Chapter 4 Development of the Oulu ICT Cluster, and Verification of the Working Hypothesis
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DBJ Research Center on Global Warming Discussion Paper Series No. 59 (4/2016) The Mechanism of High-tech Industrial Cluster Formation: An Empirical Study on the Process of ICT Cluster Formation in Oulu, Finland Takashi Sasano The aim of this discussion paper series is to stimulate discussion and comment from academics and policymakers through a preliminary draft form. This paper is included by permission of the author(s) as a tentative material before publication in peer-reviewed journals or books. Copyright and all related rights are maintained by the author(s). Views expressed in this paper are those of the author(s) and do not reflect the views of the Research Institute of Capital Formation or Development Bank of Japan. DBJ Research Center on Global Warming Discussion Paper Series No. 59 (4/2016) The Mechanism of High-tech Industrial Cluster Formation: An Empirical Study on the Process of ICT Cluster Formation in Oulu, Finland1 2 Takashi SASANO Research Institute of Capital Formation Development Bank of Japan 1 This paper is an English translation of most of the original paper, which was written in Japanese and originally appeared in Economics Today, Vol. 27, No. 2, October, 2006, published by the Research Institute of Capital Formation, Development Bank of Japan. I deeply thank Ms. Beverly D. Hasegawa, International Strategy and Coordination Department, Development Bank of Japan Inc., for her careful translation. 2 I thank Prof. Takeo Kikkawa (Tokyo University), Prof. Shigeru Matsushima (Hosei University), Prof. Akio Nishizawa (Tohoku University) and participants in the seminars respectively held by Prof. Kikkawa, Prof. Matsushima and the Research Institute of Capital Formation for their helpful comments and suggestions. I am also indebted to Prof. Yuko Harayama (Tohoku University) for his many motivating suggestions given at the Regional Cluster Seminars in Sendai and Tokyo. I also thank key persons related to the Oulu ICT cluster who kindly allowed me to conduct interviews, and especially thank Mr. Seppo Mäki, former Manager, Business Relations, City of Oulu for his extensive help and kind suggestions. II CONTENTS Introduction・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ · 1 Chapter 1 Differentiating the Concepts of Industrial Agglomeration and Industrial Clustering・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ · 4 Chapter 2 A Review of Research Findings on the Economic Mechanisms At Work within Industrial Agglomerations and Industrial Clusters・・ · 9 Chapter 3 Constructing a Working Hypothesis for the Formative Mechanism of High-tech Industrial Clusters・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 17 3.1 Sustaining Mechanisms of Industrial Agglomerations・・・・・・・・・・・・・・・・・・・・・・ 17 3.2 Summarizing the Breakdown Mechanisms of Industrial Agglomerations・・・・・ 21 3.3 The Formative Mechanisms of High-tech Industrial Clusters・・・・・・・・・・・・・・・・ 22 3.3.1 Innovation and Its Relationship to Industrial Agglomerations・・・・・・・・・・・・・ 24 3.3.2 Sustaining Mechanisms of High-tech Industrial Agglomerations・・・・・・・・・・・ 29 3.3.3 Working Hypothesis for the Formative Mechanisms of High-tech Industrial Clusters・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 30 3.4 Verifying the Working Hypothesis: Selection of a Region for Analysis・・・・・・・・ 39 Chapter 4 Development of the Oulu ICT Cluster and Verification of the Working Hypothesis・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 41 4.1 Oulu Before Development・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 41 4.2 Summary of the Development of Oulu and the Oulu Region・・・・・・・・・・・・・・・・ 45 4.3 Moves Taken by Local Actors in the Forming of the Oulu ICT Cluster, by Decade・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 60 4.3.1 Principal Initiatives from 1958 through the 1970s・・・・・・・・・・・・・・・・・・・・・・・・・ 60 4.3.2 Principal Initiatives in the 1980s・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 86 4.3.3 Principal Initiatives in the 1990s・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 102 4.3.4 Principal Initiatives in the 2000s・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 107 4.4 Verification of the Working Hypothesis・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 111 III 4.4.1 Verification of the Five Formative Processes・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 111 4.4.2 Verification of Mutually Enhancing Causal Correlations among the Formative Processes・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 134 4.4.3 Verifying the Boundary between the Foundation Period and the Development Period・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 144 4.5. Principal Actors in Activity Groups Involved in the Formative Process of the Oulu ICT Cluster・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 145 4.6 Summary・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 149 Chapter 5 Conclusions・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 152 Appendix Implications of IT Cluster Formation for Regions in Japan・・・・・・・・ 155 Afterword・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 165 Bibliography・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 166 IV Introduction The concept of the industrial cluster is a familiar one to regional development workers, policy formulators for industry, science and technology, and researchers in these fields throughout the world.3 In Japan, the central government implements cluster policies4 developed since the beginning of this century by the Ministry of Economy and Industry (METI) and the Ministry of Education, Culture, Sports, Science and Technology (MEXT). Regional governments may use central government measures to augment policies they already have in place; those with no measures of their own may use the government’s as starting points for new initiatives. The development of an industrial cluster takes time. This may be one reason why Japanese communities planning to create a cluster tend to wait for the results of existing initiatives to come in before exploring future strategies.5 Similar approaches are taken throughout much of Europe, North America and Asia. Even regions where clusters are up and working make ongoing efforts to ensure that they produce stable or better results. As an idea, the industrial cluster has drawn steady interest from a wide range of people across the world and from regional development specialists in particular. This is because it is seen as a valuable methodology for producing stable growth and employment in regional economies, one which helps a region’s leading industries to maintain and strengthen their competitiveness while creating new local firms and sectors. For individual companies, the concept can have important relevance for site location and innovation strategies. Companies with global operations, especially in knowledge-intensive or science-based fields, find numerous advantages in locating in an industrial cluster: not only do they enjoy superior access to materials and components, but they also have a better chance to differentiate their goods and services 3 Michael E. Porter, in The Comparative Advantage of Nations (1990), points out that the more competitive of a country’s industries tend locate in clusters. He uses the term frequently throughout the book. 4 METI initiated an industrial cluster project in FY2001. MEXT began an intellectual cluster development project in FY2002. 5 Some regions, such as Kyoto and Hamamatsu, are regarded as home to developed industrial clusters. Even here, however, efforts are ongoing to support the creation of new businesses and industries. 1 from those of other firms. Clusters provide a favorable environment for innovation, which is a difficult factor to overestimate. Entrepreneurs, meanwhile, benefit greatly from starting up in a region supportive of their needs. It would hardly be surprising to find that regions which are supportive turn out disproportionate numbers of entrepreneurs. Research on industrial clusters took off in earnest in the 1990s, when both national and local government policymakers showed increasing interest in the subject. From the start, there has been some confusion as to what, exactly, is meant by the term ‚industrial cluster,‛ and proponents tend to differ in their definitions. Some, moreover, refer simply to ‚clusters,‛ others to ‚industrial clusters‛ or ‚regional clusters.‛6 Still others, emphasizing the role of clusters in fostering venture business, use the term ‚innovation clusters.‛7 In a similar vein are the ‚industrial district‛ and ‚innovative milieu‛ concepts. 8 ‚Regional innovation systems‛ 9 also have many features in common with industrial clusters. Terms and definitions may vary, but all of these concepts are closely connected with how regional development strategy, national and regional science and technology policy, and innovation policy are designed. ‚Industrial cluster‛ is the term I use in this paper. It refers to a type of regional industrial strategy aimed at achieving sustainable development of the local economy, or, more specifically, ensuring stable employment and maintaining or increasing local exports. Thus I stress the word ‚industrial‛ in ‚industrial cluster.‛ Suitable businesses for an industrial cluster are by no means limited to those in high-tech or even the manufacturing industry. Local measures to promote the tourism industry may result in ‚tourism clusters,‛ for example. Of the many types of industrial 6 METI and MEXT use the term ‚regional cluster‛ in linking the Industrial Cluster Plan with the Intellectual Cluster Creation Project (MEXT Science and Technology Research Center Research Group No. 3 (2004), p. 4). 7 Nishizawa