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Mikhaylov, Andrey; Mikhaylova, Anna

Article — Published Version Spatial and sectoral distribution of international clusters in the Baltic region

European Journal of Scientific Research

Suggested Citation: Mikhaylov, Andrey; Mikhaylova, Anna (2014) : Spatial and sectoral distribution of international clusters in the Baltic region, European Journal of Scientific Research, ISSN 1450-202X, European Journals Inc., , Seychelles, Vol. 121, Iss. 2, pp. 122-137

This Version is available at: http://hdl.handle.net/10419/107012

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SPATIAL AND SECTORAL DISTRIBUTION OF INTERNATIONAL CLUSTERS IN THE BALTIC REGION

Mikhaylov A. S. Immanuel Kant Baltic Federal University, A. Nevskogo str.14, , 236041, Kaliningrad region, Email: [email protected] Tel.: +79052400526

Mikhaylova A. A. Immanuel Kant Baltic Federal University, A. Nevskogo str.14, Kaliningrad, 236041, Kaliningrad region, Russia

Abstract This article reveals the spatial and sectoral distribution of international clusters in the Baltic macro-region. The research results suggest that there are 28 international clusters in the Baltic region, all of which have an organized structure and are supported by the state. An overwhelming majority of identified clusters represent cross-border type. The most prosperous cross-border regions in this regard are Oresund, , Bothnian Arc and Oslo - Vaster (or the GO region). Nearly half of the international clusters studied represent knowledge intensive sectors of economy and almost all are associated with the introduction of innovative solutions. A quarter of all international clusters of the macro-region are engaged in the life science sector, which could be a competitive niche of the Baltic region on the global scale.

Keywords: international cluster, cross-border cluster, transnational cluster, Baltic region, Oresund, Jutland, Bothnian Arc, GO region. JEL Classification Code: R11, F23, F63

1. Introduction Back in 1993 J. Dunning questioned the fundamental tenets of the M. ’s diamond model with regards to the immobility of assets across national boundaries. Maintaining the statements of R. Mundell, he argued for the transnational movement of created intangible assets (such as technological competencies, organizational skills, cultural norms and other ‘proximities’ reflected in the classification of R. Boschma), precisely concerning the concept of cross-border interrelated inter-firm rivalry and the clustering of related industries. Active cross-border and transnational regionalization processes around reflect on the notion of increasing interdependence of the inter-state strategic developments. Establishment of , cross- border regions and other strategic alliances between different states and subjects inevitably contribute to the establishment of qualitatively new forms of international inter-firm and indeed the inter-organizational collaboration. While such concepts as global production network (GPN), global innovation network (GIS), global value-chain and other transnational forms of networking 123 European Journal of Scientific Research Vol.121 No.2 (2014) received generous amount of attention in scientific literature, the phenomenon of international cluster is generally neglected. The aim of this article is to provide basic understanding of the international cluster concept, as well as to highlight the geographical and sectoral distribution of international clusters in the Baltic region of Europe.

2. Previous empirical research on international clusters As a short preface, it is worth mentioning, that back in 1998 M. Porter has noted an example of a cross-border chemical cluster involving and the German-speaking border area of Switzerland. However neither M. Porter, nor have a number of other rather famous authors (Birkinshaw J. and Solvell O., 2000; Rugman A.M. et al., 2000, 2002; Karlsson Ch., 2008; etc.) given international cluster concept individual attention. While the major problem in development of this concept is that little is known about best practice of international clustering around the globe. In this regard, it is worth to remind ourselves that M. Porter has written his famous book – “Competitive advantage of nations” based on in-depth case studies of industries and competitiveness (- clusters of competitiveness) doing interviews and surveys, and conducting analyses in a number of countries for over four years. Hence empirical research on international clusters is of primary importance for building a corresponding concept. One of the first known studies on cross-border clusters was held by Dudarev G. et al. (2002). Based on analysis of the cross-border data they discuss the possible basis for development of “over-the-border” clusters between and Russia. Among the main areas of potential cross-border clustering, they have considered the forest industry, metals and metal processing, ICT, food and energy. Oddly enough (considering active cross-border regionalization processes around Europe) the first and most significant studies on international clusters were conducted by Russian scientists1, generally within a framework of international research projects (Russia – ; Russia – Finland; Russia – Belarus). A number of PhD dissertations (e.g. universities of Murmansk, St. Petersburg, Petrozavodsk), books (e.g. Kibitkin, 2006) and textbooks (e.g. Emelyanov, 2008) have been published in 2005 onwards. Most publications reflect on the possibility of modernizing remnants of the Soviet industry, considering the international cluster concept as an effective tool in achieving synergetic effect with neighboring countries. Studies of opportunities… (2011) is a complication of research papers [case studies] of an international research project on Finnish – Russian trans-border clusters. The research covers such industries as forest, food, tourism, logistics and IT. The core objective of the project is to analyse the opportunities for developing trans-border Finnish-Russian clusters. Since “any inter- companies network is made of social web and any industrial cooperation implies collaboration of people having trust in each other” (p. 5), authors strongly rely on the survey methodology, apart from quantitative data analysis. The study provides an in-depth understanding of SWOT to establish clusters between Russia and Finland in the future. Andersson, et al. (2004) pinpoint to the fact that actors of industrial clusters are generally spatially scattered, whereas collaboration network of actors within localized clusters lies [mostly] beyond the actual spatial concentration2. Despite the seemingly correct and sound inferences with regards to interplay between separate regional clusters (i.e. transnational networking of clusters), it is hardly possible vis-a-vis international clusters, since there is lack of

1 The terms "international cluster", "interstate cluster", "cross-country cluster", "cross-border cluster" and "transnational cluster" have been used. 2 Relatively little business is done with local firms and most local inter-firm transactions are mostly exchanges of basic inputs and services rather than exchanges of knowledge. Hence “the central issue is whether clusters are primarily a functional or spatial phenomenon” (p.156). 124 European Journal of Scientific Research Vol.121 No.2 (2014) empirical evidence on individual clusters transcending national borders. Among of the few known clusters that link actors across national borders authors cite the following examples: automotive cluster engaging Portuguese and Spanish actors, plastics cluster in Twente (Dutch- German border region), the RegioTriRhena (involves stakeholders from France, Germany and Switzerland), and the Öresund biotech cluster, that connects actors from both sides of the Oresund strait ( - ). Zashev (2008) investigates the topic of internationalization of clusters based on the evidence from 12 EU border regions: Finland (South - Tornio), Germany (Hochfranken - Görlitz), Greece (Serres - Florina), (Zgorzelec - Biala Podlaska), Northeast and Southeast , Bulgaria (Petrich - Kystendil). The research project challenges the prospects of cross- border cooperation in Europe. Despite the fact that this study is not specifically oriented at identifying nor analysing the cross-border clusters precisely, one of its main objectives is to detect clusters on the border territories and ascertain the possibility of cross-border clusters establishment. The research results suggest that authors are rather sceptical on the possibility of establishment of a single cluster across borders. Therefore the paper concludes, that “it is questionable whether a cross-border cluster policy would make sense at all regarding the differing economic structures of the two countries”. Asheim B.T. et al. (2009) provide a case study on possibly the most striking example of an international cluster in Europe – Medicon Valley. The authors describe an equal engagement of Swedish and Danish actors into the collaboration process within the cluster, negotiating the fragmentation and imbalance of cross-border regional interactions. Taking note of a wide variety of terms used to describe the unique features of the “cross-regional” (p.131) or the “bi-national” (p.132) or the “cross-border” (p.135) cluster under study, it is clear that authors distinguish the single Medicon Valley cluster from the notion of “two separate national clusters with less dignity on the global bio-market” (p. 135). As well as marking the gap in the scientific literature. Royer S. (2007) has used the value adding web approach in describing and analysing the socio-economic, political and cultural aspects affecting the effectiveness of the “cross-border” Medicon Valley cluster. The study indicates vertical, horizontal and lateral actors involved. The research results provide a number of valuable insights on collaboration system of actors within cross-border clusters. For instance, author defines interactive learning as an important success factor of a cross-border cluster. Nevertheless, the study raises a vast variety of questions, for instance: are the hypotheses true with regard to other international clusters? Potential to network… (2007) is the research paper conducted in line with the Baltic Metropoles Innovation project with the focus on inter-regional networking aspect of cluster development. Authors discuss the creation of “meta clusters, networks of networks or cluster alliances” that span across neighbouring countries (p.11). International clusters are treated as a type of organized clusters that have established strategic alliance in-between separate cluster actors or as “collective strategies of the cluster alliance”. Based on this assumption, a number of characterizing features of “meta clusters” are identified: they are strategically managed; exhibit formal character of relations; direct competition [between alliance partners] is mostly excluded3. Authors suggest that large TNCs, as well as international linkages between science parks can act as pipelines (Bathelt et al., 2004) that would trigger inter-regional networking of clusters in the Baltic region. Stating the difficulty in identification of clusters across geographies, authors provide an example of the “cluster alliance” between Kista (Stockholm, Sweden) and Otaniemi (Espoo, Finland). However, this “inter-regional networking of regional clusters” (p.76) generally

3 The fact that importance of cooperation is overseen over the competition factor in international cluster is supported by most authors that study international clusters. 125 European Journal of Scientific Research Vol.121 No.2 (2014) lies beyond the pale of international cluster concept, which is a single cluster that involves actors from two or more countries. Džupka P. (2010) reflects on methodological approach used in the “Knowbridge project” to identify the development of cross-border research-driven cluster in border regions Košice (Slovakia) and Borsod-Abaúj-Zemplén (Hungary). The author mentions the following main research tools to be used: questionnaire survey as the first method that involves the broadest variety of respondents, which will enable to investigate the quality and intensity of cooperation between different actors; semi-structured interviews and focus groups will allow predicting the future development of the cluster. The target groups include: companies along the value chain, regional and local authorities, research and educational institutions, NGOs. Although the core of the research paper is the methodological approach to identify cross-border clusters it is hardly substantial and needs further refinement. Viachka A. (2012) reports a summary of the Global cluster initiative survey 2012, held by the European cluster observatory via on-line survey. Analysis of the 382 recorded questionnaires suggest that 13% of cluster initiatives are of “trans-national” nature. Given the amount of total records one can assume that at least a few of the considerable number of transnational and cross-border cluster initiatives should evolve into international clusters. Hence the question is on the geography and specialization of these initiatives. Unfortunately the report does not provide a reader with this valuable information. Walerund C. and Viachka A. (2012) have investigated various types of transnational networks of cluster organizations, as well as the transnational cluster organizations, being closely interconnected with the notion of organized international clusters. Authors collected secondary data from various cluster-related databases, such as: European cluster observatory, Europe INNOVA, Global cluster initiative survey, etc., and have analysed it according to the following characteristics: lead partner’s country, the types of members engaged, the sector of specialization (if any), the objectives and activities, the funding, and the maturity [duration] of the network. A total number of 84 transnational networks have been identified, 8 of which being referred to as transnational clusters: biotech cluster (FR, DE, CH), green technology cluster (NO, SE), construction cluster (NO, FR, DE, GB, FI), IT cluster (SE, DE), life science cluster (NO, SE), micro and nanotechnology clusters (DK, SE / DE, CH), food processing cluster (IT, FR, GR, ES, PT, CY). One of the most important points of this research is the advocacy of the cluster identification methodology based on self-proclaimed membership in addition to secondary data analysis. Flash EB (2006) is another example of research on clusters structured in a questionnaire form and designed based on self-assessment of respondents with regards their involvement in cluster-like environment. Self-declaration of cluster membership is seen as the most effective method to date to identify cluster network, however its limitations relate to the confusing and complex phenomenon of clustering. Findings suggest that almost two-thirds (65%) of strategic managers of companies working in a cluster-like environment desire more public support in developing trans-border relations with other clusters or geographic regions. State of the Region Report (2012) is an annual evaluation of competitiveness and cooperation across the Region and of cross-country linkages in particular. Research findings suggest that , Denmark, Sweden, and Finland are among the top five countries in terms of such linkages4, indicating greater possibility of international clusters establishment. Whereas , Poland and have not yet established sustainable and dispersed transnational linkages, as result these countries lag far behind. Authors of the report state a

4 Based on international scientific co-publication indicator. 126 European Journal of Scientific Research Vol.121 No.2 (2014) number of recommended activities as to upgrade the transnational collaboration network: market integration, investments in transportation and science infrastructure, building networks of clusters on a national level, improvement of knowledge exchange and common learning. Promotion of entrepreneurship… (2001) argue that the only reason for a firm to participate in a transnational cluster is the aspiration to find new business opportunities. Authors believe that a number of minimum membership requirements for engaging in transnational cluster will considerably improve mutual benefits from cooperation. Thereby the following minimum requirements for engaging in a transnational cluster network are suggested: certain level of maturity (number of continuous activities, personnel, and business contacts), industrial compatibility (i.e. availability of partner enterprises), market awareness, etc. Network organization on the other hand should provide information on the appropriate funding programs, do the match-making of actors, provide the market overview and possible scenarios for internationalization, etc. DG Enterprise and Industry report (2007) suggests that transnational cooperation between clusters can further strengthen European clusters. Authors argue that there are certain methodological challenges ahead to do the cluster mapping, while not specifying them. “INNO Germany” (2010) sees great significance of clusters that operate across borders, since it can dramatically improve the cluster policies’ efficiency5, provide the required critical mass of actors in peripheral [border] regions, and enhance the cross-border collaboration within the production value chain and knowledge co-creation. The report gives an example of successful inter-regional aviation cluster in Germany, which engages actors from Hamburg, Schleswig-Holstein, Mecklenburg-Vorpommern, Bremen and Lower Saxony, and the case of an unused cooperation opportunity in the light engineering cluster in Italy (regions of Suzzara and Guastalla), caused by contrarious policies between regions. It is evident that administrative barriers play a crucial role even within the national borders. Summarizing the literature overview a number of major gaps can be allocated: first, there is no unified terminological apparatus established with regard to international cluster concept; second, most of the empirical research is not specifically directed at studying international clusters, all in all discussing only the possibility of such type of cluster to emerge; third, there is a clear deficit of examples on international clusters.

3. Methodology In general terms, the Baltic region is defined as a set of states located on the shore of the Baltic Sea. However there is no generally accepted approach to defining the affiliation of a country or a separate territory to this macro-region. This conceptual uncertainty gives rise to certain methodological difficulties in the research process of studying the formation and development of international clusters. Generally scholars consider nine countries that have direct access to the Baltic Sea: a part of (Denmark, Sweden and Finland), the Baltic countries (Lithuania, Latvia, Estonia), northern lands of Germany (Mecklenburg-Vorpommern and Schleswig- Holstein), northern voivodships of Poland (Warmian-Masuria, and West Pomerania), and the North-West of the Russian Federation (Leningrad, Pskov, Novgorod and Kaliningrad regions, and the city of Saint-Petersburg). A broader approach is associated with additional inclusion of: - Norway and Iceland, which is reflected in the structure of the Council of Baltic Sea States (CBSS);

5 Although authors do acknowledge the difficulties related to state financial support of cluster initiatives across borders. 127 European Journal of Scientific Research Vol.121 No.2 (2014)

- Norway, Belarus, all provinces of Poland, Brandenburg and Berlin lands of Germany, two additional subjects of the Russian Federation (Murmansk region, Republic of Karelia), which is enshrined in the international program of territorial planning “Vision and strategy development of the Baltic region, 2010” (VASAB). At the strategic planning phase of the study the classical narrow definition of the Baltic region was adopted. However, the boundaries of the study area were deliberately extended in the process of collecting and analysing the data as to obtain a more adequate picture of the actual distribution of international clusters. The study area includes: Scandinavia (Denmark, Sweden, Finland and Norway), the Baltic countries (Lithuania, Latvia, Estonia), northern lands of Germany (Mecklenburg-Vorpommern, Schleswig-Holstein and Brandenburg, as well as cities of Hamburg and Berlin), northern voivodships of Poland (Lubusz, Warmian-Masuria, Podlaskie, Pomerania and West Pomerania), and the North-West of the Russian Federation (Leningrad, Pskov, Novgorod, Murmansk and Kaliningrad regions, Republic of Karelia and the city of Saint- Petersburg). The territories allocated for analysis are illustrated in the figure 1.

Fig. 1: Geographical area of research

The chosen study area is consistent with the position of European institutions for cluster and cluster initiative studies (for example, the European cluster observatory), as well as with the 128 European Journal of Scientific Research Vol.121 No.2 (2014) approach reflected in the pan-European programs for international cooperation: Interreg, Interact, BSR stars, Central Baltic, etc. The study design is based on self-proclaimed formal clusters with an organized structure, which implies the availability of cluster organization (generally an NGO) and cluster management. Moreover, the cluster mapping is based on secondary data, available in official open-source documents of the respective organizations (e.g. national governmental authorities, pan-European programmes and initiatives, scientific institutions, etc.). In order to qualify as an international cluster, a sample clusters’ structure has to correspond with the “Doubled triple helix” model (Mikhaylov A.S., 2013b). And be in line with the general definition of an international cluster: “is a network of sustainable interactions between a wide range of interrelated, interdependent, mutually reinforcing and competing stakeholders, which are localized in the territories of the two or more countries, operate in related industries, possess similar level of development of skills and techniques, and are involved in joint process of value creation” (Mikhaylov A.S., 2013a).

4. Research results According to analysis of the European cluster collaboration platform database by the end of 2013 the Baltic region incorporated as many as 369 registered clusters and cluster organizations6, of which international clusters account for less than 8%. A relatively small proportion of international clusters highlight the complexity of this form of economic integration. This data is consistent with the results obtained during the survey on cluster initiatives conducted by the German organization Competence Network, which showed that only 10% of European cluster initiatives have specific plans for internationalization7. Figure 2 reflects the distribution of countries located in the Baltic region, according to the degree of their involvement in international clusters. No international clusters were identified in Estonia, Latvia and Russia.

Fig. 2: The share of international clusters in the total amount of organized clusters with the participation of the country, in %

Overall, the share of international clusters in Scandinavian countries account for 22.2 % out of the total number of organized clusters located in these countries. For the and Poland this figure is much lower - less than 7 %. Sweden holds the leading position by the share

6 European cluster collaboration platform database URL: http://www.clustercollaboration.eu (accessed 10.02.2014) 7Competence Network official website URL: http://www.kompetenznetze.de/service/bestellservice/- medien/kurzstudie_internationalisierung.pdf (accessed 10.03.2014). 129 European Journal of Scientific Research Vol.121 No.2 (2014) of international clusters in the total volume of clusters with the country’s involvement. Almost a third of all established clusters on its territory can be attributed to the international type. Norway and Denmark are also showing good results for this indicator. The modest share of international clusters in Germany compared to the leaders of the macro-region is because the study covers only the northern lands of Germany (Mecklenburg-Western Pomerania, Schleswig-Holstein and Brandenburg) and the cities of Hamburg and Berlin. Overall, the country has a significant number of organized clusters - more than 300 (including mature international clusters, for example, “BioValley”, engaging France and Switzerland), indicating a significant potential of the country in the broader scope of Europe. In absolute terms, Denmark and Sweden participate in 19 international clusters in the Baltic region, Germany in 10, Norway and Finland in 6, Poland and Lithuania in 2 each. Distribution of international clusters based on the criteria of geographical localization of actors is shown in the figure 3.

Fig. 3: The degree of participation of countries in international clusters in the Baltic region by the cluster type

A) Share of cross-border and transnational clusters with participation of a country in relation to overall number of cross-border and transnational clusters in the Baltic region, in %

B) Distribution of international clusters of the Baltic region countries according to the cluster type, in pc.

Out of the 28 identified international clusters in the Baltic region, 75% are cross-border and 25% are transnational. The most active participation in the both types of international clusters of the macro-region is shown by Denmark and Sweden (see fig.3). Historical unity of the 130 European Journal of Scientific Research Vol.121 No.2 (2014)

Danish-Swedish border regions resulted in a favourable environment for the development of cross-border cooperation with the subsequent creation of a single cross-border region. Notable results of international cooperation between the two countries are international clusters Medicon Valley and Cluster 55. The ratio of cross-border and transnational clusters involving Germany is 60 and 40%, respectively (Fig. 3B). Within the borderlines of the Baltic region, more than 57% of transnational clusters are initiated involving actors located in Germany, indicating the high importance of the country in international cooperation and transnational regionalization processes. Finland and Norway are involved in six international clusters of the macro-region, but the nature of their participation varies. Finland is characterized by a high proportion of cross-border clusters (about 80%), while in Norway this figure is at 30%. The degree of involvement of these countries in international clusters in the Baltic region is also different. Finland demonstrates the relatively low degree of involvement in cross-border and transnational clusters of the macro- region: 23.8 and 14.3 % respectively (Fig. 3A). Level of transnational regionalization of Norway is higher (57.1%) and is comparable to Germany and Sweden (Fig. 3A). Causes of the different degree of involvement in the processes of cross-border cluster cooperation are largely due to the nature of the cluster policy conducted in the country. Cluster policy in Finland is associated with the Centers of expertise program, which focused more on the development of national industrial clusters and on improvement of their competitiveness by building an effective system of relations between institutional actors. The creation of international clusters in Finland is the result of a joint initiative with Swedish institutions aimed at development of peripheral areas and improvement of the efficiency of historical integration processes in the border area. This explains a high proportion of Finnish participation in cross- border clusters precisely. Cluster policy in Norway is also focused on the development of national clusters. However, a number of highly developed national industries that are included in the key areas of expertise of the Baltic region (e.g. life science), allowed the country to form a number of transnational links. In 2005, a transnational cluster MedCoast Scandinavia was formed, in 2006 - Oslo Cancer Cluster. Moreover, in the last decade the programs of state support of the formation and development of clusters in Norway have become increasingly focused on the benefits of creating an international network of cluster collaborations. Poland and Lithuania are involved only in transnational clusters and their degree of involvement in the international cluster cooperation in the Baltic region is low. A significant proportion of cross-border clusters in the total number of international clusters in the macro-region indicates a high level of development of cooperative ties in cross- border regions.

131 European Journal of Scientific Research Vol.121 No.2 (2014)

Fig.4: Distribution of cross-border regions according to the number of cross-border clusters formed on their territory, in %

Most cross-border clusters of the Baltic region are located in the four cross-border regions: Oresund, Jutland, Bothnian Arc and Oslo - Vaster Gotland (or “GO region”) (see Fig.4). The leading position is held by the Danish - Swedish Oresund region. It was established in 1993 by combining the Capital Region of Denmark and the Region Scania in Sweden. Its establishment was accompanied by 1) the creation of a single cross-border committee – “Oresund Committee”, which consists of seven Danish and five Swedish members and 2) the development of transport infrastructure between the two border areas (e.g. construction of a bridge across the Oresund strait). The second most common cross-border region is called Jutland, which in various periods of history alternately belonged to Denmark and Germany. The most recent changes in the boundaries of the region took place after the Second World War in 1955, with the signing of the Danish - German agreement on cooperation in the framework of the Declaration Copenhagen - Bonn. In 1997 the Southern Denmark - Schleswig was created, which became the foundation of modern cross-border region. Today Jutland has a specially created organization, the so-called growth centre (“Vækstcentret”), which coordinates the political, business and social initiatives in the region. The cross-border region of Bothnian Arc formed in 1998 through the merger of 12 municipalities (7 Swedish and 5 Finnish) is located on the coast of the . More than half the population of northern Sweden and northern Finland reside in this region. A number of specific problems were addressed with the creation of the Bothnian Arc region, namely: lack of qualified specialists in the border regions; insufficient staff mobility; inefficient use of the capacity of Oulu and Lulea cities as centres of industry and R&D. Creation of the Bothnian Arc region accompanied by the creation of a single association (“Arc association”) brings together representatives of government, business and science of the two countries. The cross-border region Oslo - Vaster Gotland or so-called “GO Region” (named after the signed treaty between Gothenburg and Oslo), was created in 1995 with the signing of an agreement on cross-border cooperation between the cities of Oslo (Norway) and Gothenburg (Sweden) with isolation of the cooperation priority - biopharma. In 2003 the borders of cooperation were extended to areas Akershus and Ostfold in Norway and the Vaster Gotland region in Sweden. The formation of modern borders of the cross-border region accompanied by the creation of an association, which includes cross-border region council (18 members), a contact group (1 representative from each country) and four working groups of the secretariat (in communications, culture and tourism, business and education). To date, the council of the GO region (GO council) consists of six Norwegian and six Swedish members, with representatives from government, industry, universities and border services. Sweden participates in cluster collaboration in 3 of 4 border regions outlined above 132 European Journal of Scientific Research Vol.121 No.2 (2014)

(Oresund, Bothnian Arc, Oslo - Vaster Gotland). Denmark in 2 of 4 (Oresund and Jutland). Germany, Finland and Norway only in one each. This distribution in the least due to their geographical location, being a consequence of the high level of innovation potential of the represented regions8. According to the study on the typology of the EU border regions conducted under the “EU 5th Framework-program for research and technological development”, based on cluster analysis, cross-border regions Oresund, Jutland, Bothnia arc and Oslo - Vaster Gotland belong to a group with a high degree of integration, characterized by a significant degree of economic efficiency, social and cultural proximity (Topaloglou L. et al., 2005). Other cross- border regions lagging behind in their level of development and economic performance, in particular due to the lack of systemic economic relations (the Baltic states, Poland) and low market potential (north-east of Germany and south-west of Finland), which has a negative impact on the development of international clusters. The participation of a country in an international cluster is determined by the presence of appropriate actors and their competences, which are able to provide a synergistic effect of complementary properties of existing cluster members. The distribution of international clusters in the Baltic region by area of specialization is shown in Figure 5.

Fig. 5: Distribution of international clusters of the Baltic region according to their specialization, in %

About half of the international clusters of the macro-region are involved in knowledge intensive sectors of economy and nearly all related to the introduction of innovative solutions9, which is a clear confirmation of innovation being a key property of an international cluster. Among the major areas of occupation are: life science (including pharmaceutical, biotechnology and medical technology); research and development; nanotechnology; environmental technology; transportation and logistics; industry. Considering different spatial types of international clusters (i.e. cross-border and transnational), we differentiate clusters according to the key areas of specialization and sectoral diversity (Fig.6).

8 For the study results on innovation potential of the Baltic region countries see Mikhailova A.A., 2013. 9 For example, international clusters in the field of eco-technology are strongly oriented at inter- organizational cooperation for alternative energy (bio-ethanol) and waste recycling. 133 European Journal of Scientific Research Vol.121 No.2 (2014)

Fig.6: Distribution of international clusters of the Baltic region according to the specialization and spatial type, in %

А) Cross-border clusters

B) Transnational clusters

One of the main and most developed areas of specialization of international clusters in the Baltic region is life science. This is largely due to the long history of the formation of this trend in the macro-region. In Sweden, the scope of medical biotechnology has evolved since the 1950s. In the 1990s, the government has established a number of national agencies to promote the commercialization of university research in this area (e.g., “Teknikbrostiftelsen” - TBS) and increased share of funding for both applied and fundamental research. Between 1995 and 2003, a high growth rate of biotechnology industry has began - 10% annually, being the result of an active government policy. Also in the second half of the 90s a number of major mergers happened to form the company Pfizer and AstraZeneca, in which according to the year 2007 there were employed about 70% of all medical and biotechnology specialists in Sweden. Large universities of Uppsala, Stockholm, Gothenburg, Lund and Malmo were the centres of attraction for more than 200 large companies in the medical and biotechnology, thus form strong regional clusters. In 2004, a national program was launched in Sweden on the commercialization of innovations – “A National Biotech Agenda For Growth” (“Neergaard Agenda”) and a range of other initiatives was undertaken. In 2005 “National Biotech Strategy Program” was formed, that includes special support for international clusters. 134 European Journal of Scientific Research Vol.121 No.2 (2014)

The long development history of the life science sector is also typical for Denmark, which originated in the 70-80s of XX century since the country advanced technology from the U.S.A. and UK. As a result of substantial public financial support for universities involved in the creation and commercialization of innovations, the state managed to form regional clusters in a form of associations of companies, including start-ups around a strong player - university. Then in the mid-1990s, such successful international clusters as “Medicon Valley” were formed, which became points of growth in the life science in the country that is reflected in the state support for the industry “The Bio-Health Industry in Denmark” from 2002. In Germany, as in the (except Finland, which failed to form biotechnology sector), the life science industry is a priority and is highly developed: it employs about 35 thousand people and operates 565 companies; 10 % of companies and 25 % specialists are concentrated in the Baltic region. Growth rate of the industry - more than 10% per year. In 1996, the Ministry of Science and Education of Germany launched a program to encourage the development of clusters – “BioRegio competition”, which resulted in formation of regional clusters (the first in 2008 - Biotech Cluster Rhine-Neckar - BioRN), some of which are subsequently transformed into a major regional (e.g. BioConValley) and international (e.g. BioValley) clusters. Basis for the development direction of the life science in the Baltic countries is largely incorporated in the Soviet period, when it was created the necessary infrastructure (Latvia) and formed human resources capital (Lithuania). Currently, Latvia is positioned as a promising place to put the pharmaceutical industry because of the relatively low cost of doing business (including labor) and the availability of infrastructure. Country can serve as an industrial platform for chemical and pharmaceutical industry (for example, the company Olainfarm), laboratory technologies (company ELMI), etc. In 2006, the “Lativian Association of Biotechnology” was established, bringing together about 50 companies that are engaged in the provision of medical services and diagnosis of diseases. Due to inadequate funding from the state and value of foreign direct investments, companies are forced to focus on the domestic market, as a permanent and stable source of income. Estonia has also created and operates an association – “The Estonian Biotech Association”, representing the interests of 26 companies, of which 70% are concentrated in Tartu and 30% in Tallinn. The main specialization is chemical industry and medicine. Most firms were founded in the mid-1990s and is the result of successful university startups (e.g., the company ToroSen and Vidgenyx), funded by a government program SPINNO. In addition a number of the oldest Estonian biotech companies have come into the country from Sweden and Finland. Major investment projects with state participation were launched in the early 1990s, including the construction of industrial parks. However, due to lack of a unified national program of development in the life sciences and the lack of financing, the construction of industrial parks was completed only in 2003, and partly occupied by specialists of the IT sector. Lithuania - the only one of the Baltic countries involved in international clusters in the Baltic region in the field of life sciences. This trend, along with IT is highlighted as a key to the country's economy, which has resulted in high rates of development of biotechnology companies in recent years in comparison with Latvia and Estonia (annual growth rate of the working population - 5 % per year). All Lithuanian companies operating in the life sciences are located in Vilnius. The largest of them are Sicor, Fermentas and Biocentras (combined market share of 80%) are natives of the USSR Institute of Applied Enzymology (founded in 1975) - key competence center in the field of ferments and enzymes. Two other major Lithuanian company Biosinteze and BIOK were also formed in the Soviet Union in the framework of the Institute 135 European Journal of Scientific Research Vol.121 No.2 (2014) start-ups10. Thus, almost all countries of the Baltic region have identified the life sciences sector as a priority for development of their academic and applied research. This has enabled to form seven international and several regional clusters in the macro-region. Further active development of this area of specialization will appoint Baltic region as a global centre of competence in this area. Being a participant in an international cluster each region / country inevitably develops its own specialization (see Figure 7).

Fig. 7: Specialization of international clusters by country of the Baltic region, in %

Life sciences, as the focus of international cluster cooperation, dominated almost in all countries except Finland, which is largely focused on industrial production. Variety of sectoral specialization of a country is strongly correlated with the degree of its involvement in the international clusters of the macro-region. For example, the participation of Denmark and Sweden in the cross-border and transnational clusters reflected in the development of all nine directions of cluster cooperation in these countries that are represented in the Baltic region. However, it has to be noted that creating a network of inter-organizational interactions in the context of transnational cluster is more complex process than cross-border. Region must have a significant potential for innovation in their chosen field of specialization. The presence of a simple competitive advantage, expressed in lower production costs, does not have such a significant weight in the organization of transnational cluster, such as in the global value chain. Moreover, cross-border cluster often acts as a transitional stage in the development of international cluster capable to eventually increase its network and territorial boundaries.

10Information portal of the on biotechnology, Federal Ministry of Education and Science in Germany URL: https://www.biotechnologie.de/BIO/Navigation/EN/Background/countries-in-fokus.html (accessed 02.03.2014) 136 European Journal of Scientific Research Vol.121 No.2 (2014)

5. Conclusion Empirical research on international clusters can be hypothetically divided into 1) research on factors that could potentially trigger the formation of such clusters, and 2) rare disjunct case studies on fairly studied and well established examples of international clusters (e.g. Medicon Valley). Taking note of a vast variety of organized clusters that are organized in Europe to date – over 400, and at the same time considering active regionalization processes, the research question raises by itself. Namely, how prevalent are the international clusters? Moreover, additional questions would be: what is their spatial and sectoral distribution? The research was limited on studying organized international clusters located within the borderlines of the Baltic macro-region (see fig.1). Research results suggest that there are 28 international clusters, 75% of which are cross-border and 25% - transnational. All of the 21 identified cross-border clusters of the Baltic region are located in the four cross-border regions: Oresund, Jutland, Bothnian Arc and Oslo - Vaster Gotland (or “GO region”) (see fig.4). This indirectly indicates that favourable external conditions (e.g. openness of the borders, ease of personal movement, level of international trade, state support, etc.) play a crucial role in formation of organized international clusters. The innovative activity has proven to be the major property of an international cluster. Nearly half of the international clusters studied represent knowledge intensive sectors of economy and almost all associated with the introduction of innovative solutions. A quarter of all international clusters of the macro-region are engaged in the life science sector, which could be a competitive niche of the Baltic region on the global scale.

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