Book Review (Tsuji et al. 2007)

Image of the cover of Industrial Agglomeration and New Technologies. A Global Perspective

Industrial Agglomeration and New Technologies. A Global Perspective

Masatsugu Tsuji, Emanuele Giovannetti, Mitsuhiro Kagami (Editors)

Edward Elgar: Cheltenham (2007), 383 pages, Hardcover (£95), ISBN: 9781845423964.

Reviewed by Silvia Grandi, Faculty of Economics in Rimini, University of Bologna and RCEA.

(10 February 2009)

Targeting both policy-makers, business leaders, and economic theorists, this book aims at presenting the themes the authors consider inseparably tied to the clustering phenomenon: multinational corporations and their supply chains; the role of governments in creating infrastructures, regional specialisation in response to global competition; and the role of R&D in innovation. Rather than offer a unified theory of agglomeration, the book is an interesting collection of anecdotal evidence (from which readers learn by examples and comparisons) and can then attempt to generalise and extract theoretical rules.

After a short introduction by the editors, the book presents a collection of twelve papers that analyse significant examples of industrial agglomerations found in selected world regions. Geographically, the book covers Asia, Europe (actually only Italy), and the Americas and these are its main partitions of the volume.  Despite its global perspective in which several well known case studies are reported, this choice reveals too openly that the book is a result of an international research team, composed of Japanese, Italian and U.S. scholars. The inclusion of a selection of case studies in other areas where agglomeration experiences are well known (i.e. India, Argentina, Brazil, North Africa, the Middle-East, and in Europe, Spain and Eastern EU countries) could add more breadth to the book. More comprehensive is the longitudinal reading of the typologies of examples according both to the sectoral and lifecycle stages of the industry, starting from more mature and traditional industries (i.e. the case of automobile and parts in Nishi-Mikawa, iron town cluster of Yawata, the footware industry of the Riviera del Brenta, the ceramic tile industry district of Sassuolo) to the new technologies industrial agglomerations (software and IT in Korea, the Biomedical district of Mirandola, software in Mexico City, in  Monterray, in Jalisco and in Aguascalientes). Another strength of the book is the variety of methodological approaches used by each author in their empirical analyses. These span from historically and descriptive to the application of more quantitative econometric modelling methodologies, all characterising the current state of research in the field of agglomeration and clusters.

A few essays employ a broader perspective and are less territorially oriented, either because they focus on industrial agglomeration analysis at the national level (Japan, China, US) or they discuss new technologies and their relationship with agglomeration. The first six chapters are dedicated to agglomeration in Asia. In particular, chapter two, by Masatsogu Tsuji, analyses agglomeration along the supply chain, addressing a case of hierarchical production structure in the car industry. In particular, it investigates the relationship between Toyota and its part-suppliers, bringing into focus the effects of introducing IT and the Just-in-time system, the Realtime purchasing system, and concurrent engineering. Chapter three, by Mitsuhiro Kagami, addresses the relationship of agglomeration and locations led by firms with an historical and lifecycle perspective. It considers the case of the heavy industry of the iron town cluster of Yawata. Chapter four, by Takuo Imagawa, does not focus substantially on a territorial case study, but instead utilizes an empirical approach to investigate the effect of  IT and growth, especially with regard to the phenomena of spill-over, urbanisation, and de-centralisation. Chapter five, by Akifumi Kuchiki, presents an analysis of the Vietnamese experience. It focuses on the role of Industrial Zones (IZ), especially those of Haiphong, together with infrastructure and the presence of public or public-private agents, in agglomerating firms and the enhancement of aggregate growth. This is done with a theoretical macroeconomic model, based on IZ functions as quasi-public goods to attract FDI as well as analysing the role of agents. In particular, for Vietnam, agents have been Japanese trading corporations, that have encouraged investment by Japanese manufacturing firms in certain areas, as well as governmental promotion agencies and other companies established in IZs. Chapter six, by Yasushi Ueki, contains empirical evidence of growth and agglomeration of some knowledge-intensive sectors such as IT, R&D, and education in Korea. The last chapter (seven), by Koichiro Kimura, is dedicated to Asia and examines regional industrial disparity using data and personal interviews. It relies heavily on spatial economics, especially à la Krugman (1991) with particular reference to Eastern areas and the rest of China.

The second part of the book is a collection of four chapters written by Italian scholars using different approaches. In chapter eight, Luca De Benedictis uses the Balassa index of revealed comparative advantage to analyse the structure of Italian exports and its change over time, with non parametric statistical techniques. According to his results and theoretical explanation, the persistence of comparative advantage observed is related to the presence of industrial districts (Beccattini, 1987). In the chapter that follows, Roberta Rabellotti explains the impact of globalisation on Italian industrial districts by attempting to integrate the local development analysis and the global value chain approach. As a case study, she analyses the Brenta footwear  district – located in the  Veneto region. In Chapter ten, Enrico Santarelli focuses on competitive advantages, and utilizes a territorial approach. The Emilia-Romagna region is particularly important in his study considering the relationship between technological change and innovation and industrial districts. Firstly, he describes two case studies: the biomedical district of Mirandola and the Ceramic tile one of Sassuolo. Secondly, he proposes an econometric panel model based on EPO patent data of firms located within and outside the industrial districts. He demonstrates that in the second half of the 1990s the competitive advantage with regard to technology has been less strong for firms located in industrial districts than before. The last chapter of the second part, co-authored by Giovannetti, Neuhoff and Spagnolo, involves an interesting discussion dedicated to the role of Internet and the loss of significance of distance in agglomeration phenomena, indeed a challenging recent element in agglomeration studies that still has not received enough attention. This paper starts with a rich introductory part which provides food for thought on time-space consideration in agglomeration. Then, the focus shifts to the agglomeration in the cyberspace especially analysing the effects of the geographical location of Internet Service Providers (ISPs) in their peering decision. An exploratory empirical analysis of the peering decision of an Italian ISP, the Milan Internet Exchange, is done to evaluate the strength of agglomerating forces on peering. The results of this study confirm that even in one of the most technological advanced cluster of firms, spatial agglomeration still plays a positive role.

The third part of the book is dedicated to the Americas. Chapter twelve, by Andrew Schrank, addresses the software industry agglomeration patterns in North America and the role of off-shore outsourcing and human capital, especially of those international scientist migrants, in creating centripetal-centrifugal forces. Issues raised are analysed via exploring the North American software imports with a multivariate regression. Clemente Ruiz Duran discusses the Mexican software industry in chapter 13, in which an extensive description of the phenomena is given from an historical point of view, as well as its relation with the U.S. within the NAFTA agreement.

Finally, the book’s editors have provided a concise, clear, and effective concluding chapter. This is a summary of shared evidence presented in previous chapters: four typologies of industrial agglomeration are sets based on their main clustering features (i.e. local product districts, industrial castle-towns, urban-processing clusters and governmental supported parks and estates). Shared features acknowledged are strong externalities, increasing return to scales, minimisation of transport and communication costs, knowledge and spill-over dynamics, stable demand of their products and the positive role of governments, especially as far as SME policies. Finally, the major challenges in advanced economies and in developing countries are summed up. The first clusters are catching up by developing economies, globalisation and deregulation. This results in Multinational Corporation penetration and relocation, as well as an IT revolution that tends to lead to a world without distance. These are the most important challenges, which have already led to strong modifications and significant changes in most of the clusters taken as case studies in this book. The major challenge of induced agglomeration for growth in developing countries is the substantial creation of regional inequalities and unbalances.

In conclusion, the book makes for interesting reading, both from the point of view of case studies and in terms of empirical methodological applications. However, I would have liked to find more references to classic economic models (i.e. Weber, Christaller, Perroux, etc.) that often are, or at least partially, applicable. These references could have been used to substantiate the original elements of the findings versus established literature. Some crucial questions that would have been a significant advance in the research are only slightly or partially analysed, and are recognized by the co-editors as areas for further research. Such questions include: why does agglomeration occur in a given location and not in others? How do growth and location affect each other? And does regional discrepancies tend to widen or narrow over time?

References

Beccattini G., 1987, Il mercato e le forze locali: il distretto industriale, Bologna, Italy, Il Mulino.

Krugman P., 1991, Geography and Trade, Cambridge, USA, MIT Press.

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