The Role of Clusters in the Chemical Industry Dr. Christian Ketels, Harvard Business School
This document has been printed and made available by the courtesy of EPCA st at the occasion of its 41 Annual Meeting THE EUROPEAN PETROCHEMICAL ASSOCIATION The Role of Clusters in the Chemical Industry
Photos cover : Top : Large platform, Antwerp, Katoen Natie, © Katoen Natie Middle : Pipe rack connection, Marl Chemical Park, ChemSite, © ChemSite Bottom : Mid-Europoort cluster, Port of Rotterdam, © Port of Rotterdam
The financial support for this research by EPCA, the European Petrochemical Association, is gratefully acknowledged
Page 2 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
Content
1. INTRODUCTION 5
2. THE ROLE OF CLUSTERS IN GLOBAL COMPETITION 7
2.1. Clusters and the microeconomic foundations of competitiveness 8
2.2. Globalization 11
2.3. Cluster initiatives 13
2.4. The emerging agenda for business leaders 16
3. CLUSTERS IN THE CHEMICAL INDUSTRY 19
3.1. The context for regional clusters in the chemical industry 20 General factors 20 Europe-specific factors 21
3.2. Mapping chemical clusters 22 Cluster Mapping 22 The chemical cluster category 24 Employment 26 Exports 37
3.3. Cluster initiatives 45 The chemical industry as a basis for cluster initiatives 45 Chemical cluster initiatives in Europe and Asia 47
4. CONCLUSIONS 53
Page 3 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
Page 4 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
1. Introduction
The European petrochemical industry is in transition. Traditionally, the industry has been one of the hallmarks of European business, important for economic prosperity at home and successful in global competition abroad. This position is now under threat. Many of the traditional strengths of the European petrochemical industry remain in place – a stock of skills, knowledge and experience; well integrated facilities with a rich set of specialized suppliers, services providers, and producers; highly developed infrastructure; demanding consumers. But new locations with different sets of advantages – preferential access to foodstocks; large and growing markets; new facilities able to better exploit economies of scale; aggressive government support – are challenging these strengths. The European petrochemical industry needs to develop new sources of competitive advantage, not because the old ones have failed but because on their own they are no longer sufficient to succeed in global competition.
There is a clear realization in the industry, that business-as-usual is not an option. The ever increasing pressure from competing locations has been one factor. The bruising debates with European policy makers about environmental regulations have been another. EPCA and others have been platforms for the industry to discuss where the industry stands, what challenges it is facing, and how it can react. This report aims to make a contribution to this debate.
First, it discusses theroleofclustersinglobalcompetitionmore generally. The chemical industry has, for reasons to be discussed, a tradition of strong cluster-like linkages between companies. As the comparison with clusters in other parts of the economy shows, however, this legacy has not only been a blessing; it has in ways also limited the way in which clusters and cluster initiatives are being discussed in the chemical industry.
Second, it presents empirical facts on chemical clusters, focusing on Europe. The analysis draws on proprietary data from the Institute for Strategy and Competitiveness at Harvard Business School, the European Cluster Observatory, the Global Cluster Initiative Survey, and a number of other sources. This data has its limitations – in particular, it covers mostly Europe and North America – but it provides an important perspective on clusters and cluster initiatives in this industry; the first broad quantitative study of this sort that we are aware of.
Based on this analysis, it offers a number of observations and conclusions that are based on the data, on a review of the documents prepared by industry working groups in collaboration with EPCA, and on the experience of working with cluster initiatives and cluster policies across a broad range of countries and economic sectors.
Page 5 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
Overall, this report suggests that there is a clear opportunity for the European petrochemical industry to leverage clusters as a tool for making the transition to a new stage of successful development. The following statements describe some of the key characteristics of this new phase. For some locations and companies, they will read like a description of their current state or at least ambition. For others, they can hopefully be an encouragement to review the direction they are taking:
Competitiveness upgrading in the European petrochemical industry has moved from a model of internal optimization within companies to a model of cluster-based optimization across networks of co-located activities
Cluster efforts in the European petrochemical industry have moved from a focus on supply-chain improvements to a broad-based agenda of improving competitiveness at the level of companies, the cluster, and the cluster-specific business environment
Cooperation in the European petrochemical industry has moved from an industry-based model to a new framework of cooperation that includes different levels of government, educational and research institutions, as well as industrial partners
Page 6 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
2. The Role of Clusters in Global Competition
Successful companies in many industries are concentrated in a moderate number of locations, rather than being distributed evenly across geography. This empirical observation has long been neglected in the debate about the driver’s of company performance. Understanding the role of clusters and the wider conceptual framework of microeconomic competitiveness provides the tools to better understand the role of location in company success.
In the traditional analysis, company success is a function of industry structure and of the company’s relative position within that industry. The way to superior performance relative to your peers within the industry is through better strategies and higher operational effectiveness. Both of these are the result of management choices within the company.
While intuitive, this approach makes it hard to understand why the core activities of most successful companies in many industries tend to concentrate geographically. Why are so many of the key management decisions in the pharmaceutical industry made in New Jersey/New York and a limited number of other locations? Why in the automotive industry in Southern Germany and in a few places in Japan? Why in the financial services industry in New York and London? The geographic concentration of successful companies in a few places – different by industry – suggests that more factors than internal management and other firm capabilities play a role.
In the cluster- or, more broadly, microeconomic competitiveness-based analysis, geographic concentration of strong companies appears naturally. Location-specific factors including the presence of a cluster shape the opportunities that a management team is facing and raise the likelihood as well as the returns to making smart decisions on strategy and operations. Management choices within the company are important but location-specific factors external to the company need to be understood as well. Successful companies combine internal excellence with a presence in strong locations and clusters that leverage their strengths.
What are the location-specific factors that matter? How does globalization change the relevance of these factors? In what ways can cluster initiatives influence them? And what does this mean for the agenda that business leaders face?
Page 7 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
2.1. Clusters and the microeconomic foundations of competitiveness
Clusters are defined by Porter (1998) as “geographic agglomerations of companies, suppliers, service providers, and associated institutions in a particular field.” Their two key characteristics are thus the proximity of individual activities in terms of (1) geography and (2) value creation.
In the Boston Life Sciences cluster (see figure below) most of the activities occur in Cambridge, a relatively small geographic area within the Boston metropolitan region. Value creation is based in a core of pharmaceutical and biotech companies that draw on the presence of world-class teaching and specialized hospitals, specialized equipment and material suppliers, and providers of specialized research and business services focused on this cluster. In addition, the cluster benefits from educational institutions with many relevant research and training programs and strong cluster organizations covering different segments of the cluster. Finally, the life science cluster can utilize the assets and capabilities of the related cluster in analytical instruments, another area in which the Boston region has particular strengths.
The Boston Life Sciences Cluster
Cluster Organizations Health and Beauty Cluster Organizations Health and Beauty MassMedic , MassBio ,others Products MassMedic , MassBio ,others Products TeachingTeaching and and Specialized Specialized Hospitals Hospitals
SurgicalSurgical Instruments Instruments andand Suppliers Suppliers
MedicalMedical Equipment Equipment SpecializedSpecialized Business Business ServicesServices BiopharmaBiopharma - - BiologicalBiological Banking,Banking, Accounting, Accounting, Legal Legal Dental Instruments ceuticalceutical Dental Instruments ProductsProducts andand Suppliers Suppliers ProductsProducts SpecializedSpecialized Risk Risk Capital Capital OphthalmicOphthalmic Goods Goods VCVC Firms, Firms, Angel Angel Networks Networks
Diagnostic Substances Diagnostic Substances SpecializedSpecialized Research Research ServiceService Providers Providers Research Organizations Research Organizations Laboratory,Laboratory, Clinical Clinical Testing Testing ContainersContainers
EducationalEducational Institutions Institutions AnalyticalAnalytical Instruments Instruments HarvardHarvard University, University, MIT, MIT, Tufts Tufts University, University, BostonBoston University, University, UMass UMass
Source: Michael Porter, 2006
Page 8 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
Clusters are an empirical reality – employment in many industries is concentrated in a limited number of regions. As a corollary, many regions are specialized in a limited number of industries. Importantly, different industries have their regional concentrations in different locations and different regions specialize in different industries. There is not one road to success, but many different models where excellence depends on a set of characteristics that is truly specific by industry.
Clusters reflect the existence of spill-overs and linkages between companies. These externalities create real economic value: Companies can achieve higher levels of productivity, because they have close access to specialized suppliers and service providers and can rapidly learn from the best practices of close competitors. Companies can be more innovative, because they can turn ideas more efficiently into prototype products and services and get more quickly feedback on their market potential. And companies in the start-up phase can find the many external services and assets that they can not provide internally but need to tap into to launch their operations.
Emergence of Clusters POLICY
Location Existing Clusters
Business Environment
Natural Resources Entrepreneurs
Context for competition across regions
Page 9 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
Clusters emerge where the business environment provides opportunities for individual companies to conduct profitable operations. The nucleus for a new cluster can come from a wide range of factors related to the business environment, existing clusters, or individual entrepreneurship (see figure above). But then it almost always requires a strong general business environment to move from individual companies to a sustained agglomeration process in which more and more companies are attracted. The combination of factor conditions, the context for strategy and rivalry, demand conditions, and the presence of related and supporting industries are all dimensions that matter. The successful growth of a cluster is far from an automatic process. The initial conditions might provide an opportunity but then it depends on many individual decisions and the relationship between them whether a location can succeed in the competition with others.
Developed clusters come in many different shapes and forms. Some are organized around large anchor companies that have over time attracted a network of suppliers and service providers. Others are groups of small- and medium-sized companies that have been able to overcome the disadvantages of small individual size through active collaboration. Yet another category is characterized by small start-up companies that have developed around a university or a research institution. There is no one model that guarantees success. But success demands that the unique profile and conditions within a particular cluster are understood.
Background publications on competitiveness, clusters, and cluster initiatives
Michael E. Porter with Christian Ketels and Mercedes Delgado, Building the Microeconomic Foundations of Prosperity: Findings from the Business Competitiveness Index, in: The Global Competitiveness Report 2006-2007. New York: Palgrave. Michael E. Porter, Clusters and the New Economics of Competition, in: On Competition. Boston: Harvard Business School Press, 1998. Örjan Sölvell, Göran Lindqvist, and Christian Ketels, The Cluster Initiative Greenbook. Stockholm: Ivory Tower, 2003
Page 10 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
2.2. Globalization
Globalization was initially perceived as the death knell to clusters. The technological revolution in communication and transport would make the advantages of physical proximity obsolete. And the emerging economies would have such a huge labor cost advantage that the (falling) differences in productivity due to proximity would be marginalized. The experience of the last few years has, however, been very different. Globalization has increased the role of clusters, has spurred the development of clusters in many new locations, and changed the demands that clusters need to meet to succeed in global competition.
Globalization has increased the role of clusters in two ways. First, competitive advantages that reside in the intensive local interaction within a cluster have become relatively more important as other sources of competitive advantage related to unequal access to technology or other inputs have dried out. While a competitor can use the same supplier independent of his location, he can not get access to the full flow of linkages and externalities without being present in the cluster. Second, knowledge has become a more important driver of value creation and this has strengthened the role of clusters, a key factor in “open systems” of innovation that rely on ideas flowing between companies and research institutions in often unplanned and unstructured ways. While technology has become more widely available everywhere, the unstructured knowledge that provides superior value remains tied to specific people and locations.
Globalization has enabled many new locations to attract and grow clusters. First, the upgrading of business environment conditions in many emerging economies has made them attractive markets to serve. While some of these sales could be captured by growing existing clusters, the larger market also enabled many new clusters to emerge. And naturally these new clusters were located in or close to the growing markets. Second, the same business environment reforms have also increased the attractiveness of the emerging economies as export platforms. With a favorable combination of low wages and improving productivity they were able to attract labor-intensive and technologically mature activities from existing clusters. These “off-shored activities” turned out to follow the cluster logic in the new locations as well, concentrating geographically in a few locations rather than spreading widely throughout emerging economies.
Globalization has not only increased the relative role of location and clusters, it has raised the bar in terms of the demands that successful clusters have to meet:
First, the competition between clusters has clearly increased. More locations are vying for business activity and the pressure to meet rivals’ best practices has increased.
Second, higher levels of competition drive clusters to become more specialized and develop a clear strategic position. While in the past the important clusters in a given field tended to have a
Page 11 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
similar profile, there is now a much stronger differentiation by activity (R&D hub, production, service, etc.) and market segment (geographic, needs-based, etc.).
Third, the increasing level of specialization has increased the level of linkages between clusters and made the presence of such linkages a key element of a cluster’s strength. While in the past clusters were like different islands competing with each other, they are now part of global value chains that often compete and cooperate simultaneously.
As a result of these changes in the global economy, many industries have developed global value chains, where groups of specialized clusters develop complementary activities to serve markets in many nations.
Clusters in Global Value Chains: Footwear
Romania Portugal • Production subsidiaries • Production of Italian companies • Focus on short - • Focus on lower to production runs in the medium price range medium price range
China • OEM Production Italy • Focus on low cost • Design, marketing, segment mainly for the and production of US market United States premium shoes • Design and marketing • Export widely to the • Focus on specific market world market segments like sport and Vietnam/Indonesia recreational shoes and • OEM Production boots Brazil • Focus on the low cost • Low to medium quality finished • Manufacturing only in segment mainly for the shoes, inputs, leather tanning selected lines such as European market hand-sewn casual shoes • Shift toward higher quality and boots products in response to Chinese price competition
Source: Research by HBS student teams in 2002 – Van Thi Huynh, Evan Lee, Kevin Newman, Nils Ole Oermann
Page 12 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
2.3. Cluster initiatives
Many of the advantages associated with the presence in a cluster occur whether or not any type of organized cooperation exists between the co-located activities and companies. But cooperation can enhance these advantages and enable companies to increase the benefits they can derive from them. And with the pressure for clusters increasing to develop their own strategic positioning rather than following a generic blueprint that is the same for all locations in a given economic sector, the need for joint decision making and coordination within a cluster has even increased.
Cluster initiatives are defined as organized efforts by coalitions of companies and/or public institutions to improve the competitiveness of a cluster. Most of the activities that cluster initiatives pursue fall into one of three categories:
Upgrade company sophistication; especially if clusters consist of many small- and medium sized companies, cooperation can help them to improve operational practices by sharing best practices and making joint investments in market intelligence and other functions.
Improve the business environment; the more co-located companies and institutions exchange their views on the most pressing barriers for performance improvement in the business environment, the easier it is to define and address the key bottlenecks a cluster is facing.
Strengthen networks; the more co-located companies and institutions are aware of each other, the higher the level of linkages between them will be and the more likely it is that companies take decisions that are mutually reinforcing.
Cluster initiatives have been around long enough that a more systematic understanding of their key success drivers is emerging. The Global Cluster Initiative Survey, a survey of more than 1400 cluster initiatives has identified three different dimensions that appear to have the strongest impact on the performance of cluster initiatives: The economic context in terms of the cluster, the business environment, and the economic policy pursued which the cluster initiative operates, the activities that a cluster initiative is engaged in, and the governance structure through which the cluster initiative is organized.
Cluster initiatives are more likely to succeed, if they can leverage a strong cluster, a strong general business environment, and a regional culture of strong trust between companies and towards the public sector. While this observation might sound trivial, it does have important practical implications that are often overlooked:
Cluster initiatives can not compensate for a weak cluster or a disadvantageous business environment at a location. Cluster initiatives can support better decisions on upgrading the cluster and its environment. But without a basic set of strengths in place, such initiatives face an
Page 13 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
uphill battle. Too many cluster initiatives are launched to pursue the dreams of the next Silicon Valley while basic conditions within and around the future cluster are not in place.
Cluster initiatives need to take a role in improving the overall competitiveness of a region, even beyond the boundaries of their cluster. Cluster initiatives that follow a narrow agenda focused on their cluster alone miss out on the positive repercussions that a strong overall regional economy can provide. And they face the challenge of addressing weaknesses that are often rooted in the overall nature of the region as the interests of a narrow group, not as the interests of the wider regional economy.
Typical Activities of Cluster Initiatives
Bus. environment • Regulations and policy • Infrastructure investment Value chain Process/HR • Joint purchasing • Technical training • Joint logistics • Management training • Joint production Firm formation • Technical standards • Supply -chain development • Incubator services • Education system • Spin -off promotion • Production processes • Business services Joint R&D Intelligence • Joint R&D projects • Market intelligence Joint marketing • Technical trends • Joint product branding • Joint region branding • Joint foreign market promotion
Source: Global Cluster Initiative Survey, 2006
Cluster initiatives are more likely to succeed, if they pursue an action agenda that is targeted at the specific needs of their cluster. In general, this will require mounting concerted efforts in a number of interlinked areas. Clusters that perceive their activities narrowly as networking or another single role fail to reach their potential. Again, these results have very practical implications.
Custer initiatives need to ground their activity plans in a deep understanding of its cluster’s current profile and strategic positioning. Cluster initiatives have in the last few years been very concerned with the notion of best practices and established operational standards. While useful,
Page 14 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
these efforts often fail to start with an understanding of where the cluster stands and which role it can reasonably aspire to play in relation to its peers. Cluster initiatives are significantly more effective, if their activities are based on a clear understanding of the cluster’s unique strategy.
Cluster initiatives need to pursue parallel activities in an integrated set of areas. Cluster success is the result of mutually reinforcing strengths in the cluster structure and the cluster-specific business environment. Upgrading the cluster further is almost never the result of improving performance in only one dimension – broad based, integrated efforts are more effective.
Cluster initiatives can learn from the experience of peers but need to overcome the focus on benchmarking and copying of activities. Benchmarking and networking across cluster initiatives have over the last few years been popular activities. They can provide useful insights into how other cluster initiatives are organized, how they set strategy, and how they approach specific operational challenges. But they can also fuel a dangerous obsession of copying of activity plans that worked elsewhere but have little connection to local needs and conditions.
Cluster initiatives are more likely to succeed, if they have sufficient resources that are committed over the medium-term and a governance structure that engages the full breadth of cluster participants. In the past, dedicated individuals with long years of experience in different parts of the respective clusters were often the critical success factor for cluster initiatives. The research points towards key factors to move towards a model where the dependence on finding the right cluster initiative manager is decreased, and the initiative becomes institutionally more stable.
Cluster initiatives need to be open to all companies or institutions that are part of the cluster or have a strong influence on the cluster-specific business environment. Traditional industry associations tend to be formed by a relatively homogenous group of companies with similar structures and interests. Cluster initiatives need to instead bring together very different participants that share a common interest in strengthening the cluster but otherwise have many divergent and sometimes competing interests.
Cluster initiatives need to create a governance structure in which companies drive decisions about action priorities and work with government and others to implement them. Companies have critical insights because they alone understand what creates and destroys value on the market. The challenge for cluster initiatives is to find an organizational structure in which the dispersed knowledge from many individual companies can come together to form the basis for an effective action agenda targeted at the key barriers for higher performance.
Cluster initiatives are not a panacea. But they are a reflection of the increasing complexity of modern business, where success depends on individual performance but also a myriad of decisions taken by many independent business and government leaders. Cluster initiatives provide a unique platform to coordinate actions in the face of these multiple interdependencies without limiting the strength of competition.
Page 15 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
2.4. The emerging agenda for business leaders
Changes in the nature of global competition have made clusters an increasingly relevant item on the agenda for business leaders. Companies not only compete with their rivals’ internal qualities, they also compete with the full breadth of assets and capabilities that these rivals can access through the clusters in which they are present.
Changes in the way companies are run have accelerated this process. The trend to outsource activities that do not provide a competitive advantage within a company’s overall activity system has increased the dependence on competent suppliers and service providers. While some of them may be located far away (i.e., often in clusters like the Bangalore business services clusters that are specializing in these type of services) many are more efficiently provided in close proximity to the company. Clusters emerge naturally as companies’ spin-off activities into independent units or attract suppliers to locate nearby.
Location as Strategic Management
Traditional roles of locational analysis
PickingPicking a a location: location: WhereWhere do do we we locate locate which which activity activity in in sync sync with our strategic position?
Location Strategy
LeveragingLeveraging a a location: location: ImprovingImproving a a location: location: How do we derive strategic benefits from HowHow can can improve improve the the value value of of our our location location thethe characteristics characteristics of of our our location? location? inin supporting supporting our our strategic strategic position? position?
New roles of locational analysis
Page 16 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
For business leaders, these trends have propelled a company’s locational footprint from an (important) issue of operational efficiency, i.e. where can this activity be conducted at the lowest costs, to one of strategic positioning, i.e. where can this activity be conducted to become a source of competitive advantage. Company executives face a number of opportunities to make their locations a winning factor in competition:
The first task is to leverage the clusters in which a company is currently present in order to create sustainable competitive advantages. The location(s) a company is active in provide it with a unique set of external conditions. The challenge is to choose a strategic position on the market that leverages the advantages that the existing environment in these locations confers and minimizes the weaknesses that they might impose.
The second task is the choice of locations that provide the highest value to their business. But while in the past this choice was a large but ultimately operational question, it now achieves a truly strategic dimension: The set of locations that a company can tap into through the geographic placement of its activities becomes an important source of competitive advantages, not just a determinant of its cost level. Companies strategic opportunities are shaped by the assets and capabilities they can leverage in these locations.
The third task is to decide whether they can make investments in the business environment of their locations to improve their value for the company. The microeconomic business environment is the result of choices in which companies do play an important role. They can work with local universities in shaping education programs that provide critical skills, work with other companies to raise the profile of the region, or participate in activities of local investment attraction agencies to attract companies that strengthen the local cluster. Such investments of time and money can be as or more effective in improving the economic performance of the company than investment in internal capabilities.
Page 17 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
Page 18 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
3. Clusters in the chemical industry
In this section, we apply the general framework of clusters to the chemical industry. Our aim is to provide the basic empirical data to further the understanding of the geographical distribution of economic activity in this large sector.
The section starts with a discussion of the specific conditions that affect geographic agglomeration in the chemical industry, both generally and in Europe. It then turns to the empirical analysis. First, it discusses the definition of chemical cluster that emerges from the analysis of actual co-location patterns in the U.S. economy. Second, it applies this definition to the available employment and trade data. The employment data covers sub-national regions in North America, Europe, and Russia. While there is no comparable employment data available on other countries, we include a short discussion of the findings of other research on clusters and the chemical industry in that part of the world. The trade data covers exports from all countries. Third, the section presents a discussion of cluster initiatives in the chemical industry, comparing their particular features to the profile of cluster initiatives in other parts of the economy.
Page 19 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
3.1. The context for regional clusters in the chemical industry
The shape that clusters take in a particular sector of the economy depends on a number of key factors related to technology, government policies, and market conditions that characterize the sector across all locations. In addition, there will be a number of additional factors related to the development path that have shaped clusters in a specific geographic area that will have left a legacy in their current profile relative to other regions.
General factors
The chemical industry is based on capital-intensive processes. Investment decisions represent a significant and generally long-term financial commitment of a company to a specific location. Companies will tend to have an interest in the long-term strengths and potential of a location, not just in short-term factors like one-time financial subsidies. This creates an environment that is conducive for cluster development and cooperation.
The chemical industry uses many input factors and produces many outputs that are bulky and costly to transport. In addition, the geographical location of key feedstock inputs, predominantly oil and natural gas, do not match with the location of key markets for chemical products. Transportation costs are a significant part of overall costs along the value chain. This creates an environment where companies across different stages of the respective production process naturally co-locate to minimize on transportation costs throughout the industry value chain. It creates an environment, where clusters emerge naturally at locations with good transportation infrastructure. And it creates an environment where the presence of specialized logistical companies and proximity to related transportation and logistics clusters provide clear benefits.
The chemical industry covers segments with different economics that have given rise to a heterogeneous mix of companies. In basic chemicals, the commodity nature of products has led to the emergence of large multinational companies that compete in a global market based on economies of scale, learning economies, and the ability to manage highly optimized production structures. In specialty chemicals, the existence of many individual markets has driven a structure of companies of different sizes focused on serving particular customer needs or geographic areas with some markets global and others more national or regional in nature.
Page 20 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
Europe-specific factors
Europe continues to be a large market for chemical products. While other markets, particularly in Asia, register strong growth, the absolute size of the European market continues to provide a strong basis for European clusters serving customers in this region.
Europe’s main strength is the highly developed business environment that enables chemical companies to reach levels of productivity that largely compensate for the high factor costs in Europe. A first key strength is the availability of efficient transportation infrastructure and services, sometimes building on long traditions of individual locations as logistical hubs. A second asset is the access to a highly qualified labor force, often in regions where a long legacy of employment in the chemical industry has fostered the emergence of specialized educational institutions. A third advantage is the presence of many related and supporting industries, especially in the industrial heartlands of Europe, that provide the Chemical industry with access to productive general inputs and services.
Europe also has developed an advanced regulatory environment in which the production and use of chemical products have to meet high environmental and safety standards. Some of these regulations constitute a significant cost burden for the European chemical industry, threatening to undermine the viability of European clusters. But as far as these standards foreshadow global trends and enable companiestocomeupwithdifferentsolutionstomeetthem,theycanalsoestablishtheroleof European clusters as the innovation leaders in the global industry.
Based on these business environment conditions, Europe has developed a cadre of strong chemical companies, often with strong historical roots. Many of these companies have developed multinational reach and play an important role in the activities of clusters elsewhere in the world. This global reach is a key advantage for European clusters; it provides them with strong linkages to other markets. And it exposes European clusters to constant competition; European companies always have to consider which of the many regions they are present in provides the best location for a particular activity.
The European chemical industry is older than many of its peers in other parts of the world, especially in Asia. And it remains to be shaped by a legacy of fragmented markets, while competitors in other regions have (North America) or are (China) growing in an environment of larger, more integrated markets. While its long history has allowed European clusters to develop deeper and more complex structures, it also creates challenges. The capital stock in Europe is on average older, with production facilities not reaching the same economies of scale that new investments in Asia can reach. For European clusters, this creates challenges in terms of productivity levels. And markets in Europe are less consolidated, with more companies of sub-optimal size operating in some market segments. For European clusters, this creates challenges in terms of the coordination of activities across larger groups of actors, some of whom have low levels of competitive potential.
Page 21 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
3.2. Mapping chemical clusters
The analysis of clusters has for many years suffered from ad-hoc definitions of which industries and activities should be considered when describing a specific cluster. Professor Michael Porter has at his Institute for Strategy and Competitiveness, Harvard Business School developed an empirical approach for cluster mapping to overcome these weaknesses and create a set of cluster definitions driven by the statistical analysis of actual employment patterns.
Cluster Mapping
Cluster mapping starts from the notion that if linkages and spill-overs really do have an economically meaningful impact on companies, they should reveal themselves in the locational decisions that companies make. Other approaches that aim to measure linkages (for example input-output relations) or spill-overs (for example patent citations) directly inevitably exclude other cluster effects and face the challenge of measuring the absolute impact relative to other factors.
Cluster Mapping proceeds in two main steps:
In the first step, industries are differentiated by their distribution of economic activity across space: some industries will exhibit clear concentration of employment in a few locations, while others will be present relatively equally everywhere. The first group of industries, called traded sector, is characterized by competition and mobility across regional boundaries; access to different clusters and business environments becomes a factor in competition. The second group, called local sector, is serving only local markets and competes with local competitors; all rivals operate within the same cluster and business environment context.
In most economies, the majority of employment is found in the local sector. The U.S. with its high service share has gone furthest in this direction, while Russia with its legacy of heavy industries has the largest traded sector. European economies are found somewhere between these two extremes. The traded sector registers much higher productivity and innovation than the local sector. Both sectors have to be productive for an economy to be prosperous. Understanding the structural differences between them is an important step towards policies that can achieve this goal.
In the second step, industries in the traded sector are further analyzed in terms of the co-location of industries. If employment in industry x and industry y tend to occur in the same locations, linkages between them might influence locational decisions. The statistical correlation of employment provides the initial indication that industries might belong to the same cluster. Other factors, such as input-output linkages, are then taken into consideration as well. Based on this
Page 22 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
analysis, industries in the traded sector of the economy are then organized into cluster and subcluster categories, i.e. groups of industries that have revealed economic connections. The figure below provides a list of the cluster categories identified and gives examples of individual industries within these categories.
Source: ISC Cluster Mapping Project, 2007
The allocation of industries to individual clusters is a complex task. As one would expect, there are many industries that have linkages to different clusters. While, for example, in most regions the production of measuring and controlling devices (SIC 3829) is associated with other industries in the cluster category “Analytical instruments”, in some regions it is associated with industries from the cluster category “Chemical Products”. The cluster mapping explicitly allows for such overlaps and registers for each industry both a primary and any secondary clusters that might be relevant. These overlaps between clusters turn out to be important for the evolution of clusters and for the strength of a regional cluster portfolio. New regional clusters often emerge out of existing positions in established related clusters. Portfolios of related clusters generate higher economic results than groups of isolated clusters.
Page 23 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
The cluster mapping approach provides statistical categories that allow for the consistent comparison of different regional clusters. It is, however, subject to the limitations of the statistical data that is available, in particular the definition of regions and of industries. In reality, most cluster categories include both manufacturing and service activities. In the statistical data, service employment is captured only in very broad categories that do not allow the identification of, for example, venture capital companies exclusively focused on biopharmaceuticals. Despite these weaknesses, the cluster mapping data has provided to be an invaluable tool for cluster analysis and policy design in an increasing number of countries around the world.
The chemical cluster category
The chemical cluster category consists of more than 20 industries in seven subclusters at its core. A further 20 industries in seven subclusters from four other clusters (oil and gas, biopharmaceuticals, plastics, and analytical instruments) also register significant relations to the chemical cluster even though their primary association is with other clusters. One linkage that might become more important in the future is agriculture: if the chemical industry starts to use more agricultural-based feedstocks that might have an impact on locational patterns.
Chemical Cluster Category
Hydro- Pharma- carbons ceuticals Refractories Ammunition
Petro- Diagnostics chemicals and related
Oil & Gas Biopharma - Basic Processing ceuticals Chemicals Chemicals
Analytical Plastics Instruments
Special Treated Plastics Packaging Garments
Instruments Other Leather Packaging Tanning
Source: ISC Cluster Mapping Project, 2007
Page 24 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
Unfortunately, only the United States provides data that is detailed enough and covers indicators beyond regional employment to provide a benchmark view on the relative importance of the subclusters in the overall chemical cluster category. In Europe, comparable data across all countries is available only for employment and covers broader industry categories that do not easily translate into subclusters.
Among the 14 subclusters that are related to the chemicals cluster, basic chemicals (for example alkalies and chlorine) account for close to 19% of all U.S. employment and wages that are 10% above the average level of the cluster. Processing chemicals (for example soap and lubricants) follow with 16% of employment but less than average wages. The subclusters belonging primarily to the oil & gas cluster register the highest wages (20% of the cluster average) and 15% of employment. The subclusters belonging primarily to the biopharmaceutical clusters register wages close to the cluster average and account for 28% of employment. Among the other subclusters, only instruments accounts with 3% accounts for more than 1% of total cluster employment; all register below cluster average wages.
The chemical cluster category accounts for 5% of patents, 1.45% of wages paid, 1.3% of employment, and 0.5% of establishments in the overall traded sector of the U.S. economy. The cluster category is relatively innovation intensive, productive, large, and home to moderately large companies. The figure below ranks the chemical cluster category relative to other cluster categories along the four categories discussed.
The role of the chemical clusters in the U.S. economy
Source: ISC Cluster Mapping Project, 2007
Page 25 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
Employment
Employment is an important indicator to measure the pattern of economic activity across regions. It is not the only indicator that matters; productivity, wages, patents, and other measures of performance need to be taken into consideration as well. For the capital-intensive industries allocated to the chemical cluster category the focus on jobs can be particularly problematic. Despite these challenges, employment data is often the only comparable information available. And it does provide a number of interesting insights, especially for comparisons within the cluster category that keep the distortions in terms of different levels of capital-intensity at a lower level.
For Europe (defined as the EU-27 plus four associated countries: Turkey, Norway, Israel, and Iceland) we only have employment data available. In the European cluster sector, the chemical cluster category accounts for 1.36% of employment, only marginally more than in the United States. In both regions chemical clusters rank 18th among all cluster categories in terms of total employment. In terms of the related clusters, the U.S. registers relatively more employment in plastics and oil & gas, while Europe registers relatively more employment in biopharmaceuticals.
Sources of cluster data based on the ISC Cluster Definitions
United States – Institute for Strategy and Competitiveness, www.isc.hbs.edu
Europe – European Cluster Observatory, www.clusterobservatory.eu
Canada – Institute for Prosperity and Competitiveness, www.competeprosper.ca
Geographic concentration of employment Among all cluster categories, the geographic concentration of employment in chemical products is at an average level. Many clusters with small overall size, for example footwear, register a much higher share of their total employment in the largest clusters. But also some large cluster categories, like automotive and business services, are more concentrated than chemical products. Among the clusters related to chemicals, oil & gas and biopharmaceuticals – two cluster categories of moderate overall employment – are more concentrated while plastic – with more employment than chemical products – is less concentrated.
Page 26 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
Concentration of Cluster Employment across Regions EU-27plus4
Share of largest ten clusters in total European employment by cluster category
60%
Strong Weak 50% concentration concentration
40%
30%
20% Traded sector
10%
0% IT Oil Fin Ent Trpt Lthr Tob Bus Aprl Instr Edu Sprt Fish Text Lght Agri Metl Furn Jewl Publ Cnst Foot Phar Auto Distr CMtr Build Aero Com Medi Prod Plast Forst Powr Hosp Food HvyM Chem Source: European Cluster Observatory, 2007
Interestingly, in only one cluster category – food products - is employment less concentrated than in the aggregate traded sector. The food products cluster is significant in many regions, often in regions that are relatively small in overall size.
Leading chemical clusters in Europe The strength of regional clusters can measured along three dimensions that track different indicators of potential cluster effects. We define cut-off values for each of the three dimensions and assign “stars” to regional clusters that reach these limits.
The size of the regional cluster – measured by the total number of employees in the cluster - gives an indication of the amount of inter-cluster linkages and spill-overs that the cluster could be able to achieve. We give a star to the 25 largest chemical clusters in Europe; the leading 10%-tile among the 259 regions for which we have data.
The relative level of specialization – measured by the location quotient, the share of the regional cluster in the total employment in the cluster category across all regions divided by the share of the region in the total employment across all regions and cluster categories – gives an indication of the relative market share that a region has been able to gain in this cluster category. We give a star to regional clusters that reach an LQ higher than 2, i.e. regions have twice as much employment in this cluster category than the size of the region would suggest.
Page 27 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
The weight of a cluster in the regional economy – measured share of the cluster in the total regional employment across all cluster categories gives an indication to whether interactions within the cluster might be or more less likely given the “noise” from other economic transactions in the region. We give a star to the leading 100 clusters in Europe across all cluster categories on this dimension.
Map of leading chemical clusters in Europe
The leading European chemical cluster is located in Rheinhessen-Pfalz and meets all three of our criteria. This region – home to BASF, the world’s largest chemical company - has more than 13 times as many employees in the chemical cluster than an average region of its size. With close to 7% of all employment in the traded sector of the economy, the chemical cluster is a critical element of the region’s economy.
Page 28 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
Ten European regions meet two of our criteria; for all of them these are the size and the specialization cut-offs. Düsseldorf, the region covering the Ruhr area, registers the highest employment, followed by the regions of Antwerp, Lyon, and Istanbul. Three more German, one Turkish, one British, and one Swiss region complete the list.
Leading chemical clusters in Europe
Source: European Cluster Observatory, 2007
Looking at two of the dimensions - size and specialization - alone, adds a number of other regions to the list of significant chemical clusters in Europe. Lombardia, Catalonia, and Southern Netherlands are among the top ten locations for chemical employment in Europe but are also large economic agglomerations overall. Among the three, Catalonia - which includes the region around Tarragona – registers the highest level of specialization in chemicals with more than 80% more employees than an average region of this size would have.
Top chemical cluster locations in Europe by size and specialization
Source: European Cluster Observatory, 2007
The list of the top ten European regions by specialization on chemical products adds four regions in Eastern Germany and the new EU member countries to the list of significant European chemical
Page 29 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
clusters. Dessau is part of the East German chemical triangle, an area with a long tradition in these industries that stretches into two additional NUTS-2 regions. The three other regions are the leading chemical industry locations in the Czech Republic, Hungary, and Poland.
The data also provides some perspectives on changes that have occurred over the last few years. Unfortunately, however, sufficiently detailed data is only available for 139 of the 259 regions. The sample covers 52% of total European employment in chemical products.
The data suggests that chemical production has suffered significant jobs losses since 1999, with many of the leading chemical clusters taking the brunt of the deterioration. The regions reporting data for both 1999 and 2006 register a total loss of 78,998 jobs in the chemical cluster category. This puts chemical products into the bottom third of all cluster categories in terms of job creation. The 19 regions with significant chemical clusters in 2006 that are part of this group account for 66% of these losses. The three regions with the highest losses alone account for 50% of the losses.
Changes in Chemical Products Employment
Change in Employment, 1999 - 2006 5,000
0
-5,000
Chemical cluster -10,000 Other
-15,000
-20,000
-25,000 Köln, DE Halle, DE Basel, CH Mainz, DE Chester, UK Münster, DE Picardie, FR Koblenz, DE Lüneburg, DE Hamburg, DE Karlsruhe, DE Hannover, DE Darmstadt, DE Düsseldorf, DE Vlaams Gewest Tees Valley, UK Rhône-Alpes, FR E Riding/N Lincs, UK Haute-Normandie, FR
Source: European Cluster Observatory, 2007
Page 30 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
Strong chemical clusters in Europe are located in regions that differ in their profile from the typical European region. We select the 28 regions in Europe that have featured in the analysis as locations of chemical clusters and compare them to the 231 remaining regions. The data shows, that European chemical clusters tend to be located in large regions with a strong manufacturing base. In particular, we find that the typical home region of a strong chemical clusters is
About 17% larger in terms of overall employment than other regions
Has a share of about 41% of regional employment in the traded sector, compared to 36% in other regions
Has a share of 25% of traded sector jobs in cluster with strong levels of specialization, compared to 20% in other regions
While the potential for dynamics among the core industries within the chemical cluster category is important, it is only one dimension driving performance. The linkages to related clusters can be another critical influence. And the presence of strengths in such clusters in the same region can give insights into the particular profile of the chemical cluster within a region.
For all European regions with at least 50% more employment in chemical products than expected given their size, we track the position of these regions in the three cluster categories most related to chemical products, i.e. oil and gas, biopharmaceuticals, and plastics. These regions are then grouped by the combination of other clusters in which they have significant strengths, measured by the same indicator of specialization. Interestingly, Izmir (Turkey) is the only region with a significant chemicals cluster that has no specialization in any one of the three clusters related to chemicals.
The analysis reveals a clear differentiation of regional clusters.
Eleven European regions, with Cheshire in the UK (home of ICI chemicals) and Düsseldorf (covering the Ruhr-area) the most significant, have a significant position in chemicals and plastics but not in biopharmaceuticals.
Eight regions, including most of the leading European chemical clusters, combine positions in chemicals with positions in plastics and in biopharmaceuticals.
Four regions, all in Germany, combine positions in chemicals with positions in plastics and in oil &gas.
Three regions register strengths in chemicals and oil & gas but not in the other related clusters.
One region, Haute Normandie in France with relatively small overall employment, has a significant position in all three cluster categories related to chemical products.
There are no regions with positions only in chemicals and biopharmaceuticals or in chemicals, biopharmaceuticals, and oil & gas but none of the other two related clusters
Page 31 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
Linkages of Chemical Clusters To Plastics To Oil & Gas Clusters Clusters
Cheshire, UK Münster, DE D üsseldorf, DE Köln, DE Eszak -Magyarorszag, HU Halle, DE Kujawsko -Pomorskie, PL Lüneburg , DE Dogu Marmara, TR Tees Valley and Durham, UK Severozapad, CZ E Riding and N Lincs , UK Guneydogu Anadolu, TR Opolskie , PL Hamburg, DE Kozep -Dunantul , HU Koblenz, DE Hannover, DE Haute -Normandie, FR
Rheinhessen -Pfalz, DE Nordwestschweiz, CH Darmstadt, DE Vlaams Gewest, BE Rhône -Alpes, FR Picardie, FR Istanbul, TR Catalu ña, ES To Biopharmaceuticals Clusters Source: European Cluster Observatory, 2007
The strongest chemical clusters tend to have positions in at least one, more often two related cluster categories. There is evidence of super-cluster effects; linkages between related clusters that add to their inherent benefits. Chemical clusters lower down the rankings are focusing on specific steps in the value chain from feedstock inputs (oil & gas) to final outputs that require moderate (plastics) to final outputs that require advanced (biopharmaceuticals) additional capabilities. Making the link between inputs to the most advanced outputs directly or focusing on the most advanced outputs alone seems to be too challenging; the required capabilities are different and might be attracted by different set of regional characteristics.
Leading Chemical Clusters in the United States The U.S. chemical clusters register a total of 457,500 jobs in 2004; roughly half of the employment registered by their European peers. Following the same methodology as for Europe, the table below identifies the leading U.S. chemical clusters by size, specialization, and weight. We add the additional condition that the cluster needs to register at leas 2,500 employees. Houston (Texas) and Augusta (Georgia) are the two only clusters that register three stars, i.e. meet the cut-off values on all three dimensions.
Page 32 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
Leading chemical clusters in the United States
Source: ISC Cluster Mapping Project, 2007
Looking at two of the dimensions - size and specialization - alone reveals a number of other regions significant for the chemical cluster category in the U.S. Many of the large metropolitan regions come close to Houston in terms of absolute employment levels in chemical products. But given the overall size of these economies, the role of the chemical cluster in these regions tends to be small. Only Cleveland has a significant level of specialization in chemicals, registering 60% more employees in this clusters than would be expected for a region its size. Some very small regions like Lewiston (ID) and Casper (WY) register high levels of specialization in the chemical cluster. With an absolute size of less than 2,500 employees their potential for cluster effects nevertheless seems modest.
Top chemical cluster locations in the United States by size and specialization
Source: ISC Cluster Mapping Project, 2007
Many of the leading chemical clusters in the United States are located in relatively small, manufacturing intensive regions.
The average total employment across all U.S. regions is 650,000; the average total employment in the home regions of the leading U.S. chemical clusters only 450,000.
Page 33 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
Both types of regions have a similar share of total employment in the traded sector: 29% in regions with strong chemical clusters versus 28% in regions without.
But regions with chemical clusters have a significantly higher share of their traded sector employment in strong clusters, i.e. clusters with at least twice as much employment as in an average region of its size. In regions with strong chemical clusters, strong clusters account for 35% of traded sector employment versus a share of 28% in other regions.
Comparing chemical clusters in Europe and the United States While direct comparisons of U.S. and European clusters are problematic – U.S. metropolitan regions are more heterogeneous in size and capture more economic transactions while European NUTS-2 regions are more homogeneous in size and follow administrative boundaries – that available data indicates that:
Chemical products account for roughly twice as many jobs in Europe than in the United States. While the share of the category within the traded sector of the economy is virtually identical, the European economy has 60% more jobs overall and higher share of its employment in the traded sector (36% versus 30%)
Strong chemical clusters in Europe tend to be in relatively large regions while they tend to be in relatively small regions in the United States. In both Europe and the U.S. chemical clusters tend to locate in regions with relatively strong portfolios of manufacturing-driven clusters.
These differences have a visible impact on the overall economic geography of activities in the chemical clusters category. As in many other cluster categories, the top locations in the United States account for a significantly higher share of total cluster employment than in Europe. The 10% U.S. regions with the highest absolute employment in chemical products account for 48% of total U.S. chemical employment. The comparable figure for Europe is 34%. This lower level of geographic concentration in Europe can translate into fewer possibilities to reap the benefits of strong regional clusters
It turns out, that the differences in employment concentration between the U.S. and Europe in the chemical cluster are driven entirely by differences in the size distribution of regions. U.S. regions are much more unequal in size than European regions. The 10% U.S. regions with the highest total employment in the traded sector account for 50% of total U.S. traded sector employment. The comparable figure for Europe is 24%. Relative to the size distribution of regions, chemical cluster employment in the U.S. is slightly less concentrated than traded sector employment overall, while in Europe it is significantly more concentrated. The European chemical industries have to a significant degree been able to overcome the challenge of a generally more dispersed economy.
Page 34 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
Concentration of Chemical Employment Across Regions Europe versus the United States
Share of total Chemical Cluster Employment 100%
80%
60% Europe U.S. 40%
20%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Share of Regions (sorted by decreasing Chemical Cluster Employment)
Source: European Cluster Observatory, ISC Cluster Mapping Projec t, 2007
Chemical clusters in other countries In Canada, the Institute for Prosperity and Competitiveness has applied the cluster definitions developed at Harvard University to create a cluster mapping database for Canadian provinces, metropolitan areas, and Ontario census metropolitan areas. Most comparable to the U.S. metropolitan areas are their Canadian counterparts.
Canada registers four regions that register either a significant absolute number of employees in chemical products or a high level of specialization. None of these regions would make it into the ranks of the leading U.S. chemical clusters.
Leading chemical clusters in Canada
Source: Institute for Prosperity and Competitiveness, 2007
Page 35 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
In Russia and Kazakhstan, the cluster definitions were translated into the national industrial codes and used in the context of research projects on behalf of government-affiliated institutions.
Russia registers a significant list of strong chemical clusters. While these clusters might not be competitive with European or North American peers in their current form, the proximity to feedstocks and the legacy of agglomeration and skills signal the opportunities that exists. Whether these opportunities can be leveraged, however, will depend on the economic policies that the Russian government will pursue in the future.
Kazakhstan has, despite the emergence of a strong oil and gas cluster, so far not developed any significant positions in chemical products. The one existing chemical cluster would barely enter the list of leading Russian chemical clusters.
Leading chemical clusters in Russia and Kazakhstan
Source: ISC analysis, 2007
In Asia, systematic analysis of cluster structures using the cluster definitions developed at Harvard University have so far unfortunately not been conducted. In China the available analysis points out different patterns of agglomeration depending on the degree of an industry’s openness to international competition. The more open industries are, the more concentrated their locational profiles become. Different parts of chemical industry fall into different categories; i.e. chemical fibers are open to competition and increasingly concentrate in the coastal areas while pharmaceuticals are protected and remain geographically dispersed.
Page 36 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
Exports
Trade flows are another important indicator of cluster presence that is widely available. The cluster definitions originally created on the basis of industrial classification codes have been translated into definitions based on product categories used to capture international trade. The Institute for Strategy and Competitiveness has used these definitions to create a dataset of trade flows by cluster categories.
The trade data has a key advantage: it is available for almost every country in the world. But it also suffers from a number of weaknesses that need to be understood when interpreting the data. The unit of analysis for the data is the country, not the region. For large countries like the United States, the export performance in chemical products will thus be driven by many regional clusters, not just one. And since the product codes used to track international trade were used to set tariffs, they are far more granular for goods than for services. This is not so critical for chemicals, but does affect many other cluster categories in which the service component is rising.
Share of Cluster Categories in World Trade
Share of total world trade 15%
Oil and Gas 10% Automotive Information Technology Metals, M Manufacturing Agricultural Products Chemical Products Production Technology Communications Equip. 5% Plastics Biopharmaceuticals
0% 1988 1990 1992 1994 1996 1998 2000 2002 2004
Source: Global Cluster Competitiveness Project, 2007
Page 37 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
Since 1998, the global trade in chemical products has grown at a compound annual growth rate of 9.1%. While impressive on an absolute level, this rate has been below the 10.1% growth rate of total world trade. While the rise of oil and gas exports, more a phenomena of price increases than of actual volume growth, has been an important factor behind this development, other clusters have grown world exports at a rapid pace as well. Among all 39 export cluster categories, chemical products rank only 20th in terms of trade growth since 1988.
Despite the relatively modest level of growth, chemical products remain the 6th most important cluster category for world trade. While its share of world trade dropped from 5.36% in 1988 to 4.34% in 2000, it has since stabilized around a level of close to 4.6%. Among the clusters related to chemical products, oil and gas has seen the most impressive growth at annual rate of 17.7% since 1988. Oil and gas exports are since 2005 the most important cluster category in world trade, accounting for 11.6% of all exports. Biopharmaceutical trade has also grown at a brisk rate of 15.2% per annum and is now almost as important as trade in plastics.
Within chemical products, trade occurs in eleven separate subclusters. Organic chemicals are the most important one, accounting for more than 50% of total trade value.
Share of Subclusters in Total Chemical Products Trade
Other, 6.0% Pesticide and Other Agricultural Chemicals, 3.9%
Dyeing, Tanning and Coloring Materials, 5.4% Packaged Chemicals, 7.2%
Organic Chemicals, 51.5% Inorganic Chemicals, 13.0%
Chemically Based Ingredients, 13.0%
Source: Global Cluster Competitiveness Project, 2007
Page 38 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
Leading countries Exports in chemical products are dominated by a few countries. The top ten countries account for close to 70% of world chemical trade. The leading exporters are Germany, the United States, Belgium, Ireland, Japan, and China.
In addition to total export volume, a country’s specialization on chemical products and the importance of chemical products in its total exports are important indicators to evaluate the strength of export clusters.
Specialization in trade is measured by revealed comparative advantages (RCA), a concept closely similar to the location quotient used in the analysis of employment patterns across regions. RCA is defined as the world market share of a country in a specific product category – here chemical products – divided by the country’s total world market share across all exports.
The importance of chemical products in a country’s trade is measured by the share of chemical products in its total exports.
Leading global exporters in the chemical clusters category
Source: ISC International Cluster Competitiveness Project, 2007
Fourteen countries register high values across the combination of the three performance indicators applied and total chemical product exports of at least $100m. Belgium, Ireland, and Switzerland register significant strengths in all three, while the other eleven countries are strong in two of the dimensions.
The largest exports of chemical products, Germany and the United States, are, in fact, not particularly specialized in this cluster category. Both countries are strong exporters generally and chemical products are only around 30% higher than expected given their respective total export volume.
Page 39 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
The ranking of top global exports by size and by specialization individually adds a number of other countries to the list of significant exporters of chemical products.
Among the largest exporters, a number of European (France, Italy, and Spain) and Asian (Japan, China, and Korea) are among the top 15, even though their specialization level in chemical product exports is relatively modest. In fact, China exports about 20% less chemical products than would be expected given the country’s overall export volume
Among the most specialized exporters, only Dominica, a small island nation in the Caribbean with chemical exports of less than $100m, enters the list.
Top global exporters in the chemical clusters category by size and specialization
Source: ISC International Cluster Competitiveness Project, 2007
The analysis of export profiles by subcluster within chemical products reveals the significant heterogeneity in terms of countries’ specialization within this cluster category.
The leading exporters are focused on organic chemicals, the largest subcluster by trade value, and chemically based ingredients. In all other subclusters, the leading exporters have a smaller export market position than on average in chemical products.
Among the leading exports, there are significant differences in terms of the breadth of positions across subclusters. Six countries have relatively strong positions in five or more subclusters, while eight countries have more narrow positions.
Page 40 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
Share of Leading Chemical Exporters
Market share of leading in World Trade by Subcluster exporters, 2005 70%
60% Total Cluster Products
50%
40%
30%
20%
10%
0%
Explosives Refractories Synthetic Fibers Organic Chemicals Inorganic Chemicals Packaged Chemicals
Chemically Based Ingredients Miscellaneous Mineral Products Miscellaneous Crude Materials
Dyeing, Tanning and Coloring Materials Pesticide and Other Agricultural Chemicals Source: Global Cluster Competitiveness Project, 2007
Among the leading chemical product exporters, Ireland is most clearly specialized on organic chemicals with insignificant positions in all other subclusters with the exception of chemically based ingredients. Belgium and Singapore exhibit similar patterns, but are both relatively more balanced with activity in all subcluster categories.
Germany and the United Kingdom show an opposite profile, with strong positions in seven of the eleven subcluster categories. The United States and India follow with relatively strong positions in four subclusters.
The smaller exporters in this group are all relatively strong in exports of inorganic chemicals. Trinidad and Tobago, a country with significant natural gas resources as feedstocks, has little presence in other subcluster categories. Morocco also has a significant presence in miscellaneous crude materials, Jordan in packaged chemicals and pesticides, and Namibia in miscellaneous crude materials.
Page 41 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
Market share by Chemical Products Subcluster, Leading global exporters
Source: ISC International Cluster Competitiveness Project, 2007
In most subclusters, the top positions in terms of market share are occupied by countries that are leading chemical products exporters overall. Only in pesticides (France) and miscellaneous crude materials (Canada) are other countries on top.
Further down the list of leading exporters by market shares are countries with significant positions in two or more subclusters that are overall not very specialized in chemical exports:
The Czech Republic in packaged chemicals, explosives, and refractories.
Mexico in packaged chemicals, explosives, and synthetic fibers.
Russia in inorganic chemicals, miscellaneous crude materials, and explosives
Poland in packaged chemicals and miscellaneous mineral materials
Brazil in pesticides and refractories
Page 42 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
A number of further countries have a position in a single subcluster. Among them, Saudi Arabia is on the list of top exporters in organic chemicals, the largest product group in chemical exports overall.
Leading Exporters by Chemical Products Subcluster
Source: ISC International Cluster Competitiveness Project, 2007
Market shares in the global chemical export market have shifted significantly over the last few years. Germany has lost position, dropping from 20% to 12% of the world market between 1990 and 2005, with most of the losses happening through the 1990s. The United States has dropped from 16% to
Page 43 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
12% in the same period, with more of the losses happing recently. Other countries that have lost significantly are France, Japan, and the United Kingdom.
China and Singapore have at the same time gained position. China’s gains have even accelerated while Singapore has lost some ground since 2003. Belgium and the Netherlands, too, have been able to significantly improve their export market shares. Rather than simply moving market shares among world regions, the relocation of export ability has happened within them.
Market Share Changes in Chemical Products
Market share, 2005
15%
Germany
10% Belgium United States Ireland Japan France Netherlands UK 5% Switzerland S Korea China
Italy Singapore Europe Rest of the world 0% -3% -2% -1% 0% 1% 2% 3% Change in Market Share, 2005 - 1999 = 10bn US -$ exports in 2005 Source: Global Cluster Competitiveness Project, 2007
Page 44 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
3.3. Cluster initiatives
The chemical industry as a basis for cluster initiatives
Cluster initiatives do not emerge automatically; it always takes a specific decision by a company, a government agency, or some other institution like a trade association or university to launch them. Especially if the initiative originally comes from companies, it is often an individual person that is instrumental in starting the cooperation.
There is still little systematic evidence on the specific conditions that trigger the emergence of cluster initiatives. The experience from individual cases suggests, however, that many cluster initiatives fall into one out of two large groups:
Growth ambitions; if a new set of industries emerges as the result of technological innovation or if a region aims for higher growth, all too often upgrading the general business environment is either not enough or in its full breadth infeasible given the available resources. Cluster initiatives are then a way to develop a concrete growth path and to focus the existing resources on those activities that have the highest impact for a given set of businesses.
In German biotech, the ambition to find an efficient way for the government to support faster growth in this science-driven industry led to the launch of the BioRegio competition, a program to finance the best cluster initiatives in the field. In many developing and emerging economies like Thailand and Indonesia, governments have identified specific clusters as part of national economic development plans.
Crisis; if a group of industries or a regional economy faces a threat to its established position, be it through a sudden shock or a long-term decline, policies that only soften the blow or aim to isolate the cluster or region from market realities are ultimately insufficient. Cluster initiatives enable an active response that leverage the existing assets and capabilities, either by strengthening them enough to regain competitiveness or by migration them into a new market where they can become the foundation of a new competitive cluster.
In the U.S. state of Connecticut it was the cut-down in military spending and the general downturn in the early 1990s that led to the development of cluster efforts as part of an overall regional competitiveness initiative. In the UK Midlands automotive cluster, the demise of Rover initially led companies to flock together to look for government support but then became the starting-point for a much broader effort to increase the cluster’s competitiveness on the basis of collective action.
Page 45 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
In the chemical cluster category, the available data suggests that the propensity for cluster initiatives has been lower than in parts of the traded sector. Only six chemical cluster initiatives were among the 1400 cluster initiatives that participated in the Global Cluster Initiative Survey. Emerging economies report a more substantial share of their overall cluster initiatives in capital-intensive manufacturing, a broad category that also includes chemicals.
Note that the level of cluster initiatives does not imply that there was no active government policy directed at the chemical cluster. Where such industrial policies existed, however, they tended to lack a specific regional focus or where purely government policies and programs without the active involvement of other parts of the cluster in their design and execution.
Dominant Focus of Cluster Initiatives
100% Developing Economies Emerging Economies 80% Advanced Economies
60%
40%
20% Share of respondents
0% Argriculture, Capital "High tech", Tourism food, basic intensive advanced manuf. manuf. services
Automotive ; Chemicals; Forest products/paper; Metal manufacturing; Oil & petrochemicals; Plastics; Power equipment
Source: Global Cluster Initiative Survey, 2006
Growth opportunities in chemicals can and have been present in economies at all stages of development. In advanced economies, chemicals are a relatively mature group of industries where growth is the result of individual companies that gain market share or moderately expand the market through new products and services. Such growth can and often needs to be pursued individually.
Page 46 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
In emerging economies, however, chemicals can be a critical element in the move from the factor- driven to the capital-intensive stage of development. Chemical clusters can emerge if there is a concerted effort, often led by the government, to upgrade the business environment and reduce the risks of such a substantial financial commitment.
Crises have affected the established chemical clusters in the leading advanced economies. But these crises have traditionally been dealt with at the level of individual companies, not the cluster. Crises were also evident in the emerging economies, especially during the Asian crisis of 1997. But the chemical industries in these countries were generally less well developed and the crisis so deep that the chemical cluster was no specific priority.
In advanced economies, in particular the leading chemical clusters in Europe, this perspective is now changing. There is a clear sense that the strong traditional position of these clusters can not be taken for granted. A combination of rising competition from Asia and increasing regulatory pressure in Europe has led many companies to the conclusion that joint action is now necessary.
Chemical cluster initiatives in Europe and Asia
In the remainder of this section, we will compare the cluster initiatives emerging in the European chemical sector with efforts in Asia. This comparison gives a wider perspective on the context in which European initiatives operate, the organizational structures that they use, and the operational choices they face. The data to make this comparison is drawn from individual research and the documents generated by some of the cluster initiatives; a more systematic analysis is unfortunately not possible given the existing data.
Context The most important factors that shape the context for cluster initiatives – and ultimately their chances of success – are the nature of government institutions and policies, the general business environment conditions, and the strength and profile of the underlying cluster that theinitiativeaimstomobilize.
The European chemical industry faces a context that is overall quite favorable to strong cluster initiatives. But there are specific challenges that cluster initiatives need to react to, either through appropriate organizational choices or through launching targeted activities.
Regional governments tend to be well developed, widely engaged in economic development activities, and in most cases open to collaboration with companies. National
Page 47 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
governments and European institutions share the overall interest in economic development but in the past there has also often been, especially at the EU level, a tension between cluster mobilization and other policy goals
o Environmental regulations have been a strong focus of EU policies. The regulation of chemical substances through REACH has been a major effort with significant impact on chemical companies operating in Europe. The dialogue between industry and government agencies has been problematic, undermining the mutual trust necessary for cluster initiatives to work.
o Competition law is another key pillar of EU policies. Limitations to state aid and the risks of joint activities between companies being found in violations of competition law have been perceived as a barrier for launching cluster initiatives.
The general business environment tends to be strong in most European regions, especially in the locations of the leading chemical clusters. However, these traditional strengths are under pressure.
o The physical infrastructure is well developed but economic growth puts increasing strains on existing assets, especially the transport infrastructure. The leading chemical clusters in Europe are located in major economic centers affected strongly from the overall growth in transportation.
o The skill base is strong but the demographic development and the mismatch between the supply and demand of skills have created increasing concerns about skill shortages.
The leading chemical clusters in Europe have strong market positions and a rich set of supporting and related industries.
o While the maturity of the European clusters provides clear advantages, it can make the launch of a cluster initiative more complex. The legacy of relations can turn out to be a barrier for effective collaboration. The presence of many competing companies can make it less likely for any individual company to take the initiative and contribute to a common goal. Clusters with a dominating anchor firm, like BASF in Ludwigshafen, seem to work well but might also have less potential for cluster effects.
o The lower rate of market growth in Europe has a dampening effect on investment, leaving European clusters with an aging capital stock. Only 16% of all investment projects in the chemical industry occur in Europe, compared to 35% in South East Asia and 27% in the Middle East.
Page 48 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
The chemical industry in Singapore faces a context that is also strong, notwithstanding the clear structural differences between Singapore and Europe. The context for the chemical industry in China is not quite as strong but improving.
Governments play a strong active role in economic development in Singapore as well as in China. In China both the national and the regional governments are important partners for cluster initiatives.
o The Singaporean government has developed a global reputation for extreme efficiency and professionalism. The country views economic development in partnership between government and companies as a national priority.
o Government agencies in China can suffer from low efficiency and corruption, despite their clear focus on economic growth. There can also be inconsistencies between the decisions of different government agencies.
The general business environment is very strong in Singapore while the situation in China is more mixed.
o Singapore benefits from a very efficient infrastructure, high openness to foreign companies, availability if skilled local and expatriate labor, and the presence of many world-class companies in supporting and related industries.
o China has invested tremendously in physical infrastructure, boasts large numbers of graduates in many technical disciplines, and has been interested to attract foreign companies. Many industrial parks have been created, some - like Changzhou Park in the Ningbo Chemical Industry Zone south of Shanghai - with a particular focus on chemical products. But many weaknesses persist and China still ranks low on aggregate measures of competitiveness such as the Global Competitiveness Report.
Singapore has developed a strong chemical cluster as the result of a determined strategy that has persisted over many years. China has attracted a number of major investments but many clusters are still in an early stage.
o The Singaporean chemical cluster continues to receive major investment commitments from foreign companies. Supporting logistical and financial services are widely available, and the growing investments into biopharmaceuticals could present an interesting future opportunity.
o The Chinese chemical clusters are emerging around the sites of major new investments, like the joint venture between SINOPEC and BASF in Nanjing. Many clusters in China are focused on a relatively narrow set of activities, even if they reach large scale in those areas.
Page 49 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
Participants Cluster initiatives develop very different dynamics depending on who initiates them and who decides about which activities to pursue. Cluster initiatives that fail to mobilize all relevant participants from the private and public sector are often less effective, because they miss out on important information or lack the ability to address all aspects of the business environment.
In Europe, in the chemical industry the private sector tends to play a larger role in initiating and running significant cluster initiatives than in other industries. Government is involved in some of them, mainly as a partner in addressing challenges in the physical infrastructure.
o A few private-sector led cluster initiatives, like the Cluster Initiative Mitteldeutschland, have added activities to develop a broader strategy for the overall region on top of cluster-specific efforts
Cluster Initiative Mitteldeutschland
Context • Heart of the East German chemical triangle • Significant foreign investments after 1990 • Presence of strong chemical parks
Motivation • Concerns about the low attractiveness of the region as a threat to the long -term competitiveness of the chemical cluster • Concerns about the inability of the public sector to mount effec tive competitiveness initiatives across three German states
Action • Initiative taken by Bart Groot, head of Dow Chemicals operations in the region • Initial focus on regional marketing • Increasing focus on clusters – including chemicals – as engines and ambassadors of the regional economy
Source: HBS Case study Mitteldeutschland, 2006
o Government agencies have also launched a number of initiatives in which they play a more central role
Broader national and regional competitiveness efforts like the French Poles de Competitivite, the Regional Development Agencies in the UK, and the Bavarian Cluster Offensive have included chemical clusters as part of their overall activities, increasing the role of government engagement
Page 50 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
The European Commission is supporting the collaboration among regions and clusters; in that context, a network of European Chemical Regions (ECRN) has been created under INTERREG in 2003, largely to facilitate policy learning and information exchange
In Singapore and China, government plays a much more central and directive role. Companies are engaged but tend to note take the initiative or set the strategic direction
o In Singapore, the government has identified key clusters to be developed. Their efforts are then very market-oriented, targeted at the attraction of companies by providing attractive business conditions
o In China, the government has a more broad-based focus on overall development. Designated zones or regions are developed to attract foreign investors. Publicly- owned companies play a significant role as well
Activities Cluster initiatives are effective, if they identify the specific bottlenecks that affect companies in their cluster and launch targeted activities to remove them. Generic action plans or the misunderstanding that cluster initiatives are synonymous with a particular type of activity are problematic.
In Europe, supply chain improvements and specific efforts to upgrade the business environment, particularly the transportation infrastructure, dominate. But investment attraction is gaining in importance
o Think Tanks organized under the umbrella of EPCA have identified opportunities for improving supply-chain collaboration through horizontal and vertical collaboration
o An effort for collaboration of European chemical sites has been launched in 2005 under the name ECSPP to provide potential investors with more accessible information on chemical sites throughout Europe
In Asia, investment attraction and the infrastructure development are the main activities that cluster initiatives tend to engage in
Page 51 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
Page 52 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
4. Conclusions
Based on a discussion of the role of clusters in global competition, this report has analyzed the available data on clusters in the chemical industry, focusing on Europe. More data is needed, on the performance of chemical clusters in a wider range of indicators besides employment, on the specific profile of these clusters in terms of activities and market focus, and on the strength of the regional economies and business environments in which these clusters operate. More data is also needed on the many different cluster initiatives and other policy efforts to improve the competitiveness of the chemical industry and specific chemical clusters. But while the available data is in many ways only a beginning, a number of important observations are emerging.
First, this report underlines the importance of location in global competition. The economic activity in the chemical industry is concentrated in a number of competing and cooperating clusters around the world. Clusters benefit from their proximity to key markets. But being in a growing market is clearly not enough. Within Europe, different clusters have experienced quite different development paths. Strong clusters can create levels of productivity that can make them an attractive basis of operation for serving foreign markets, even if they are facing high factor prices. But there are multiple ways to success; not all successful clusters look the same. In Europe and in the world economy, different clusters and different nations have developed different patterns of specialization within the chemical industry.
Second, this report here contributes to the understanding of the clear strengths but also the visible challenges that the European chemical industry is facing. Europe is the home of many strong chemical clusters and many European countries have important positions in global chemical trade. But these positions are under threat and many strong European clusters have lost employment and market position, to Asia but also to other parts of Europe, in recent years. The maturity of European cluster supports high productivity but it comes with a legacy of assets that now have to compete with facilities in Asia that can exploit potential economies of scale and new technologies to a higher degree. And there are also signs that the level of consolidation has not progressed as much in Europe as in other parts of the world.
Third, this report argues that a new approach is required to fully leverage the opportunities of cluster-based efforts as tools to upgrade the competitiveness of the European chemical industry.
Companies need to overcome the tendency to view productivity improvements as the result of internal innovation or stronger competitive pressure on suppliers; the next level of productivity improvement will depend on concerted changes across many companies and government policies.
Page 53 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
Cluster initiatives need to broaden their perspective from a natural focus on supply-chain collaboration to a broader agenda of identifying the specific strategic positions of individual clusters and upgrading all relevant parts of their respective business environments; more changes – with some variation across different cluster locations depending on their respective strategic positions – will be necessary to sustain the potential for further productivity growth.
Collaboration between companies and the private sector needs to move to a new model. Many of the key challenges that the European chemical industry is facing – the emerging bottlenecks in transportation infrastructure and the increasing pressure from demanding product regulation – can only be addressed if companies and the public sector find a productive platform for dialogue. Cluster initiatives can form the foundation for such a dialogue and create a context of mutual understanding that allows trade-offs between different goals to be made based on facts rather than ideological positions.
During 2007, many industry groups within the European chemical industry, including the EPCA Think Tanks on Supply-Chain Collaboration, worked on new concepts to improve the competitiveness of the European chemical clusters. On 14 June 2007 the European Commission formally decided to set up a High Level Group on the Competitiveness of the Chemicals Industry in the European Union. Clusterdata–amuchmoredetailedcollectionofcluster-specificfactsshouldbeapriority–and cluster initiatives are key tools for these efforts to succeed.
Europe has the ability to develop its strong chemical industry further. And it is increasingly showing that it has the willingness to do so as well.
Page 54 of 55 (c) Christian Ketels, 2007 The Role of Clusters in the Chemical Industry
Selected publications on chemical clusters
Bathelt, Harald (2000), Persistent structures in a turbulent world: the division of labor in the German chemical industry, Environment and Planning C, Vol. 18, pp. 225 – 247. Chapman, Keith (2005), From ‘growth center’ to’cluster’: restructuring, regional development, and the Teeside chemical industry, Environment and Planning A, Vol. 37, pp. 597 – 615. Croufer, Edouard, Pieter-Jan Mermans, and Christian Weigel (2005), The Staying Power of Europe’s Chemical Industry, Arthur D. Little, Prism, Vol. 1, p. 29 – 43. EPCA Think Tank (2007), A Paradigm Shift: Supply Chain Collaboration and Competition in and Between Europe’s Chemical Clusters, EPCA: Brussels. European Chemical Industry Council (2004), Chemical Industry 2015; Roads to the Future, CEFIC: Brussels. European Commission – DG Enterprise (2005), European Industry: A sectoral overview,Commission Staff Working Paper SEC (2005) 1216, Brussels. European Commission – DG Enterprise (2000), Competitiveness of the Chemical Industry Sector in the CEE Candidate countries, Brussels He, Canfei, Yehua D. Wei, and Xieuzhen Xie (2006), Globalization, Institutions, and Industrial Location: Economic Transition and Industrial Location in China, Regional Studies, forthcoming. Janne, Odile E.M. (2002), The emergence of corporate integrated innovation systems across regions: The case of the chemical and pharmaceutical industry in Germany, the UK and Belgium, Journal of International Management, Vol. 8, pp. 97–119. Ketels, Christian, Jeffrey Fear (2006), Cluster Development in Mitteldeutschland, HBS Case 707-004, Harvard Business School Press, Boston. Koch, Thomas (2004), Global Chemicals: China remakes an industry, McKinsey Quarterly, 2004 special edition. Mariani, Myriam (2000), Networks of inventors in the chemical industry, mimeo., MERIT McCann, T.J. (1999), Chemical industry integration, Journal of Business Administration and Policy Analysis. O’Mahony, Mary and Bart van Ark (ed.) (2003), EU productivity and competitiveness: An industry perspective, European Commission: Brussels. Patel, Mitesh (2004), Competitiveness of Singaporean Petrochemical Industry, paper presented at the Bottom Line Improvement Conference, Singapore. Patti, Anthony L. (2006), Economic clusters and the supply chain: a case study, Supply Chain Management, Vol. 11, No. 3, pp. 266–270. Pillai, Jayarethanam (2006), Importance of Clusters in Industry Development: A Case of Singapore’s Petrochemical Industry, Asian Journal of Technology Innovation,Vol.14,No.2. Sikorski, Douglas (1997), Public Enterprise in the International Petrochemical Industry: The case of Singapore, Energy Resources, Vol. 19, pp. 309 – 323. Wang, Jason H J, Henry Wai-chung Yeung (2000), Strategies for global competition: transnational chemical firms and Singapore's chemical cluster, Environment and Planning A,Vol.32,pp.847–869.
Page 55 of 55 (c) Christian Ketels, 2007 THE EUROPEAN PETROCHEMICAL ASSOCIATION