The Swedish Automotive Cluster - How will it be affected by foreign acquisitions at the end of the value chain? Master’s Thesis in Business Administration, MBA programme By: Helena Sundqvist Supervisor: Urban Ljungquist 2011-01-24 Abstract In this master thesis it is analyzed how the Swedish automotive cluster will be affected by foreign acquisitions at the end of the value chain. This is a relevant topic as the Swedish automotive industry is a very important industry in Sweden. It is of interest to evaluate how the recent shifts of ownership for the Swedish automotive manufacturers will affect the Swedish automotive cluster as a whole. It is also relevant from a theoretical point of view and this thesis draws on the extensive knowledge about agglomeration and industry clusters. Further, it also exploits the national competitive advantages and selected disadvantages that can affect a national industry cluster. Based on relevant theories, a research model is selected which combines Sweden’s competitive advantages, the Swedish automotive cluster’s dynamism and its development stage into a framework which allows for conclusions about how foreign acquisitions are likely to affect the Swedish automotive cluster. By applying the research model it is shown that the Swedish automotive cluster is a dynamic and mature cluster and that this indicates that the affects of foreign ownership is believed to be positive. The foreign investments show that the Swedish automotive cluster is an attractive cluster that foreign companies want to tap into or invest in. Risks with foreign ownership in industry clusters are also pointed out based on a case study of the Swedish pharmaceutical cluster. The thesis research is mainly based on a phenomenological philosophy and the research purpose is mainly exploratory although some parts are descriptive and explanatory. The method used is qualitative but some quantitative data is used to support relevant findings. 2 Table of contents 1 Introduction ........................................................................................................................ 7 1.1 Background ............................................................................................................................ 7 1.2 Theoretical focus .................................................................................................................... 7 1.3 Problem formulation .............................................................................................................. 9 1.4 Purpose ................................................................................................................................... 9 1.5 Limitations ........................................................................................................................... 10 1.6 Thesis outlay ........................................................................................................................ 10 2 Methodology .................................................................................................................... 11 2.1 Defining the research question ............................................................................................. 11 2.2 Type of research purpose ..................................................................................................... 11 2.3 Research philosophy ............................................................................................................ 12 2.4 Deductive or inductive approach ......................................................................................... 13 2.5 Research methods ................................................................................................................ 14 2.6 Literature review and data collection ................................................................................... 15 2.7 Case studies .......................................................................................................................... 16 2.8 Selected methodology for the analysis ................................................................................. 16 2.9 Reliability and validity ......................................................................................................... 17 3 Theoretical framework ..................................................................................................... 19 3.1 The value chain and the value system .................................................................................. 19 3.2 A nation’s competitiveness .................................................................................................. 21 3.2.1 Factor conditions ............................................................................................................. 21 3.2.2 Demand conditions .......................................................................................................... 22 3.2.3 Related and supporting industries .................................................................................... 22 3.2.4 Firm strategy, structure and rivalry ................................................................................. 22 3.3 Industry clusters and their importance ................................................................................. 23 3.3.1 Critical factors for successful cluster development ......................................................... 26 3.3.2 Failure modes of regional clusters ................................................................................... 26 3.4 Foreign ownership in industry clusters ................................................................................ 26 3.5 Summary of theories used for the analysis .......................................................................... 29 4 Empirical findings ............................................................................................................ 31 4.1 Sweden’s national diamond ................................................................................................. 31 4.1.1 Swedish factor conditions ................................................................................................ 31 4.1.2 Swedish demand conditions ............................................................................................ 31 4.1.3 Related and supporting industries .................................................................................... 32 4.1.4 Firm strategy, structure and rivalry ................................................................................. 32 4.2 Foreign investments in Sweden ........................................................................................... 33 4.3 The automotive manufacturers in Sweden and their history ................................................ 33 4.3.1 The Volvo Group ............................................................................................................. 34 4.3.2 Volvo Cars ....................................................................................................................... 35 4.3.3 The history of Volvo in brief ........................................................................................... 35 4.3.4 Scania .............................................................................................................................. 36 4.3.5 The history of Scania in brief .......................................................................................... 36 4.3.6 Saab ................................................................................................................................. 37 4.3.7 The history of Saab in brief ............................................................................................. 37 4.4 The Swedish automotive cluster .......................................................................................... 37 4.5 Comparison with another important industry cluster in Sweden ......................................... 40 4.5.1 The Swedish pharmaceutical/healthcare cluster .............................................................. 40 3 4.5.2 Astra in brief .................................................................................................................... 42 4.5.3 Pharmacia in brief ............................................................................................................ 42 5 Analysis ............................................................................................................................ 43 5.1 Diamond analysis ................................................................................................................. 43 5.2 The dynamism of the Swedish automotive cluster .............................................................. 46 5.3 The development stage of the Swedish automotive cluster ................................................. 49 5.4 The effects of foreign ownership ......................................................................................... 50 5.5 Lessons learned from the Swedish pharmaceutical cluster .................................................. 51 6 Conclusions ...................................................................................................................... 52 7 References ........................................................................................................................ 54 8 Appendices ......................................................................................................................