Transformation of clusters – New modes of collaboration within the maritime industry

1. Transformation of clusters – New modes of collaboration within the maritime industry Ove Bjarnar Presentation of SOL group project in the Research Council of Norway 27th of October 2010

2. Structure of the presentation • The project • The observation • The general research questions • The analytical levels • The conceptual framework • Global capitalism as organised capitalism • Knowledge economy and asset augmenting strategies • The concept of true cluster formation • Clusters as social constructions and geographical concentration of economic activity • Research strategies • The character of clusters • The character of global pipelines • The character of embeddedness • The character of value chains • The transformation perspective

3. The Project • Marco – • Developing new knowledge within the maritime program in the Research Council of Norway (Maroff) • Academic partners • The Norwegian school of Management (NSM or BI) and • MøreforskingMolde/Molde University College • Business partners • Jets • Koppernæs group • Ulstein group

4. Observation • Central actors in the maritime industry are increasing their international presence • STX Europe (Former Aker Yards) owns shipyards in France, Romania, Ukraine and Vietnam • Ulstein Group has subsidiaries in Brazil, Slovakia, Poland, Netherlands, Turkey and China • The focus has shifted towards design and engineering, whereas ship building is increasingly outsourced to partner yards in e.g. in Poland, Ukraine, Dubai, Brazil, Spain and China • We also observe increasing inward foreign direct investment as foreign firms acquire or merge with local firms

5. observation • Most firms will use a mix of ownership and alliances when they enter into foreign locations. These relations act as conduits for new knowledge, products, services and business models (Semlinger, 2008) • As more activities are moved out of the cluster, the governance and management of these alliances over time become critical for the survival and success of the firm (Lunnan & Haugland, 2008) • As firms that are a part of a cluster orient themselves externally towards firms in other clusters, we need to know how this affects the development and competitiveness of the cluster itself • A competitive strength for Norwegian Maritime firms has been their innovation abilities. When activities gradually become global, how do firms manage interfaces between activities and what happens with innovation?

6. General research questions… • Develop knowledge on the role of the educational system as provider of relevant knowledge for the maritime cluster (WP1) • Develop knowledge on how the maritime cluster can absorb knowledge acquired through globalization (WP1) • Develop knowledge about how to manage the interfaces between an alliance and other alliance relations and the respective “home” organizations (WP 2) • Develop theoretical frameworks that facilitate firms’ innovation efforts in connecting actors, technologies and ideas that require joint efforts of several parties (WP3) • Examine how local production models affect the management of interdependencies in globally distributed production networks (WP3)

7. Analytical levels • Cluster level: • How is the maritime cluster able to combine and integrate locally embedded knowledge with knowledge derived from international operations and from products and services developed abroad? • Firm level: • How does the firm deal with international alliances? • Activity level: • How do innovations arise in collaboration? How do new innovations come about? What happens to the regional production model when moving from co-located to global value chains?

8. Framework • Global capitalism is an organised capitalism • The number of networks and alliances has soared over the last two decades (Claes et al 2005, Dunning 2000, Birkinshaw 2000, Enright 2000) • FDI has rapidly grown into an asset augmenting mode of operation (Dunning 2000) • Especially targeting the creation of new knowledge in collaborative ventures – knowledge as heterogeneous capital (Dunning 2000, Powell and Grodal 2005) • Innovation pressure fosters hybrid organisations as actors struggle to synthesise highly specialised but also fragmented knowledge through systemic relations (Narula and Zanefi 2005, Lam 2005, Powell and Grodal 2005) • Geographical concentration of economic activity is a prominent expression of the global knowledge centred economy (Amin and Thrift 1994, Porter 1998, Belussi and Samarra 2010) • Tapping into and transferring tacit knowledge inside and between organisations is increasingly becoming a competitive advantage (Dunning 2000, Bathelt et al 2004, Rugman and Verbeke 2001) • Global capitalism rests on organisational mechanisms developed to handle processes for which there are no market mechanisms (Granovetter 1985) • FDI increasingly channelled into clusters, implying that actors seek to tap into clusters as social constructions – not primarily as agglomerations (examples like Italy and Norway) (Belussi and Sedita 2010)

9. Framework… • Global actors are targeting areas of ”true cluster formations” (Malmberg and Power 2006) • Processes of spatial agglomeration • Networking processes • Processes of representation and metamanagement – how the cluster is performed • Cluster firms interwoven in global production networks and value chains at different geographical levels (Gereffi et al 2005) • Globalization through interaction with incoming actors – territorially anchored processes are socially stretched towards global hierarchies or networks (Amdam, Bjarnar and Lervik 2009) • Globalization through setting up foreign operations (subsidiaries, JV’s, alliances) by indigenous firms • Cluster development linked to the character of the cluster, to global pipelines, to the character of embeddedness of firms and to integration into value chains

10. Character of clusters • The character of the cluster. Clusters may differ according to dynamism (Birkinshaw, 2000), economic development (Gupta & Govindarajan, 2000; Kim & Zhang, 2008; Meyer, 2004), or the age of the clusters (De Propris & Driffield, 2006) • According to (De Propris & Driffield, 2006) well established and strong clusters absorb transferred knowledge better than new ones. To study the importance of the character of the cluster we want especially to focus on qualitative and quantitative aspects of the labour force with the maritime cluster like: • Does the educational system fit to this concrete cluster and thereby provide the cluster with relevant qualification to meet both domestic developments and internationalisation? How does the cluster deal with demographic changes that affect the labour force in the region?

11. Global pipelines • Global pipelines. When a firm that is strongly embedded in a cluster internationalises, the firm acts as an external linkage for knowledge transfer (Hervás-Oliver & Albors-Garrigós, 2008). The MNC represents the main linkage, or global pipeline (Bathelt, Malmberg, & Maskell, 2004) between the international knowledge sources and the cluster in the home country (Cooke, 2005) • Pipelines are established between the local firm and e.g. a foreign firm that the local firm has acquired. If the local firm keeps this knowledge to itself, the pipeline is closed. If the firm absorbs knowledge so that it is shared with other actors in the cluster, it is open • How is experiences from foreign operation (e.g. ship building in Rumania or other localities) transferred back to Norway? Is the knowledge shared by the cluster actors (open pipelines) or not (closed)? How is the knowledge of the migrants (i.e. people from the Baltic states who work in the cluster for a shorter or longer period) assimilated by the cluster?

12. Character of embeddedness • Local embeddedness. Foreign subsidiaries may tap into knowledge bases in foreign market (Bartlett & Ghoshal, 1989; Birkinshaw & Hood, 1998). The concept embeddedness has been introduced to capture firms’ connectedness with the local knowledge base (Dacin, Ventresca, & Beal, 1999). Implies adaptation of processes, routines and practices. Accordingly, learning from actors to which subsidiaries are embedded is expressed in the creation of new or changes of existing practices • We assume that when firms invest in foreign areas where relevant competences are high (like Shanghai or Singapore), and they are locally embedded in these areas, this represents a new knowledge source that may strengthen the local cluster if knowledge is transferred back. On the other hand, such foreign regions may also act as a driver to move headquarter-function out of the cluster • To what extent do foreign investments in area with high relevant competence act as a resource for strengthening the cluster or for moving out of the cluster?

13. Character of value chains • A PhD-project at the Molde University College will be integrated into WP1. • The project will follow the development of selected supply chains in the cluster, and study the changes in governance structures in the cluster over the last 30 years. • The project seeks to identify which historical events that have led to these changes; technological, market and/or institutional. • A part of the project will focus on the present transformation of the supply chains in the cluster; which impact have globalization had on the relations in the supply chains? • Dag Magne Berge will be responsible for topic 1; Ove Bjarnar for topic 2; Rolv Petter Amdam for topic 3 and Lise Halse will be associated with this work package.

14. The transformation perspective • Globalization is something beyond internationalisation • The connections between the global knowledge economy and clusters as social constructions and performed entities should be conceived of as forms of transformations of clusters • Conceptualising both path dependencies and current transformation is essential to the understanding of the effect of globalization on cluster dynamics and on business strategies • Examples: • Cluster based firms benefit under certain conditions from being actors in global value chains – positive feed back on the cluster reconfiguration (Belussi and Samarra 2010) • Cluster based firms may loose momentum when engaged in global chains under certain conditions – like when they loose control over design functions- and competence and are hindered from developing specialised R&D competencies (Belussi and Samarra 2010) • Networks are transformed as actors strive to transfer both tacit and formal knowledge across vast geographical, cultural or institutional settings - recent literature focus on professional communities of practice or pipelines (PoC’s) • Also transformed in terms of processes of decision and legitimization – for example • Equipment suppliers: shall we stay regional or follow our clients abroad? • Do global networks foster modularisations and predefined and low end stylish design models? How would it be affecting the cluster competence base? • Will increasing attachment to foreign clusters (like Singapore) and its competence base act as a pull factor to move key functions or operations out of the cluster? • How can vital knowledge be stored and transferred across multiple and shifting projects and alliances?