Environment and Planning A 2005, volume 37, pages 571 ^ 580
DOI:10.1068/a36273
Guest editorial
The restructuring of old industrial areas in Europe and Asia Since the Industrial Revolution, the cyclical processes of the rise and fall of regional economies have been accelerating. The fall and necessary restructuring of regional economies have obviously had a long tradition in Europe, but are relatively new phenomena in some countries of Asia. Because this restructuring process is a recurring phenomenon, to describe and explain it is an important task for economic geography. However, as will be shown below, modern theoretical concepts in economic geography mainly try to explain the positive sides of geographical clustering of industries. Conversely, little of this literature attempts to explain the negative sides of geographical clustering. This is, to some extent, contrary to older theories on unbalanced regional development that addressed both positive and negative aspects of regional evolution (Hirschman, 1958; Myrdal, 1957). Because the lock-in concept is one of the few promising modern concepts which try to explain the negative sides of clustering (that is, the decline of old industrial areas) it forms the theoretical core of this theme issue. There are two sides of geographical clustering of industries: a positive ...
Much literature in economic geography has been written about the positive sides of geographical clustering industries, such as the work on the rise of new high-tech regions, industrial districts, and regional production clusters in North America and Western Europe (Keeble and Wilkinson, 1999; Storper, 1997). Most authors have tried to come up with explanations for the rise of these regions in order to contribute to regional economic development theories and to learn policy lessons from these success stories for other regions. In the 1980s, for instance, geographers and sociologists launched concepts such as flexible specialisation, (Piore and Sabel, 1984), industrial districts (Pyke and Sengenberger, 1992), and the innovative milieus (Camagni, 1991). Furthermore, some well-known economists have been dealing with the question why internationally successful industries tend to concentrate in a few nations or regions (Enright, 1995; Krugman, 1991; Porter, 1990). More recently, Storper (1997), Morgan (1997), Maskell and Malmberg (1999), Boschma (1997; 2003), Essletzbichler and Winther (1999), and Schamp (2000) have tried to bring together economic geography with the evolutionary school of technological change, which, unlike neoclassical theory, ``takes history and geography seriously by recognizing the importance of place-specific elements and processes to explain broader spatial patterns of technology evolution'' (Essletzbichler and Winther, 1999, page 180). This school regards the mutual relations between innovations, firms, and the political and socio-institutional forces as conditions for an optimal diffusion process and thus for economic growth. Closely related to the evolutionary school are the regional innovation systems concept (Cooke et al, 2004) and the learning region (Morgan, 1997). These explanations share a focus on the origin and development of innovation and the significance of industrial organisation and interfirm linkages for regional competitiveness and regional innovation processes (Malecki, 1997; Schamp, 2000; Sternberg, 1995; To«dtling, 1994). Most of them belong to the recently coined family of territorial innovation models (Moulaert and Sekia, 2003). They increasingly turned from `economic' reasons for growth of new industrial agglomerations to `social' and `cultural' reasons (Amin, 1999; Amin and Thrift, 1994; Cooke and Morgan, 1998; Martin, 1999).
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Advocates of the regulation school have criticised most of the above-mentioned approaches as being technologically and economically deterministic and have tried to place the explanations for regional economic development within a broader social and political context, often at the national level (Kra«tke, 2000). The school emphasises the relationships between production systems and governance systems and between different spatial levels of analysis. ... and a negative side ...
Most of the above-mentioned theoretical concepts and studies assume that geographical concentration of industrial activities positively affects competitiveness. This correlation, however, is not watertight. According to Saxenian (1994, page 161), ``spatial clustering alone does not create mutually beneficial interdependencies. An industrial system may be geographically agglomerated and yet have limited capacity for adaption. This is overwhelmingly a function of organizational structure, not of technology or firm size.'' Therefore, many scholars stress that clustering may also be responsible for the loss of national or regional competitive advantage (Enright, 1995; Glasmeier, 1994; Grabher, 1993; 1994; Hassink, 1997; Porter, 1990; Steiner, 1998). Geographically concentrated clusters can become insular, inward-looking systems, as many old industrial areas, both resource-based monostructural areas, dominated by, for instance, steel, coal mining, and shipbuilding, and areas which specialise in consumer goods (textiles, for instance) (Schamp, 2000), have shown us (Hamm and Wienert, 1989; Ha«uÞermann, 1992; Hudson, 1994; Steiner, 1985). What are the reasons for the failure of some regional production clusters? Grabher (1993, page 256) gives a first broad explanation for the problem, when he states, ``the initial strengths of the industrial districts of the pastötheir industrial atmosphere, highly developed and specialized infrastructure, the close interfirm linkages, and strong political support by regional institutions öturned into stubborn obstacles to innovation'' (the `rigid specialization' trap). There are also more specific failure mechanisms of regional clusters. Some regional production clusters might decline through competition from other clusters (cutlery in Sheffield, for instance, was overtaken by Solingen, and Solingen has been challenged by the `Japanese Solingen', Seki) (Enright, 1995; Hayter and Patchell, 1993). Most authors, however, point to the decrease in competition and domestic rivalry through ossification that might occur in regional production clusters (Enright, 1995; Porter, 1990). If cooperation in regional production clusters is going too far and coordination is allowed to insulate firms from competitive pressures, incentives can become skewed, and the localised industry can lose its vitality (Enright, 1995). Close relationships between firms may eliminate the need for firms to develop certain functional specialties, such as marketing, that are carried out through personal relationships within clusters. Geographically impacted information may prevent firms reacting quickly and effectively to stimulus from outside the cluster. Lock-ins as an explanation for the decline of industrial areas
Grabher (1993) has defined these kind of failures as functional lock-in (hierarchical interfirm relationships) and cognitive lock-in (a common world view that might confuse secular trends with cyclical downturns). The lock-in concept as such was presented earlier by the economists Arthur (1989) and David (1985). Grabher's lock-ins were not only observed in old industrial areas such as the Ruhr Area (Grabher, 1993), but they are also partly responsible for the inflexibility of modern industrial districts, such as Baden-Wu«rttemberg (Braczyk et al, 1996), and in offshore engineering (Isaksen, 2003) and certain defence-industry areas (Hassink, 1999). Closely related to the decreasing competition and dynamism is the possibility of a political lock-in that might arise in a production cluster (Grabher, 1993; Hamm and
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Wienert, 1989; La«pple, 1994; Morgan and Nauwelaers, 1999; Ro«sch, 2000; Wo«Þmann, 2001). Political lock-ins are thick institutional tissues aimed at preserving existing traditional industrial structures and therefore unnecessarily slowing down industrial restructuring and indirectly hampering the development of indigenous potential and creativity. Institutional tissues consist partly of organisations (``formal structures with an explicit purpose''), such as political administrations at all spatial levels, trade unions, large enterprises, and business support agencies, and partly of ``things that pattern behavior'', such as norms, rules, and laws (Edquist, 1997, page 26). With regard to the latter part, there seems to be, therefore, a strong relationship between cognitive lock-ins and political lock-ins. Such a particular and thick institutional tissue can, together with the firms and workers, form a so-called self-sustaining coalition (Grabher, 1993; Hudson, 1994; Kunzmann, 1996). In such a situation, large companies do not want to give up sites for the attraction of inward investment, as they are afraid to lose qualified employees to competitors. Local authorities do not see the point in attracting inward investment or in promoting restructuring in another way, as large tax incomes are paid by traditional industries. In some regional production clusters, the spirit of the Schumpeterian entrepreneur might dwindle because of an increasing industrial concentration and the domination of large companies. The self-sustaining coalition also lobbies for sectoral interventions often at a national or supranational level, which hamper the restructuring process more than they support it, as they remove the incentives to take initiatives for entrepreneurs and thus paralyse competition and tranquillise large industries (Hamm and Wienert, 1989). Morgan and Nauwelaers (1999) stress that in these kind of networks status is privileged over knowledge, power over learning, and the past over the present. Closely related to the concept of political lock-ins is the concept of nonproductive political networks launched by Fu«rst and Schubert (1998) and traditional elites ``that desperately try to hang on to rapidly eroding positions of power'' (Swyngedouw, 2000, page 552). In one way or another, many of the studies on old industrial areas point to the evolutionary terms path dependence and lock-ins, be they functional, cognitive, or political lock-ins or a combination of the three forms of lock-ins as the main internal barriers to industrial restructuring. The line, however, between successful and open regions and old industrialised, insular, inward-looking areas can be very thin (Boschma and Lambooy, 1999; Fromhold-Eisebith, 1995; Grabher, 1993; Hamm and Wienert, 1989; Isaksen, 2003; La«pple, 1994; Maskell and Malmberg, 1999; MeyerStamer, 1998). This is illustrated by Essletzbichler and Winther (1999) when they speak about positive and negative lock-ins and by Fu«rst and Schubert (1998) when they distinguish between productive and nonproductive political networks. As milieus tend to change more slowly than industries, a sclerotic milieu can remain in a region even after the industrial structure to which it belonged has already disappeared. The potentially fast and sudden development of lock-ins and the thinness of the line between `good' and `bad' industrial agglomerations (Hassink, 1997; Saxenian, 1994) show the importance of studying and understanding this phenomenon in economic geography. Maskell and Malmberg (1999) distinguish `good' from `bad' agglomerations by pointing to their ability to `unlearn', which necessitates the removal of formerly significant institutions which act as a hindrance to further development. The learning region can be considered as the only concept that tries to tackle this question. It therefore seems to be most focused on overcoming and avoiding political lockins in old industrial areas (Gertler and Wolfe, 2002; Hassink, 2001; Morgan, 1997; OECD, 2001; Schamp, 2000). By focusing on the learning ability of regional actors the concept might be able to explain why in some regions collective tacit knowledge can turn from a strength into a weakness (path dependence), a feature which has been
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neglected to a large extent by the industrial district, innovative milieus, and production cluster models (Hassink, 1997). Although there is a strong focus on path dependency and lock-ins in the recent learning-region literature, little has been said about how lockins emerge, what factors affect their strength and what exactly distinguishes lock-ins favourable to regional economies from unfavourable ones. Lock-ins and older theories
The concept of lock-ins also has interesting, yet unexplored, relationships with older theories in economic geography and social and economic sciences. First, in the 1980s, there was a large amount of literature in economic geography on industrial restructuring and the spatial divisions of labour (Hudson, 1989; Massey, 1984). Second, the concept bears strong similarities to Olson's (1982) arguments on the negative impact of institutional sclerosis on economic development at the national level (see also Elbaum and Lazonick, 1986; Lorenz, 1994). According to Wo«Þmann (2001), Olson's concept of institutional sclerosis can be well applied at the regional level. At both levels, the emergence of interest groups can stimulate the rent-seeking behaviour of actors. Not only can institutional rigidities hinder economic restructuring at both levels, in a worst-case scenario these rigid institutions at the regional and national level mutually reinforce each other. Third, economic historian Checkland (1976), in his study of shipbuilding in Glasgow until the 1950s, has used the metaphor of the large and shady upas tree to show that a dominating local industry prevents any other new industry from growing beneath it. When the tree/industry dies there is nothing to replace it, which can severely damage the local ecology/economy. Fourth, the concept of sunk costs (costs that are irrevocably committed to a particular use, and are therefore not recoverable in case of exit), which stems from industrial organisation studies, explains why particular regional industrial structures do not change. Sunk costs are strongly related to the emergence of oligopolies, as they operate as an entry barrier for new firms and as an exit barrier for old firms. Although Clark and Wrigley (1995) and Melachroinos and Spence (2001) have recently introduced the concept into economic geography, they focus strongly on the corporate level and neglect to some extent the impact of sunk costs on the regional institutional context. Sunk costs, however, seem to affect to a large extent a whole range of decisionmakers in old industrial areas. Not only may corporate managers continue to fund failing projects in a desperate attempt to turn them profitable, but political decisionmakers may also be inclined to keep alive old plants that have received funding from them in the past, rather than admit to the electorate that they have been subsidising ailing enterprises. Sharp and Salter (1997) show that the cultural context (collective Asian versus individualistic North American) has a strong impact on the willingness of managers to commit themselves to failing projects. Finally, there are interesting links between Hirschman's (1970) theory of exit, voice, and loyalty and the concept of lockins. Hirschman (1970) discusses exit, voice, and loyalty options in terms of consumers who feel that the products of a particular company are degenerating. Although his theory is stated in terms of businesses and the market, he also briefly discusses a further possible application to the dissatisfaction of interest-group members with a group. Hirschman's theory states that, if customers are dissatisfied with a particular product, they have the choice of either complaining to the firm (voice) or simply taking their custom elsewhere (exit). Crucially, the voice and exit options interact with each other and also with a further option, loyalty. Relevant to a decision is the issue of whether there is any available alternative. In a situation where there is no sufficiently similar alternative, as might be the case in many old industrial areas, actors might opt for voice and a lock-in might emerge.
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The theme issue
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Thus, of all modern theories in economic geography, the evolutionary school and the related lock-in concept, and to a lesser extent the regulation school, are useful concepts to understand the negative consequences of path-dependent development and the importance of regions' capabilities to adjust their institutional endowments (`unlearning') (Martin, 1999; Maskell and Malmberg, 1999; Schamp, 2000). The recently developed learning-region strategy aims to improve the latter capabilities. Of the three lock-ins (functional, cognitive, and political), political lock-ins, in particular, seem to be the most crucial concept in understanding the negative sides of clustering, as in traditional industries it is often political decisionmakers which eventually decide about subsidies or closures of plants (McGillivray, 2000). Grabher's lock-in concept has been cited very often (see, for instance, Cooke and Morgan, 1998, page 111; Schamp, 2000, page 139), showing its importance as an explanatory concept for the decline of industrial areas. However, the lock-in concept has some weaknesses we would like to tackle with the help of this theme issue. First, the inductive, bottom-up concept is too weak to be a sound theoretical concept in economic geography yet, as it is mainly based on observations in a few regions (the Ruhr Area mainly) and one kind of traditional industrial complex (steel and coal mining). To some extent, therefore, the lock-in concept seems to belong to what Markusen (1999) has labelled ``fuzzy concepts'', which are characterised by a lack of conceptual clarity, rigour in the presentation of evidence, and clear methodology and by difficulties in operationalisation. Second, no systematic crossregional and cross-sectoral comparative research has been done on the specific role of lock-ins in hindering restructuring processes in old industrial areas. There is a vast range of literature both on the experiences of individual old industrial areas in Western Europe (Baeten et al, 1999; Bo«mer, 2000; Dale, 2002; Hudson, 1994; Kunzmann, 1996; La«pple, 1994; To«dtling and Sedlacek, 1997; van Geuns, 1990; Wood, 1994), Eastern Europe (Grabher and Stark, 1997; Uhlir, 1998; van Zon, 1998), and North America (Florida, 1996; Gertler, 1995), and on comparisons between regions in Europe and North America (Cooke, 1995; Hamm and Wienert, 1989; Ha«uÞermann, 1992; Hayter, 1997; Kunzmann, 1988; see also Schamp, 2000). But there are few studies on experiences in East Asia (exceptions are Edgington, 1999; Lim, 1994; Shapira, 1994). Although scholars have tried to find theoretical explanations for the decline of old industrial areas in Western countries (Boschma, 2003; Boschma and Lambooy, 1999; Hamm and Wienert, 1989; Schamp, 2000; Steiner, 1985), no systematic cross-regional and cross-sectoral comparative research has been done on the specific role of lock-ins in hindering restructuring processes in old industrial areas. Moreover, no comparative studies have been carried out on the restructuring of old industrial areas in Western Europe, Japan, and the first generation of newly industrialising countries (NICs) in East Asia (South Korea, Taiwan, Singapore, and Hong Kong), let alone on the role of lock-ins in explaining differences in the restructuring process between these areas. Because of global shifts of industrial activities from North America and Western Europe to Japan and later on to the first and to the second generation of NICs (such as China, India, Malaysia, the Philippines, and Thailand in Asia) (Dicken, 2003), the problems of restructuring old industrial areas have also shifted over time. Whereas several regions in Northern America, Western Europe, and Japan were hit by industrial restructuring in the 1970s and 1980s, serious problems of industrial restructuring have only begun to emerge in the first generation of NICs since the mid-1990s. In the near future, the problem of restructuring in old industrial areas is likely to increase in these countries, as more and more industrial activities are shifted to neighbouring low-cost countries. Critically applying and testing the Western concept of lock-ins
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in the Asian context will lead to its further development and refinement. Comparing Asian and European research results on lock-ins will contribute to a badly needed stronger involvement of Asian research in mainstream economic geography (Yeung and Lin, 2003). In order to tackle these issues and hence to upgrade lock-ins from being merely an observed pattern towards a sound theoretical concept, an international workshop on the restructuring of old industrial areas in Europe and Asia was held at Bonn University's Department of Geography in Germany on 11 and 12 July 2003. A selection of workshop papers presented in this theme issue provide concrete evidence of various patterns and strengths of lock-in effects appearing in the restructuring process of old industrial regions of Europe and Asia. Ray Hudson proposes concepts of pathcontingent development, instituted behaviour, particularly in terms of cognitive and policy lock-in, and governmentality, which together allow a deep understanding of the processes of regional uneven development and changing position of regions such as the North East of England. Keith Chapman analyses a concrete case-study area, Teesside in northern England, which has been heavily dependent upon a single industry, chemicals. Based on in-depth analysis of several restructuring programmes, he argues that the regional economy became locked in to the fortunes and strategies of an industry group, represented by one company, ICI. Eike W Schamp documents the changing roles of a former footwear production centre, Pirmasens in Germany, in the process of globalising production, marketing, design, and R&D activities. He demonstrates that the fortunes of the region can differ from those of companies by showing that, even if Pirmasens failed to maintain jobs within the region, company owners successfully maintained their businesses by continuing to hold governing authorities with altered locations of production and market segments. Marion Eich-Born and Robert Hassink's paper is the only paper that shows the direct competition that takes place in some traditional industries between industrial regions in Europe and East Asia. Their paper is on the battle between shipbuilding regions in Germany and South Korea. It shows that political lock-ins in shipbuilding are to a very small extent regional phenomena. Instead they emerge at the national and international institutional level, which regulate the conditions of competition to an increasing extent. The restructuring processes of a large Asian textile centre, Singapore, is examined by Leo van Grunsven and Floor Smakman. They articulate differentiated strategies showed by Singaporean textile firms in response to the increasing global competition. They suggest that Singaporean firms are rather successful in minimising lock-in effects. Because of the strong empirical character of the theoretically informed papers and their critical stance on the lock-in concept, this theme issue contributes greatly to an understanding and long overdue broadening of the concept as an explanation for regional industrial decline in several ways. First, it challenges the typology developed by Grabher (1993) and proposes additional types of lock-ins. Related to this point, it stresses the ambivalent (potentially positive and/or negative) and contingent nature of lock-in. Second, it gives insight into the dimensions that affect the strength or weakness of lock-ins, such as the role of the size of firms and of differing industrial structures, the position of firms in the control system (for example, buyer-driven commodity chain), monostructure versus diversified production structures, the role of nonlocal ownership, and the impact of national varieties of capitalism or national business systems, which strongly vary within Europe and Asia (Hall and Soskice, 2001; Whitley, 1999). Third, although lock-ins are related to three levels, that is the industrial, regional, and firm level, it criticises the concept's too strong focus on the regional level. Firms, for instance, may choose to shrink in order to recover, so that lock-ins may turn out to be promising not only for the survival of the firm but also for the industry.
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Local and regional governments are increasingly faced with regulations that stem from supranational organisations and actors involved in lock-ins are increasingly situated at several spatial levels (from local to supranational), cooperating with each other in an interactive way (Hollingsworth and Boyer, 1997). Acknowledgements. The papers in this theme issue were first presented at the international workshop on ``The restructuring of Old Industrial Areas in Europe and Asia'', University of Bonn, Germany, 11 ^ 12 July 2003. We are grateful to four anonymous referees and the participants in the above-mentioned workshop for giving fruitful comments on parts of this guest editorial. We are also grateful to Nigel Thrift, Henry Yeung, and Ros Whitehead for their advice and support in the preparation of the theme issue. Finally, we acknowledge the financial support that was provided by the Asia ^ Europe Foundation/Asia Alliance Grant to organise the workshop.
Robert Hassink University of Duisburg ^ Essen, Institute of Geography, Lotharstrasse 54, D-47048 Duisburg, Germany, e-mail:
[email protected] Dong-Ho Shin Department of Urban and Regional Development, Hannam University, Daejeon, Korea; e-mail:
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