Building Regional Innovation Systems: Is Endogenous Industrial Development Possible in the Global Economy?

Globalisation: A Challenge for Local Industrial Policy Economic globalisation refers to the shift of the world economy towards an increasingly supranational functional integration co-ordinated by transnational corporations (TNCs) (Dicken et al 1997). In those sectors where these tendencies are strongest (such as the automotive industry and electronics), globalisation has led to a steadily increased influence of TNCs over national industries. In part, this takes place through corporations establishing or buying firms in different areas of the world, and in part through the linking of formally independent companies to TNCs as subcontractors and suppliers. In this way large numbers of firms are linked together in networks that are directly or indirectly co-ordinated by the headquarters of TNCs. The expressed or implied message of many contemporary analyses of globalisation is that the balance of power in the economy is tipped in favour of TNCs at the expense of nations and regions, as more and more firms and regional production systems are incorporated in global commodity chains (Storper 1997). Decisions on, amongst other things, downsizing, closure and relocation of firms, are taken directly (for plants owned by TNCs) and indirectly (for suppliers) in remote headquarters and not by local entrepreneurs. Thus, as firms are tied into evolving international organisation structures, the continual reorganisation of global firms has the capacity to dramatically reshape the fortunes of regional economies. This is further emphasised by the fact that economic activity is perceived as increasingly placeless and de-territorial ised. The potential of endogenous growth based on regional resources and trust-based local relations is then seen to be threatened by the globalisation tendencies. This article aims to analyse some of the possibilities and barriers that local communities face in promoting endogenous industrial development in an increasingly globalised economy. The analysis is based on the view that regionalisation is an important aspect of the globalisation trend and, therefore, a crucial economic trend in the international economy. In the second section, some theoretical issues are introduced and some policy background and dilemmas set out. In the third section, a description is given of the 1997 decision by the large transnational corporation, Ericsson, to move one of its development departments from a small Norwegian town to the Oslo region. The reversal of this decision caused by strong opposition from employees and the local area in general is then analysed. This example illustrates some threats that globalisation trends exert on the local economic development potential, as well as opportunities for economic development which it can create in certain areas. Finally, in the concludi ng section, the discussion departs from the 'Ericsson case' and discusses, from the perspective of regional innovation systems, development policies aimed at embedding units of TNC in local areas. The section also discusses how the case study may advance our understanding of the interplay of globalisation and regional dynamics. Regionalisation as an Aspect of Economic Globalisation Regionalisation is increasingly seen as one important aspect of the globalisation trend. Regionalisation refers to economic activity dependent on resources that are specific to individual places (Storper 1997). The principal empirical sign of the trend towards regionalisation is the apparent growth in importance of regional clusters and innovation systems over the last decades. Since the 1970s different types of regional cluster have established a strong position in world markets for both traditional products (e.g. Third Italy) and high technology products (e.g. Silicon Valley). This has led leading researchers and policy makers to observe that 'today's economic map of the world is dominated by (.) clusters: critical masses -- in one place -- of unusual competitive success in particular field' (Porter 1998: 78). …