How can cluster initiatives desg

1. Internationalization and Global Value Chains:
The Agenda for Cluster Initiatives
Dr. Christian H. M. Ketels
Institute for Strategy and Competitiveness
Harvard Business School
President, TCI Network
2nd BSR Stars Cluster Conference
19 September 2014
Berlin, Germany
1 Copyright 2008 © Christian Ketels, Michael E. Porter

2. Cluster Organizations Looking Outside
2 Copyright 2008 © Christian Ketels, Michael E. Porter
INTERNAL
Creating Networks
Launching Joint Actions
EXTERNAL: Other Locations
Technologies
Global Value Chains
Export Markets
EXTERNAL: Other Sectors
Technologies
Emerging Industries

3. Local Buzz and Global Pipelines
Strong internal
cluster dynamics
3 Copyright 2008 © Christian Ketels, Michael E. Porter
2. More attractive
for international
partners
1. Better able to
take advantage of
own capabilities
3. Better able to benefit from
international partnerships

4. Internationalization: The Case for Joint Action
Barriers for internationalization
• Natural barriers through language and distance
• Knowledge barriers through lack of information
• Behavioral barriers through legacy effects and culture
• Policy-induced barriers through funding rules and market differences
• Barriers through differences between private and public benefits
4 Copyright 2008 © Christian Ketels, Michael E. Porter

5. Types of Linkages between Clusters
Joint services
Policy
learning
Cluster participants Cluster participants
5 Copyright 2008 © Christian Ketels, Michael E. Porter
Cluster
initiative
Cluster
initiative
Commercial
collaboration

6. Evolution of Cluster Initiatives’
Internationalization Activities
6 Copyright 2008 © Christian Ketels, Michael E. Porter
Export
Promotion
Policy
Learning
Commercial
Collaboration

7. Some Facts About Internationalization (1)
• Dramatic increase in trade volumes in prior to the global crisis;
significantly lower export growth since then
– Possible drivers include a slowdown in the reduction of trade costs and
barriers
• Trade remains dominated by goods, but service exports are growing much
7 Copyright 2008 © Christian Ketels, Michael E. Porter
faster
• Significant increase in the number of locations engaged in global trade

8. Some Facts About Internationalization (2)
• Trade is dominated by large companies; there is a strong relationship
between MNC presence and exports
– Only China and Germany are outliers, with much higher exports than predicted
given their number of multinational firms (MNCs)
• The growth in global trade has been driven by trade of intermediate goods
within related companies, i.e. international trade between subsidiaries of
an MNC
– Exports and FDI are different options companies face in there internationalization
strategy
– Measures of Value Added incorporated in exports are increasingly used to
analyze bilateral trade balances
8 Copyright 2008 © Christian Ketels, Michael E. Porter

9. Some Facts About Internationalization (3)
• Exports largely take place with neighboring countries
• There is a significant relationship between a country’s stage of economic
development and the profile of its exports
• Exporting is risky; a large number of export attempts to new markets is
discontinued after a short amount of time
9 Copyright 2008 © Christian Ketels, Michael E. Porter

10. Some Facts About Internationalization:
Implications
• Exporting remains a potentially attractive but also risky endeavor
• The market place of locations has become more competitive
• While government agencies tend to separate between export promotion
and FDI, for companies the two are integrally connected
• The needs of companies in terms of internationalization differ significantly
10 Copyright 2008 © Christian Ketels, Michael E. Porter
by their size
Successful internationalization efforts require:
• A cluster with a clear positioning/value proposition in its respective
market
• A cluster initiative with an internationalization strategy that identifies
objectives, target geographies, and services for specific segments of cluster
participants

11. Value Proposition
of your Cluster
• What markets are you serving/competing in?
• What unique value does your location offer?
• What are other locations that you are competing with?
Tools to use for an analysis of your cluster’s positioning
• Five Forces analysis
• Value Chain analysis
• Market segmentation
• Relative cost position
• International cluster mapping tools
11 Copyright 2008 © Christian Ketels, Michael E. Porter

12. An Example: Locations’ Positioning in Footwear
Romania
• Production subsidiaries
of Italian companies
• Focus on lower to
medium price range
China
• OEM Production
• Focus on low cost
segment mainly for the
US market
Vietnam/Indonesia
• OEM Production
• Focus on the low cost
segment mainly for the
European market
Portugal
• Production
• Focus on short-production
runs in the
medium price range
United States
• Design and marketing
• Focus on specific market
segments like sport and
recreational shoes and
boots
• Manufacturing only in
selected lines such as
hand-sewn casual shoes
and boots
Italy
• Design, marketing,
and production of
premium shoes
• Export widely to the
world market
Brazil
• Low to medium quality finished
shoes, inputs, leather tanning
• Shift toward higher quality
products in response to Chinese
price competition
Source: Research by HBS student teams in 2002 – Van Thi Huynh, Evan Lee, Kevin Newman, Nils Ole Oermann
CAMACOL11-02-07 CK 12 Copyright 2007 © Dr. Christian H. M. Ketels

13. Internationalization Strategy
of your Cluster Organization (1)
• What are the objectives of your internationalization activities?
– Open additional markets for your firms
– Strengthen access to critical knowledge or technologies
– Collaborate with other locations to provide an integrate offering
– Attract activities to strengthen your local cluster
– …
Tools to use for a fact-driven definition of objectives
• Performance diagnostics
• Cluster mapping
• …
Critical to engage cluster
initiative stakeholders in
this process; needs to
reflect their needs
13 Copyright 2008 © Christian Ketels, Michael E. Porter

14. Cluster Diagnostics
14 Copyright 2008 © Christian Ketels, Michael E. Porter
Performance
Patterns
Profile of the
Cluster
Quality of Cluster
Participants

15. Internationalization Strategy
of your Clusters Organization (2)
• What services should you offer to whom in order to achieve your
15 Copyright 2008 © Christian Ketels, Michael E. Porter
objectives?
– Needs-based segmentation of your market
• Within the cluster/outside of the cluster
• SMEs/large companies
• …
– Definition of your product/service portfolio
• Information services
• Joint activities
• …
Explore and leverage the
offerings of the EU and
national/regional agencies
supporting trade and FDI

16. Internationalization Strategy
of your Clusters Organization (3)
• Which locations should you target in your activities?
– Identify geographies based on you objectives
– Look for intermediaries, often cluster organizations, in this location
Tools to use for an identification of target locations
• Company interviews
• Mapping of current international linkages of your cluster
• Cluster mapping
• Networks of cluster organizations
• …
16 Copyright 2008 © Christian Ketels, Michael E. Porter

17. Clusters and Cluster Organizations in Europe
Cluster
Collaboration
Platform
www.clustercollaboration.eu
Cluster Observatory:
Organisations
www.clusterobservatory.eu
17 Copyright 2008 © Christian Ketels, Michael E. Porter

18. Clusters and Cluster Organizations in the US
18 Copyright 2008 © Christian Ketels, Michael E. Porter
Clusters
Regions
Organizations
Project Background - Methodology - Data Sources - Partners
Research - Policy Examples - Case Studies - News

19. Cluster Organizations Worldwide
19 Copyright 2008 © Christian Ketels, Michael E. Porter
www.tci-network.org
Cluster Initiative Database
Sector-Specific Networks
of Cluster Organizations:
Aerospace
Chemicals
Clean Tech
Biotechnology
Food
Water
…

20. A Recap
• You need to know your cluster
• You need to have an internationalization strategy
• You are not alone: draw on the partners and tools
available to support you
20 Copyright 2008 © Christian Ketels, Michael E. Porter

21. A Quick Outlook: Relating to other Sectors
21 Copyright 2008 © Christian Ketels, Michael E. Porter
INTERNAL
Creating Networks
Launching Joint Actions
EXTERNAL: Other Locations
Technologies
Global Value Chains
Export Markets
EXTERNAL: Other Sectors
Technologies
Emerging Industries

22. • Innovation is often happening at the intersection of
technologies and industries; some within clusters, some
between them
• Combination with other sectors that are locally strong can
provide a unique competitive advantage for your cluster
22 Copyright 2008 © Christian Ketels, Michael E. Porter

23. An Example: Ten Broad Domains of Emerging Industries
Adv. Logistics
Creative
Economy
Experience
Economy
Downs.
Chem
Biopharma
Adv. Packaging
Med
Dev
Medical
Devices Digital
Mobility
Environ.
Services
Plastics
Upstr.
Metal
Light.
Appl IT
Downst
. metal
Transp.
Autom
Aerosp.
Comm
Bioph.
Oil &
Gas
Prod.
Tech
Touris
m
Perf
Arts
Marke‐tng
Music
Bus
Serv
P&P
Env
Serv
Video
Wood
Prod
Metalw
.
Vulc.
Mat.
Agricult
.
Blue Growth
Elect.
Power
Fishing
Upstr.
Chem
More at the
European Cluster Conference,
Brussels, 20‐21 October