IDSE-CNR and University of Bologna

The Evolution of Industrial Sectors in Europe

Email address: cainelli@idse.mi.cnr.it

Abstract:
The evolution of an industrial sector at regional level results from the interaction of three different but related levels: a local/territorial level, a national/institutional level, and finally, an international/global one. Since technological differences are assumed to be the prime cause of differences in growth rate of GDP, this aspect is particularly significant in evaluating the role of technological change where several dimensions intervene to shape the innovative performance of firms. We can thus identify a tacit (mainly local) dimension that interacts with a codified (national and international) one, through the mediating role of the national bridging institutions. Therefore, as a result of the complex combinations of these factors, a wide variety in the patterns of sectoral regional development is observed. This obviously results in very different patterns of competitiveness are likely to emerge as result of the different degree with which these three factors overlap. Moreover, the identification of the relevant level at which the processes of industrial development take place is of crucial importance for the definition of the appropriate level at which policy interventions are more effective. In particular, as far as the engine of local industrial agglomeration and growth is concerned, it lies in the different configurations of the economic structure, determining different patterns in the knowledge spillovers (Jaffe, 1989) and the consequent extent of externalities (as measured by indicators of specialisation and/or variety). Thus different patterns of local growth derive from local spillovers which can be either intra or intersectoral, either produced by a competitive or a monopolistic market structure (Glaeser et al., 1992; Henderson et al., 1995; Cainelli and Leoncini, 1999). Obviously the reference is here to the so-called Schumpeter Mark I (Schumpeter, 1934) and II (Schumpeter, 1943). The existence of 'local capabilities' is not however the only engine of growth. On the one side, the international transfer of knowledge (for instance by multinationals) has an increasing influence on the shaping of technology creation. However, home country main characteristics still constitutes a powerful shaping force influencing the main technological directions of national firms (Porter, 1990; Patel and Pavitt, 1997). Therefore, national technological characteristics (e.g. as captured for instance by patenting and R&D activity) and international elements (openness to trade and/or comparative advantages) contribute to further define the conditions for the growth of a regional sector (Fagerberg, 1994). The aim of this paper is to analyse, from an empirical point of view, the evolution of the European regional manufacturing sectors. In particular, using the EUROSTAT Regio dataset and adopting econometric and statistical techniques, an empirical assessment will be made about the role of the former factors in shaping the conditions of local industrial development. In so doing, the role of historical conditions, the eventual trade-off between local and global pressures, and the role of variety and/or specialisation of industrial environments as leading factors in spurring local industrial growth in European regions will be taken into account. The analysis is based on a dataset mainly based upon EU regional data (Nuts2) for the regions of European countries (Belgium, Denmark, Italy, France, Germany, the Netherlands, Spain, United Kingdom) and 9 'Nace Clio' manufacturing sectors (B13-Ferrous and non-ferrous ores and metals, other than radioactive, B15-Non-metallic minerals and mineral prod., B17-Chemical prod., B24-Metal products, machinery, equipment and electrical goods, B28-Transport equipment, B36-Food, beverages, tobacco, B42-Textile and clothing, leather and footwear, B47-Paper and printing prod., B50-Prod. of various industries (branches RR17). All data are from the Regio dataset, apart from those of Germany and UK. In fact, regional accounts and employment data at regional level have been obtained respectively from the Federal Statistisches Bundesamt and from the Official National Statistic Institute (ONS). R&D data are based on the OECD ANBERD database. The econometric specification adopted takes into account the local components as specified in Glaeser et al. (1992) and Henderson et al. (1995), and the national and international components (see, for instance, Fagerberg, 1994). In this way it is possible to deal with the broader elements that jointly contribute to shape the regional socio-economic environment within which firms operate. Regressions are also run for each sector. The specification is as follows: GPRO = f(PRO, SPE, VAR, R&D, SER, POP, TRA) where the dependent variable is the growth rate of labour productivity of a certain sector located in a certain region during the period 1980-1992. The regressors are: PRO is the labour productivity level in 1980; SPE is the level of specialisation as in Glaeser et al. (1992); VAR is variety in the industrial and economic environment surrounding each sector i as obtained in Henderson et al. (1995) by calculating an Herfindahl index of concentration on the other sectors; R&D is the share of national R&D of sector i on value added of the same sector in 1980; SER is market service share of total employment; POP is regional resident population in 1980; and finally TRA is international trade. Some preliminary results highlight several interesting elements, some of which confirm sort of well known stylised facts. Indeed, we observe conditional convergence of labour productivity in EU in the period 1980/92. Furthermore, the interrelatedness of the factors shaping the growth of productivity in the European regions is quite clearly shown by our results. In fact, sectors in EU where productivity grows more are located in ‘small’ regions, and are specialised sectors in a diversified economic environment (industrial structure) with a strong (supporting) service sector. On top of these local factors, R&D at national level and trade related variables have a positive impact on the evolution of these sectors. ** REFERENCES OMITTED -- refer to PDF file.

PDF file of paper: cainelli_abstract.pdf

Session: Empirical Issues in Industrial Organization and Development

Time: Sunday, 8 July, 2:15pm - 3:45pm

Room: F