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Clusters and the development of supplier networks for multi national companies

Clusters and the development of supplier networks for multi national companies. Magdolna Sass, Institute of Economics of HAS Miklós Szanyi, Institute for World Economics of HAS. Cluster concept. Aim: enhancing global competitiveness at regional level

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Clusters and the development of supplier networks for multi national companies

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  1. Clusters and the development of supplier networks for multinational companies Magdolna Sass, Institute of Economics of HAS Miklós Szanyi, Institute for World Economics of HAS EACES conference, Moscow, 28-30August, 2008

  2. Cluster concept • Aim: enhancing global competitiveness at regional level • Core: cooperation on various corporate functions (slaes, purchase, training, innovation logistics, marketing…) • Tools: shared use of cluster services, personal and informal contacts, knowledge generation and distribution size increase joint appearance EACES conference, Moscow, 28-30 August, 2008

  3. Cluster features • Regional concentration of activity • Sectoral focus (traded clusters) • Heterogenious structure of participants • Cooperation and competition • Innovation (knowledge generation and sharing) • Critical mass (size, financial independence) • Life cycle EACES conference, Moscow, 28-30 August, 2008

  4. Can a supplier relationship form the basis of a cluster? • Analysis: supplier relations: can be perceived as a lower level cluster, and can be a good basis for clustering • What factors determine the use of local supplies by MNCs? • Basis: extension of UNCTAD (2001) based on company case studies and a survey of 151 companies (Hungarian companies) + a detailed company case study of Electrolux-Lehel (outstandingly high level of local supplies, high level of embeddedness in the local economy, strong ties with suppliers, though no cluster development)

  5. Factorsinfluencing the share of local supplies (in total inputs) • Mode of FDI entry • Sector • Export-oriented versus domestic market oriented • Gap (level of difference) between the „domestic” and „foreign” sector • Age of the investment • Quality of (potential) local suppliers • Nationality of the investor • Global strategies of MNCs • Affiliates’ role in global MNC network EACES conference, Moscow, 28-30 August, 2008

  6. Table 3 Share of local suppliers in privatised companies

  7. Table 4 Share of local supplies for greenfield investments in Hungary * production relocated to China in 2002-3

  8. Table 5 The top ten Hungarian exporters, 2006

  9. Clusters from supplier networks? • Privatization vs. greenfield: not highly relevant (clustering is new phenomenon) • Sectoral affiliation (traded clusters) most globalized (mobile) industries • Participation most likely who paid attention to supplier network development (until now little MNC involvement) • Unprepared local participants (lack of trust, short term horizon) • Clustering is more complex and difficult issue • MNCs’ involvement over time: proof of benefits of clustering • Eminent role of social capital building, role of potent cluster management EACES conference, Moscow, 28-30 August, 2008

  10. Thank you for your attention!

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