new bundle of technologies and related economic activities will, however, have a significant positive impact on a region’s development. In order to shape the development path so that the local effects of a crisis are overcome, a new ensemble of competencies must develop (Bathelt and Boggs
2003; 2005). This ensemble must be anchored into the local economy by non-ubiquitous resources found within a specialized social division of labor, have a certain size, and develop particular institutions to reproduce itself.
This conception assumes that bundles of overlapping technological trajectories drive regional development, characterized by the effects of incremental, cumulative learning processes and unexpected ruptures. In a similar vein, Feldman and Francis (2006) argue that principally each region has some entrepreneurial potential for the development of innovations even though the potential might remain latent or hidden for a long time. Drawing on North
American experience, they argue that this potential can be mobilized resulting in the establishment of new firms, particularly in periods of crises and discontinuities. Potentially, these start-up processes might drive regional development later on.
The concept of re-bundling does not imply that regional crises are overcome through regional assets alone; in fact, re-bundling processes are often initiated or supported by external agents and their particular competencies. In recent years, it has been recognized that integration into global production networks can be seen as being essential for the competitiveness of regional actors (Henderson et al. 2002; Owen-Smith and Powell 2004;
Amin 2004). However, in order to anchor these initiatives in a region and trigger regional development, local actors will also have to be mobilized. Interaction between internal and external actors needs to be established in order to enable a recombination of assets and spur new rounds of capital accumulation to support a renewed development path. The concept of regional bundles draws attention to the actors and assets that are situated within a region or 10 are available to that region. This perspective focuses on those agents which can be mobilized to anchor a new or renewed technological trajectory in a particular region.
This relational view enables a broader analysis of the effects of globalization and regional deindustrialization processes in that it focuses on how agents have redirected industrial relations and reacted to new opportunities of globalization, as well as threats of restructuring, in a variety of different ways. We follow this route of inquiry in the empirical part of this paper by investigating restructuring processes in those operations of the former
Hoechst and Rhône-Poulenc groups which were split off, as they were not considered to be part of the core competencies of Aventis. In addition to analyzing the negative consequences, we will also explore the impact of these processes on supplier networks and induced start-up activities in the former core regions of these firms.
Due to international mergers, existing social divisions of labor are restructured and established institutional settings are challenged as new connections have to be created and multiple distances bridged (Rallet and Torre 1999; Boschma 2005). This requires the establishment and mobilization of relational proximity (Bathelt and Glückler 2003; Atherton
2003; Amin and Cohendet 2004), which enables firms to organize and direct industrial production over space and between different social, cultural, institutional and political settings in a reliable way. The aim of this paper is not to investigate the effects and problems of international mergers in integrating business units from different contexts, but rather to analyze the effects of this transformation on existing and potential future inter-firm linkages in the former core regions of the merging companies. As relational proximity enables firms to deepen their learning capabilities collectively, we hypothesize that suppliers may be able to develop specialized competencies if they can build upon relational proximity established by earlier interaction with their customers.
The next section will lay the groundwork for our study in that it will explore the development of the chemical firms Hoechst and Rhône-Poulenc, and the context which gave 11 rise to their merger. The remaining sections of this paper will then take a closer look at the re- bundling activities that have taken place since the merger, focusing on processes of knowledge generation in the supplier sector and new firm formation.
4. Economic geographies of regional restructuring in the chemical industry
Since the 1980s, changes in the global settings of the chemical industry put increasing pressure on the Hoechst and Rhône-Poulenc groups to rationalize their structure and extend their spatial reach. On the one hand, this was related to stagnation tendencies in some traditional market segments, increased cost competition due to the presence of new competitors from newly industrialized countries, and high labor costs in the former industry cores. On the other hand, globalization processes offered opportunities to access new markets and benefit from increasing economies of scale and synergies in production (e.g. Schumann et al. 1994; Bathelt 1997). Since many companies had a widely diversified and costly production program, specialization and rationalization processes, along with increased international mergers and acquisitions, became particularly important. In the case of both Hoechst and
Rhône-Poulenc, which had established large conglomerates of chemical production over time, the restructuring processes not only aimed to reduce existing inefficiencies, but also led to a fundamental restructuring of the respective home regions, especially in the mid 1990s.
4.1 Historical growth and diversification of Hoechst and Rhône-Poulenc
Interestingly, the historical development of Hoechst and Rhône-Poulenc was characterized by some parallels in terms of their paths of growth and diversification. Hoechst was originally started up in the 1860s in the city of Höchst near Frankfurt/Main as a producer of dyestuffs (Büschenfeld 1958). Over time, the firm broadened its production focus in an evolutionary manner. This was partially due to new discoveries made in existing technologies in the chemical industry as a result of trial-and-error. By-products of some production 12 processes became the starting point for development activities which led to new applications and products. In the dyestuff production chain, it was discovered, for instance, that intermediate products also had medical benefits. This led Hoechst to expand its activities to include the production of pharmaceuticals. In addition, the rapid growth and diversification of the chemical industry benefited from scientific discoveries that occurred after World War I, which resulted in the establishment of new production branches, such as synthetic fibers and plastics (Bäumler 1988; 1989). As a consequence, Hoechst developed into a diversified conglomerate of chemical production and became a world leader in many branches of the industry. Hoechst’s Frankfurt/Main headquarters became one of the world’s largest chemical production sites, which was characterized by complex, interrelated production processes and a high degree of vertical and horizontal integration. By means of acquisition, Hoechst extended its activities in the Frankfurt/Main region early on, with locations in Offenbach, Fechenheim,
Griesheim, Kelsterbach and Wiesbaden. In the early 20th century, the company had already established an international marketing and production network with production sites in Paris,
Liverpool and Moscow. After World War II, Hoechst was able to expand its activities even further.
In 1928, Rhône-Poulenc was originally established as the Société des Usines Chimiques
Rhône-Poulenc (S.U.C.R.P.), when the firms Société Chimique des Usines du Rhône
(S.C.U.R.) and Société Poulenc Frères merged. Having originally been a trader of chemical products, S.C.U.R. (until 1895: Gilliard, Monnet et Cartier) shifted into a producer of chemicals through backwards integration when the production of the dyestuff “Fuchsin” was launched (Cayez 1988; Laferrère 1991). At the beginning of the 20th century, the production of dyestuffs was terminated, so instead Rhône-Poulenc focused on the production of pharmaceuticals (e.g. Aspirin and Penicillin) and synthetic fibers (e.g. Viscose and Nylon), which had become more profitable production branches. As opposed to Hoechst, many of the new products did not result from internal innovation but were acquired from other firms. This 13 was done through licensing arrangements and the establishment of strategic alliances or partnerships with those firms in possession of the respective patents. There were, of course, also some products that were invented by Rhône-Poulenc itself. These included Vanillin, a vanilla aroma which is still an important end product of Rhodia, a major successor of Rhône-
Poulenc, and perfumes which were in high demand in the Brazilian market (Cayez 1988;
Gambrelle 1995).
4.2 Setting the scene: restructuring processes in the 1990s
Since other multinational companies had already made movements to form more focused global operations by restructuring internally and expanding externally, Hoechst changed its strategy when the new CEO Dormann came into power in 1994. Dormann restructured the activities in southern Hessen by shutting down older production plants, especially in the area of basic chemicals and intermediaries, and by also selling production branches to other chemical firms or spinning them out (Frankfurter Allgemeine Zeitung 1996).
Instead of giving the various branches time to establish their own independent market position,
Hoechst focused on making short-term profits by selling these units. The result was a loss of decision-making competencies in southern Hessen and a greater dependence on external headquarters (Bathelt and Griebel 2002). Similar to the development of Novartis (Zeller 2001),
Dormann and his colleagues decided to concentrate on the firm’s core competencies by focusing on “life sciences”, i.e. pharmaceuticals and agricultural chemicals. Genetic engineering was seen to be the core technology that bound both branches together and resulted in technological synergies. Parallel to this restructuring, the large US pharmaceuticals producer Marion Merrell Dow was acquired (1995) and the French Roussel Uclaf fully integrated (1996), which formed Hoechst Marion Roussel (Frankfurter Rundschau 1995). The goal behind these acquisitions was to strengthen the overall pharmaceutical activities and expand international market presence. 14
In the case of Rhône-Poulenc, the ownership structure drastically changed when the state took control in 1982. Similar to other large firms in strategically important sectors, the
French socialist government acquired the majority of the shares of Rhône-Poulenc in order to gain control over employment relations and influence strategic decision-making. The goal behind this move was to strengthen the company’s position as a globally-active national champion. In 1993, the company was re-privatized. This action was associated with a shortage of capital from private investors who were having reservations about getting involved with a state-owned company. It was also related to expectations that this type of firm, due to its structure of ownership, would not act according to the requirements of the market, and thus be less profitable. After 1993, the central government kept only a minority share of the group and stepped back from its direct economic intervention policy. This re-privatization led to a systematic restructuring of Rhône-Poulenc, a process similar to that which had taken place at Hoechst. Under the leadership of Fourtou, who was voted CEO in 1986, Rhône-
Poulenc decided to concentrate its future operations in the area of life sciences. The production program became much leaner and was reduced from 160 to only 35 product groups (Cambon 1997). As opposed to Hoechst, the group was, however, not dissolved, split up or sold to a variety of different firms. Existing divisions were restructured and recombined into a new “group” structure. All production activities in the area of basic and specialty chemicals were integrated into the newly formed Rhodia group. This group went public in
1998 and became an independent chemical producer. At that time, Rhône-Poulenc completely concentrated on the production of pharmaceuticals and agricultural chemicals (Bonnet 2005).
4.3 Global focusing and the Aventis merger
In the mid 1990s, Hoechst and Rhône-Poulenc were both under pressure to expand their international market presence and faced ongoing acquisitions and mega mergers in the pharmaceutical industry (e.g. Lill 1994; Zeller 2001; Bunzenthal 2004). It seemed quite 15 natural that discussions to merge Hoechst and Rhône-Poulenc were initiated. In making this decision, it was certainly helpful that Hoechst’s Dormann was open to the francophone life- style and got along well with his Rhône-Poulenc counterpart Fourtou (Frankfurter Rundschau
1998). In addition, the firm Centeon, a joint venture between a former US-subsidiary of
Rhône-Poulenc and a Hoechst branch of the former Behringwerke in Marburg, created a basis for further cooperation because it served to establish initial trust between the parties. The merger between both firms into the new Aventis group took place in 1999 (Frankfurter
Rundschau 1999). The initial choice to locate the headquarters in Frankfurt/Main was abandoned, and new headquarters were established in Strasbourg.
Although this was supposed to be a merger between equal partners, it quickly became clear that the French side was dominant. Although Dormann remained CEO of the new
Aventis group, the French dominance became apparent when the French Landau was announced as the new CEO immediately following the initial two-year period of the merger
(Frankfurter Rundschau 2002). Critics of the merger were skeptical, foreseeing this as a first step in a long-term process of further restructuring (e.g. Ochs and Sievers 1998; Hoffritz
2000); this was indeed the case (Kappes and Trucchi 2005a; 2005b). On the one hand,
Aventis was under pressure because it did not have a well-developed “pipeline” of new drugs, which were in a promising stage of research, development and testing cycles. Therefore, in the long term, the market position of the firm seemed in danger. On the other hand, as one former manager commented, there were rumors about differences and incompatibilities in the
German and French “corporate cultures” since Hoechst had taken over Roussel Uclaf (see, also, Frankfurter Rundschau 2001). Further, the original strategy which focused on life sciences did not work out because important markets did not accept genetically engineered foods (Hoffritz 2000). As a consequence, this strategy was given up and a new focus was set to concentrate exclusively on pharmaceuticals. 16
In 2003, the French pharmaceutical group Sanofi-Synthélabo had already announced its interest in acquiring Aventis and integrating its operations. Originally, this was considered a hostile takeover; however, the acquisition was successfully negotiated after a several-months period (Wille 2004; Salzmann 2004). In the end, Sanofi-Synthélabo and Aventis merged into the new Sanofi-Aventis group (Le Monde 2004; Kappes 2006). The new firm became a purely
French-owned global player, ranked third in the world pharmaceutical market. This merger can be viewed as a continuation of the French tradition of maintaining national ownership of large groups in strategically important industries.2
5. Changing relations and re-bundling in the regional supplier sector
Adjustments to new global settings in the chemical industry and the restructuring activities related to the Aventis merger caused a shift in the production and ownership structure of the former Hoechst and Rhône-Poulenc groups. Activities that were no longer part of the core competencies of Aventis were transformed into independent firms or parts of other groups (Figure 1). Further, the main plants and headquarters were reconfigured from integrated production sites owned and controlled by single companies, to decentralized industrial parks occupied by a larger number of independent firms (Kappes 2006). As will be demonstrated, the economic consequences of this restructuring process on the supplier sector were substantial. There were also remarkable differences between different types of firms, as
2 After initial successes, recent developments have indicated that another major restructuring could take place involving Sanofi-Aventis and Bristol-Myers Squibb, the effects of which could again be quite drastic for some of the existing operations and production networks. On the one hand, important patents will run out in the upcoming years. On the other hand, new health policies in developed economies which aim to reduce costs are a burden for further growth. As a consequence, the firm has put investment projects in the Frankfurt/Main region on hold and seemingly started discussions with Bristol-Myers Squibb to initiate another mega-merger. Through
17 well as between the Frankfurt/Main and Lyon and Grenoble regions on the way in which supplier relations were affected. Rather than viewing pre-existing supplier relations as a source of functional lock-in, our subsequent analysis will investigate which structures of social relations in supplier linkages may help generate competitive advantage and flexibility and which other structures may block this off.
5.1 Shifts in the Frankfurt/Main region
As opposed to other chemical industry groups, such as BASF, the restructuring process of Hoechst was more drastic and was less sustainable in terms of the use of regional resources
(Bathelt 1997). This was particularly the case for business segments that were split off or shut down, as well as for the regional workforce and supplier sector, both of which did not have a high priority in the decision-making process. Since the mid 1990s, numerous production branches in the region were shut down, other business segments were sold to other chemical or related firms, and mergers with other firms were pushed ahead (Bathelt and Griebel 2002).
Unlike the case of the Swiss firms Ciba-Geigy and Sandoz, which placed a high priority on strengthening their home region and maintaining headquarter and decision-making functions in Basel (Zeller 2001), the restructuring activities of Hoechst initially had a clear negative effect on the Frankfurt/Main region. By 1997 the formerly integrated production site of
Hoechst in Frankfurt/Main had already experienced a loss of about one third of its workforce, from 28,000 employees in 1990 to a mere 21,000 (Hanack and Bartsch 1997; Papenhausen
1999). In addition to jobs, the region also lost substantial decision-making functions, and criticism among the general public regarding the restructuring of Hoechst became louder.
this merger, Sanofi-Aventis would be able to strengthen its research base and pipeline for new drugs (Toronto Star 2007; Frankfurter Rundschau 2007a; 2007b. 18
Hoechst increasingly focused on international markets and placed less emphasis on the stagnating German markets; this became clear when Dormann pointed out that a firm’s home should be its market and not its region or city (Salzmann 1998). The formerly integrated chemical site in Frankfurt-Höchst was transformed into a chemical industrial park, i.e. the
Industrial Park Höchst (IPH). Other Hoechst sites in the Frankfurt/Main region were also converted into industrial parks (Figure 2), i.e. Industriepark Kalle-Albert, Wiesbaden (about
90 firms; 5,000 employees), Industriepark Griesheim, Frankfurt/Main (about 30 firms; 1,200 employees) and Industriepark allessachemie, Frankfurt/Main and Offenbach (12 firms)
(Planungsverband Ballungsraum Frankfurt/Rhein-Main 2007). However, not all impacts on the regional chemical industry were negative. Re-bundling activities began to take place, initiated by the more than 80 firms which occupied the IPH site in 2004.3 These firms developed new strategic goals and strengthened their market positions by establishing new facilities and technologies, mobilizing innovative activities, and attracting further investment by other firms. This helped reduce the investment and innovation deficits which had built up during the 1990s. By 2004, employment in the IPH had stabilized with about 22,000 people
(Strohm 2003; Wille 2004).
The analysis of a database of suppliers, provided to us by the IPH, revealed that southern Hessen was still a major location for trading firms, service providers and other suppliers of chemical products for the former Hoechst units and IPH operations in 2000.
3 It has to be pointed out that the tenants of the industrial parks in southern Hessen (Figure 2) were not primarily suppliers of the original chemical operations of Hoechst. They were new firms which resulted from the disintegration and restructuring processes. Many of these firms were potential customers for the established regional suppliers and service firms. In addition, new firms moved to the IPH in recent years which were unrelated to the former production branches at this site. Similar processes also apply to the industrial parks in Rhône-Alpes although these locations primarily host firms which directly resulted from the disintegration of Rhône-Poulenc. 19
According to this database, 972 of the potential 2,435 suppliers (ca. 40%) were located in southern Hessen and a few adjacent counties. Of the 240 suppliers approached, 106 participated in a fax survey conducted in 2000 (Bathelt and Griebel 2002). It turned out that
90% of these suppliers were quite small, with 100 or fewer employees; and half of them had less than 10 employees. These firms were strongly embedded in the region through close input-output linkages, despite the restructuring activities that had already taken place.
Regional linkages were particularly strong at the customer end (Table 1); about 65% of the firms surveyed had more than half (most of them even more than three quarters) of their sales within southern Hessen. In terms of purchases, most firms had a more widespread supplier base from which they acquired their supplies. Less than a third of the surveyed firms purchased more than half of their supplies within the region (Table 1).
In terms of the type of interaction with chemical firms, it was not surprising that most relations with IPH customers were fairly standardized, while complex transactions involving individual training, after-sales services or joint technical adjustments were rare. This is, of course, not unusual in the chemical industry. Upon closer investigation, there were, however, significant differences between the different types of suppliers. While firms with a decreasing
IPH sales share were primarily involved in delivery-related interactions, suppliers with a growing IPH sales share had a significantly stronger focus on systematic feedbacks and joint problem-analysis than the other firms. On the one hand, this suggests that firms which were more successful in maintaining strong business relations or strengthening their sales position with IPH customers had placed a stronger emphasis on complex, knowledge-intensive interactions and services which required more in-depth technical adjustments and ongoing communication. On the other hand, less successful suppliers had primarily engaged in simple transactions with their IPH customers focusing on price and delivery issues, while neglecting more complex types of interaction. The survey indicates that many suppliers were able to develop specialized competencies by having intensive interaction and engaging in learning 20 processes with their customers over time. Through this, they were able to engage in re- bundling activities and acquire new customer groups in different markets.
Today, many firms evaluate the dissolution of the former Hoechst group and the subsequent restructuring of the chemical production complex more positively than during the
1990s. Several of the managers of the former Hoechst branches that were interviewed mentioned that they had to face stronger competition than in the past, but that they were also more specialized and well-prepared to face worldwide competitors. The new structure would enable them to react quicker and more flexibly towards changing market requirements compared to the “old, rigid Hoechst days”.
5.2 Shifts in the Lyon and Grenoble regions
Due to external pressures, the French Rhône-Poulenc group was also restructured during the mid 1990s. As opposed to Hoechst, restructuring activities initially concentrated on internal reorganization. After the re-privatization of the group, the different production branches were recombined into a holding structure. Instead of selling production branches individually to other firms or closing them down, Rhône-Poulenc established a new chemical company, i.e. Rhodia, which incorporated all the activities that did not fit into the defined core competencies. Rhodia took over most of the former chemical branches in the Rhône-Alpes region, located around Lyon and Grenoble (Figure 3; Laferrère 1991). Due to the tight economic situation and pressure from the capital owners, Rhodia had to further restructure its activities in subsequent years. This was due to the fact that many plants had older machinery and therefore needed to make investments in new equipment. As a consequence, the integrated production structure was partially dissolved and several units were sold to other firms; this was primarily done to raise capital for investments in other branches.
Formerly integrated production sites were opened up and an industrial park structure established in Roussillon, St.-Clair-du-Rhône und Le Pont-de-Claix. Many of the new tenants 21 of the chemical parks only established branch operations that they controlled from their headquarters which were located elsewhere. Similar to the situation in southern Hessen, decision-making competencies were thus partially relocated. As opposed to Hoechst, the restructuring process in the Rhône-Alpes region is still at a relatively early stage, and thus has not resulted in large negative impacts that are comparable to those in southern Hessen. Even though future structures are unclear at this point (Kappes and Trucchi 2005a; 2005b), further substantial effects on employment and supplier relations can be expected. The closure and reduction of production units in the chemical industry (including pharmaceuticals) caused a modest decrease in employment by about 1,000 to 64,000 between 1999 and 2005 (Assedic
2006). In our survey of 42 suppliers in the Rhône-Alpes region in 2004/05, we found that most firms were deeply embedded in the region through material linkages, despite ongoing restructuring activities. Almost 60% of the firms surveyed responded that they sold more than half of their products to customers in the Rhône-Alpes region (Table 2). As the restructuring process proceeds, this share will likely decrease.
Compared to the situation in southern Hessen, where many suppliers and service providers were successful in restructuring their production programs, the Rhône-Alpes firms have been less successful. As our interviews illustrated, assembly and installation were often done strictly according to the instructions of the customers, with little supplier initiative allowed or innovation involved even when customized supplies were delivered. One manager mentioned that, “[t]hese people send us an advertisement, an order which we respond to according to their specifications. They determine the rules since they are also the users ...
They direct the process and this is why we follow them … we do not create or change anything by ourselves. We follow their system” (translated from French). Opportunities for interactive learning and the development of specialized competencies were, thus, limited for the former Rhône-Poulenc suppliers. 22
The interviews conducted also suggested that many suppliers had difficulties adjusting to the new structures of the chemical industry. This was partially related to the fact that the suppliers focused on manufacturing activities with only a few accompanying service activities.
A comparison of the former Rhône-Poulenc suppliers in Rhône-Alpes with the former
Hoechst suppliers in southern Hessen supports this observation (Table 3). It shows that the proportion of German chemical suppliers that were involved in additional consultation activities, personnel training at the customers’ sites and after-sales services was significantly higher than that of French suppliers. In contrast, at a similar stage of restructuring the former
Rhône-Poulenc suppliers conducted significantly more manufacturing jobs, such as assembly or maintenance activities at the customers’ sites with fewer complex service relations involved (Table 3). Our interviews indicated that multidimensional interrelationships between suppliers and customers which do not merely focus on manufacturing were particularly important for the generation of specialized competencies. Overall, re-bundling processes in
Rhône-Alpes were not as far developed as those in southern Hessen. Due to the structure of social relations, which did not stimulate competence formation in the supplier sector to a great extent, re-bundling processes in Rhône-Alpes will likely take place under more difficult circumstances than in southern Hessen, which may force many suppliers and service firms out of business.4
4 It has to be emphasized that the effects of the restructuring processes would be more drastic if those firms and operations were included which declared bankruptcy and went out of business. We were not able to include these processes and their consequences for re-bundling because systematic information about the extent of such processes and the respective agents involved was not available. 23
6. Firm formation processes in the Frankfurt/Main chemical industry
Studies in the North American context have shown that structural crises in large firms or industries can provide incentives for agents to recombine technologies and other resources in order to start new ventures and access different markets (e.g. Saxenian 1994; Hayter 1997;
Feldman and Francis 2006). In many high-technology regions, the regional growth path was substantially affected by such start-up and spin-off processes. In regions such as Silicon
Valley, Boston or Ottawa, large firms and organizations acted as incubators for the formation of spin-offs. In the chemical industry, similar experiences have not been documented or studied in great detail. In general, the chances for start-up and spin-off processes in the chemical industry are viewed as being low because production processes are very knowledge- and capital-intensive and thus serve as entry barriers. In addition, German industry is not characterized as particularly entrepreneurial, with relatively low rates of new firm formation
(e.g. Sternberg et al. 2006). This is, in part, due to fact that the institutional settings of the
German model favor intra-firm career planning in large firms over individual risk-taking in new ventures (Hall and Soskice 2001).5 Keeping this in mind, the industry observers that were interviewed said that they would not expect the restructuring of Hoechst to cause substantial start-up processes in the Frankfurt/Main region. As one leading manager of a chemical firm phrased it, “[t]he classical Hoechst employee is not an entrepreneur”.
In a study of new firms which were started up from Hoechst since the 1990s, Kobiela
(2003) was able to show that the above-mentioned expectations underestimated the degree of entrepreneurial activities which had taken place. In contacting several former Hoechst units that had become parts of different firms, Kobiela (2003) was able to identify 24 firms that had
5 Since restructuring processes in Rhône-Alpes were in an early stage at the time of our study, we did not systematically investigate firm formation processes in this region. 24 spun off operations or established new firms, with or without the consent of the former
Hoechst group. These processes of new firm formation can be viewed as initial regional re- bundling and the search for new regional growth paths. Since several of the large Hoechst successors were not willing to release information about spin-off activities, we can expect that the real number of start-up firms that were directly or indirectly initiated by the restructuring process of Hoechst was much larger. In his work, Kobiela (2003) conducted structured interviews with 15 of these start-ups firms which were located in the Frankfurt/Main region; the goal was to inquire about the experiences and motivations behind the start-up processes and the way in which these ventures benefited from existing competencies and relations with the former Hoechst group.
Most of the start-up and spin-off firms identified were established in the service sector:
7 were established as public relations/advertising agencies, 5 as consulting businesses and 5 as law firms. Only 3 firms were founded in the area of chemical or biotechnology production
(Table 4 A). The majority of firms interviewed (10 out of 15 firms) were started up during the period of restructuring prior to the Aventis merger. One third (5 out of 15 firms) were established afterwards between 2000 and 2002 (Table 4 B). Most of the firms were still quite small at the time of the study; of the 15 start-ups investigated, 12 had a workforce of less than
10 people. Of these firms, 7 had only one employee. Only one production firm interviewed, which was established as a management buy-out, had more than 1,200 employees (Table 4 C).
This firm was quite successful and doubled its workforce since it spun off.
Interestingly, the new firms still had strong linkages with the units with whom they dealt with when they were still employed with Hoechst. In fact, 11 out of 15 firms even had more than 50% of their sales with former Hoechst divisions. When the decision was made to start up a new venture, founders seemed to expect to locate within the Frankfurt/Main region because this was where the major customers were supposedly located. A number of new firms
(6 out of 15 firms) even established operations in the IPH or another former Hoechst site in 25 the region. The start-up decisions were directly related to the restructuring of Hoechst. The founders had often not been pleased with the anticipated effects of the restructuring processes, or felt that they were too young for early retirement. As a consequence, they decided to become independent and establish their own businesses; however, this step did not cause a termination of business linkages with their former employer. In some cases, the start-up decisions were influenced by Hoechst to support future business relations. As Kobiela (2003) clearly points out, most start-up decisions would not have taken place independently of
Hoechst’s restructuring.
At the time of the interviews, most new founders who had originally started their ventures in an insecure market situation were quite pleased with the development of their businesses (12 out of 15 firms). Only a few were somewhat skeptical regarding future growth opportunities as they had not been overly successful. They were well aware that they benefited substantially from the technological and market know-how, and the business experience which they had acquired beforehand; most founders had worked for more than ten years for Hoechst (Kobiela 2003). They decided to establish their new business in the same area of expertise, and consequently they developed a specialized competence in the chemical industry from which they could benefit later on. These start-up processes were part of a broader trend toward re-bundling and developing new growth paths in the future. Even though these re-bundling activities have only been moderate and have not yet taken off, the view that the regional chemical industry could not expect substantial start-up waves in the future, which was expressed by a representative of an industry association, seemed somewhat hasty (Hicken
2007).
7. Conclusions
This paper focuses on regional adjustment and restructuring processes which are a consequence of international mergers in the chemical industry. These mergers require that 26 corporate networks be reorganized and have a substantial impact on the scale and scope of regional production and supplier networks. Although one could argue that such restructuring can be analyzed as a lock-in process in an old industrialized region, we have chosen a different route of enquiry. This is because such a lock-in perspective neglects the fact that lock-in is not a negative process per se, and often becomes the source of substantial returns.
We therefore develop a perspective which focuses on the opportunities for re-bundling rather than emphasizing the negative consequences of lock-in. This conception calls for a relational view of regional restructuring, based on a micro-scale analysis at the firm level (Bathelt and
Glückler 2003). Using the example of the merger of the former Hoechst and Rhône-Poulenc groups into Aventis, this paper analyzes how supplier relations have been affected by these restructuring processes and how they have led to start-up processes of new firms. Instead of investigating those activities which became the core of Aventis, our study focuses on other operations which were considered to be less important and thus split off. Our analysis particularly draws upon the two former core regions of chemical production, i.e. southern
Hessen, Germany and Rhône-Alpes, France.
The restructuring process which led to the Aventis merger began in the mid 1990s. In the case of southern Hessen, Hoechst began to dissolve its formerly integrated production structure by selling chemical production branches to other firms or closing the respective units.
The firm then fully concentrated on life sciences. Internal reorganization provided the starting point for the restructuring of Rhône-Poulenc and was geared toward increasing the profitability of the group. Only shortly before the Aventis merger, all chemical activities, apart from life sciences, were combined and split off into a new firm, i.e. Rhodia. It was not until then that substantial restructuring of the chemical activities in the Rhône-Alpes region began. Overall, the restructuring process of Rhône-Poulenc’s former chemical branches started later than that of Hoechst and is still underway. It can be expected that this process will have further negative effects on the Rhône-Alpes region, since some former chemical 27 branches of Rhône-Poulenc are still characterized by older technologies and a need for modernization.
In southern Hessen and Rhône-Alpes, the Aventis merger and associated restructuring led to substantial job losses and a reduction of regional supplier linkages. Formerly integrated sites of chemical production were opened up and transformed into industrial parks (Figure 2;
Figure 3). At the same time, new opportunities have also emerged as firms began to re-bundle their assets and recombine them to produce new goods and services or access new customer groups. Some agents used the restructuring process to start up new firms of their own; this even occurred in the German context where risk-taking in new ventures is generally not that common. These new firms used competencies and knowledge networks that were already established in order to develop a unique production and service program to both former
Hoechst units and new customers. Suppliers which intensively interacted with their chemical customers, involving additional services and joint problem-solving, were able to develop specialized competencies that allowed them to adjust to changing requirements during the restructuring process. This development of competencies was more distinct in southern
Hessen than in the Rhône-Alpes region. In Rhône-Alpes, many suppliers suffered from this process as their share of sales with regional customers decreased.
In general, our impression was, however, that firms did not place much attention on the supply-chain side beyond managing cost aspects. Especially in the Rhône-Alpes region, the importance of suppliers as partners in processes of knowledge generation was largely underestimated or overlooked. Firms relocated their purchasing departments from the regional production sites to other locations. Although these shifts were aimed at increasing efficiency and concentrating competencies, this clearly had a negative impact on the production sites.
The lack of proximity between production and purchasing divisions caused the development of different levels of expectations regarding the needs in production. The centralized purchasing divisions of customers tended to make their decisions based on price 28 considerations at the expense of quality requirements. This led to problems in production and created an additional burden for the regional suppliers, as local knowledge tended to be ignored.
Furthermore, it is remarkable how small the impact of regional and local governments was in this restructuring process, and how little different government levels were engaged in the transformation after the Aventis merger. Neither in southern Hessen nor in Rhône-Alpes was a policy response initiated that could have supported firm formation processes or restructuring in the suppliers sector. In the Lyon region, this can be explained by the fact that the restructuring processes remained largely unnoticed by the public. In Frankfurt/Main, the situation was different; although policy makers were aware of the changes, they largely ignored the restructuring processes occurring within the industry. This seemed to be at least partially related to the fact that chemical production did not fit into the city’s “clean image” as a major center of financial and other knowledge-based services in Europe. Although regional planning now realizes that the chemical industry is an important asset to the region in terms of employment and technology development (Planungsverband Ballungsraum Frankfurt/Rhein-
Main 2007),6 support policies tend to focus on the small biotechnology segment. A biotechnology innovation center was, for instance, established close to the university.
Through this, regional policy aims to support the formation of networks between existing firms, new firms and the university. In conclusion, concrete policy support for the ongoing transformation processes in the chemical industry still needs to be developed, and is necessary in order to guide further globalization and restructuring processes.
6 Regional policy makers were seemingly also involved in keeping the main location of the chemical producer Ticona, a former Hoechst branch, within the region after it became clear that the firm had to give up its original production site in Kelsterbach, which was too close to the new Frankfurt/Main international airport (Ochs and Schubert 2006; Schubert 2007). 29
Acknowledgements
Earlier versions of this paper were presented in 2006 at the Fifth Proximity Congress on « La proximité, entre interaction et institution » in Bordeaux and the RGS-IBG Annual International Conference in London. We would like to thank the participants of these congresses, particularly Stephen Appold, and the two reviewers of European Planning Studies for their valuable suggestions. We are also indebted to Nicole Kogler and Clare Wiseman for providing critical comments on earlier drafts of this paper.
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35
Table 1. Regional sales and purchase shares of former Hoechst suppliers, 2000 (Source: survey results)
Regional Regional sales Regional purchases i share - Firms per sales class - - Firms per purchase class -
Number (n=101) Share (100%) Number (n=100) Share (100%)
1 1 – 25% 21 20.8% 50 50.0%
2 26 – 50% 15 14.9% 20 20.0%
3 51 – 75% 9 8.9% 9 9.0%
4 76 – 100% 56 55.4% 21 21.0%
36
Table 2. Regional sales shares of former Rhône-Poulenc suppliers, 2004/05 (Source: survey results)
Regional sales i Regional share - Firms per sales class -
Number (n=38) Share (100%)
1 1 – 25% 6 15.8%
2 26 – 50% 10 26.3%
3 51 – 75% 3 7.9%
4 76 – 100% 19 50.0%
37
Table 3. Complexity of interaction of former Rhône-Poulenc and Hoechst suppliers with their Rhône-Alpes 2004/05 and southern Hessen customers 1999/2000, respectively (Source: survey results)
Share of suppliers Share of suppliers Complexity of in Rhône-Alpes in southern Hessen 1) i interaction 2004/05 1999/2000 Test statistic i
p1i (n1=41) p2i (n2=105)
1 Standardized supplies 17.1% 38.1% -2.78 ***
2 Customized supplies 58.5% 51.4% 0.78
3 Additional consultation 26.8% 53.3% -3.13 ***
4 Training personnel at customer site 4.9% 16.2% -2.29 **
5 After-sales services 2.4% 27.6% -5.07 ***
6 Assembly/installation at customer site 56.1% 33.3% 2.53 **
7 Maintenance at customer site 53.7% 30.5% 2.58 **
8 Joint product develop- ment 17.1% 5.7% 1.81 *
Significance levels: ***=1%, **=5%, *=10% p p 1) 1i 2i i p 1 p p 1 p 1i 1i 2i 2i n1 n2
38
Table 4. Characteristics of start-up and spin-off firms from Hoechst, 2002/03 (Source: Kobiela 2003, pp. 6, 52 and 53)
Number of firms by branch i A. Branch (n=24)
1 Public relations/advertising agency 7
2 Law firm 5
3 Consulting firm 5
4 Other service firm 4
5 Chemical production firm 2
6 Biotechnology firm 1
Number of firms by year j B. Year established established (n=15)
1 1996 1
2 1997 4
3 1998 2
4 1999 3
5 2000 3
6 2001 1
7 2002 1
Number of firms by size k C. Number of employees (n=15)
1 1 7
2 2-10 5
3 11-20 1
4 21-110 1
5 111-1200 1
39
Figure 1. Regional effects of international mergers: the Aventis case
40
Figure 2. Structure of the former Hoechst sites in the southern Hessen region in 2005/06 after the Aventis merger
41
Figure 3. Structure of the former Rhône-Poulenc sites in Rhône-Alpes in 2005/06 after the Aventis merger