Regional development and clusters

Regional development is a holistic concept that refers to sustainable growth in various domains of interest, such as economic status of the region, social dimension of the region, culture, politics and administration in the region and environment. Regional development is meant to reduce the differences between developed and less developed regions within a state or community. A related international current is evident in the broadening of notions of development regionally and locally beyond its longstanding economic and quantitative focus to encompass sustainable social, cultural, political and environmental dimensions and more qualitative, even subjective, concerns about the quality of life (Pike, 2011).

The fundamental principal around which the process of regional development evolves is the concept of sustainability. The Brundland Commission defined sustainable development as the “ability to make development sustainable—to ensure that [development] meets the needs of the present without compromising the ability of future generations to meet their own needs”. Thus, each growth of a certain dimension should bring long-term advantages and not compromise the future of next generations.

The holistic perspective of regional development is strongly tied to the “3 pillars of sustainability”, concept which states that in order to reach sustainable development, all 3 pillars that hold up its “roof” should be equally considered: economy, society and environment.

The need for a regional development policy in the European Union came with the integration process, especially when including poorer states. The Werner Report in 1971 backed the movement towards economic and monetary union by 1980, and observed that continuous regional disparities within the EU would weaken the achievement of the European Monetary Union. The EU had managed a healthy regional development policy since 1975, relocating funds from the well heeled member states to poorer nations and regions through the EU’s structural funds (Malais and Haegeman, 2009).

Regional development policies have been formerly structured around two axes: infrastructural endowment and top-down industrialization process. These policies, however, did not manage to have a long-term successful effect on regional development and employment. Traditional top-down policies aimed at achieving economic development normally consisted of supply-let policies, focused either on infrastructure provision or on the attraction of industries and foreign direct investment (Pike 2011). A new policy approach had to be considered, and a more holistic perspective had to be taken into account, in order to improve regional competitiveness, and create sustainable growth. The new regional development paradigm is innovation oriented. This strategy starting from bottom-up is based on local activities of different nature. It depends on private actors and cannot be planned but supported by the regional decision-makers (Thierstein and Walser, 1999).

The economic structure that best defends the interests of businesses and fosters innovation, economic growth and competitiveness is represented by clusters. The term became famous with Porter’s “The Competitive Advantage of Nations” article in 1990. He later stated that “A cluster is a geographically proximate group of interconnected companies and associated institutions in a particular field, linked by commonalities and complementarities”(Porter, 1998a). Jacobs and De Long (1996) expand Porter’s classification and presents a more in-depth definition of industry cluster, taking into consideration the geographic and spatial clustering of economic activity, horizontal and vertical relationships between industry sectors, presence of a central actor, firms' cooperation and the role of social interaction.

The growth of the largest clusters has been driven by market demand and entrepreneurial spirit. Some began as large companies that originally located in less populated areas to take advantage of low wages and surplus labor markets and that later disintegrated into smaller firms (Rosenfeld, 2002).

The changing economic conditions suggest that regional economic performance (e.g., the quality of jobs, generation of out-of-region exports, wealth and income generation) is based on a “portfolio” of industries whose competitive position is reinforced by a network of customers and suppliers (Felbinger, 2001). Given the characteristics of clusters defined by authors such as Porter, Krugman or Schumpeter, to name a few, authors have further studied the impact of clusters, mainly industrial, on regional development: McCann and Arita (Industrial clusters and regional development: a transaction-costs perspective on the semiconductor industry, 2004); Asheim, Cooke and von Taylor Francis (Clusters and Regional Development: Critical Reflections and Explorations, 2006); Adams and Wang (Industrial clusters and regional economic development in China: the case of “green” food, 2009) or Isbasoiu (Industrial Clusters and Regional Development. The Case of Timisoara and Montebelluna, 2006).

In order to support innovation and economic growth, the European Commission has recently developed cluster policies, acknowledging clusters as a crucial trigger for regional development. Typically, policies in support of cluster development are not explicitly called “cluster policies” but are part of broader strategies aiming at regional and business development. (EU 2008, as cited in Carlsson and Pikard 2011) The EC created programs aimed at supporting R&D and started new initiatives to help governments and regional institutions to create and develop regional clusters, such as PRO INNO Europe and Europe INNOVA.

Cluster policies can be defined as specific governmental efforts to support clusters (European Communities, 2008). The requirement for specific cluster policies in the EU was defined after the European Regional Development Fund Regulation for 2007-2013 included the support of business networks, public-private partnerships and clusters and the Community Strategy Guidelines on Cohesion recommended the support of clusters for the improvement of knowledge and innovation for growth. According to Europe INNOVA Commission Staff, cluster policies are a vital element of

building strong innovation Systems and reflect where a country or region wishes to position itself in global competition with a mid-term perspective.

In October 2008, the European Commission adopted a Decision on setting up a European Cluster Policy Group with the aim to explore how to better assist Member States in supporting the emergence of more world-class clusters in the EU (ec.europa.eu, 2009). The objectives of the European Cluster Policy Group are: to make recommendations on how to better design cluster policies in the Community; to assess international trends in cluster development; to identify future challenges for cluster policies in response to globalization; to explore tools for the removal of existing barriers to transnational cluster cooperation; to analyse complementarities between the main Community level policies and the financial instruments that support clusters.

Agencies for Cluster Policy Implementation have been established in many states. Germany has 11 such agencies. These engage in programs for the development and implementation of clusters and the achievement of regional development. The main actions that these agencies take in order to implement the regional development strategy is to engage actors, collective services and larger-scale collaborative R&D (OECD 2007 Policy Brief).

Gebhard Kirchgässner came to the following conclusion: competitive markets facilitate too little attraction in regard to ecology and social sustainability (Bruno and Kirchgässner, 2002). The attractiveness to engage in an industry that is also ecologically sustainable should be a new concern for regional development policies. Regional policy must favor the creation of a framework for interaction: a framework in which companies, organizations and public agencies are able to explore joint solutions to problems shared in common, a framework in which, once dialogue has been established, attitudes that are more receptive to the interchange of information and interactive learning are generated (Diez, 2001).

The future success of regional development depends on the support and value share within its related business and should base itself also on current ecological trends. Cluster policies in order to achieve regional development, as well as the analysis of clusters on regional development have been generic, or based on industrial clusters. Industrial clusters have proved to be very beneficial on the economic and social performance of regions, however, in order to achieve sustainability, one has to grant equal importance to the ecological vector of regional development. The type of clusters that would have an equally important effect on the economy, as well as the environment, is the newer “green cluster”, also referred to as ecocluster or cleantech cluster (network of companies that use clean technologies).

4. Ecoclusters

Companies seeking a green growth strategy, innovation and competitive advantage on the long run will be interested in forming green clusters: local networks based on knowledge and value share, active in interconnected businesses, with a sustainable ecological strategy. (Tantau, 2012).The importance of green growth can also be found in “The impact of renewable energy policy on economic growth and employment in the European Union,” a report recently published by the European Commission that concludes that employment and the creation of added value will be achieved in the field of renewable energy on a different level through the installation and implementation of new policies than what was achieved in previous industries (Yoon-Jun, 2010).

Although still an emerging concept, the term Ecocluster is used for some time now, to define all business clusters acting in an ecological field. Another term associated with this context is the Cleantech cluster. Cleantech has a „new technology and related business models that offer competitive returns for investors and customers while providing solutions to global challenges” (cleantech.com, 2011).

According to a preliminary result of a research performed but not yet published by Tantau and Chinie (2012), 73% of the worldwide clusters state that regional development is one of their primary objectives. When asked about their impact on regional development, 40% of the green clusters’ representatives consider that the highest impact of the

network was on economy and ecology.

Only 10% of the green clusters’ representatives considered that their impact on the ecological and social pillars of regional development was low. However, a higher percentage of 20 considered that the economic develoment in the region, after the green cluster was created, was low. This could be explained by the very high costs that clean technologies trigger and the longer period required in some domains of activity, in order to cover the investment.

From an economical point of view, green clusters can support companies to align to the new environmental conditions, beside offering the classic economical advantages of clusters, such as increasing production and efficiency, offering new jobs, etc. One of the most important characteristics of green clusters lies in its strong dependence to innovation. Cooperation in Research and Development raises the efficiency of the R&D programs and leads to the improvement of technology, which ultimately leads to the technological endowment of the region where the cluster is active. Unlike industrial clusters, green clusters do not depend on classic resources, use scarce resources and can be developed in poorer regions.

From a social point of view, green clusters can majorly improve the poverty reduction, as they can be formed in very weak developed regions, where no conventional resources are available. If one would choose to invest in a wind energy park on the Transylvanian Plateau or in Dobrogea, the investment in the latter region would have a far bigger impact on the social dimension as it would have in the former. While the areas in which one could invest in Transylvania are many (IT, Superior education and research, Tourism, Agriculture, Automotive, etc.), the geographical conditions of Dobrogea do not offer many alternatives, and narrow the job fields.

Environmental oriented business networks lead to changing the mentality and culture of the community where they are active. A study conducted by Mintel International Group in 1991 identified the evolution phases of the consumers’ mentality, as a result of the environmental interest:

Green clusters may also help maintain agricultural tradition in rural communities, by investing, supporting and developing measures of diversity in rural economy: it is the case of Croatia, which is mostly a rural country, where the production of bio products and the use of eco-friendly resources is fostered by the United Nations Development Program (UNDP) and Croatian institutes.

A new cultural impact of the green construction industry is created by preserving historical buildings, while using environment-friendly materials and restoring the buildings with energy saving outsolation (the case of green construction in Portsmith, USA). Aside from saving costs by reusing old buildings and reducing the energy consumption, this kind of constructions help preserve the cultural identity of a region like Portsmith.

The environmental dimension is the true winner when a green cluster is formed. Environmental business contributes to reduce the negative effects over the environment by focusing on activities such as:

environmental purification, pollution control, utilization of alternative or organic resources, recycling resources, production of green products, environmental services;, developing and improving green technology.

The analysis of the impact of green clusters should help reshape the public policies for regional development. Taking into consideration the impact of green clusters on the sustainable regional growth, policies should support the creation and evolution of such business structures in poorer regions.

4.

In order to achieve our purpose, we chose to use as a research method, namely the case study. Also, we chose to focus our case study on Austria because Austria is a relative small country divided in nine regions. In order to gather data for this case study we used two instruments: internet (online statistical databases) and a questionnaire. We accessed data from the National Institute of Statistics of Austria (statistik.at) and two online platforms dedicated to clusters: clusterobservatory.eu and ClusterCollaboration.eu. With the help of the two online platforms, we identified the ecoclusters from Austria filtering the information on the following criteria: environment/green technologies, energy and packaging. We identified 6 ecoclusters in 5 different regions.

We conceived a questionnaire that we e-mailed to the management of the identified clusters (the e- mail addresses were taken from the above mentioned online databases) . This questionnaire was constructed using the ‘cluster fact sheet’ model which was an instrument used for the meeting of the European Energy and Environmental Technology Clusters in Brussels, on the 10th of February 2009

(eco.at, 2012). Our cluster fact sheet was adappted to our case study in order to obtain consistent results.

Our cluster questionnaire comprises the following fields: geographic extension of the cluster, the year of foundation, the number of employees at the moment of foundation, funding sources, services offered, the number of member companies, membership fee, type of members, main areas of activity, turnover, current number of employees in ‘green areas’(for more details, see Appendix One).

The geographic extension of the cluster, the population of the region, the number of employees at the foundation and the current number of employees are important elements in the analysis in order to see how these clusters evolved in time. Funding sources and the type of members when analyzed together tell us not only to what extent the Public Administration is involved in the process, but also to what extent the European policies are implemented at cluster level. The type of members tells us in what proportion the public and the private sector contribute to the cluster. The number of members, member fee and the type of companies measure the growth and the influence in the region of the cluster. The turnover and the number of employees activating in ‘green areas’ when compared among cluster will show us the efficiency of cluster’s activity.

5. Case study: the contribution of