Voices from the North

New Trends in Nordic Human Geography

Jan Ohman, Jan Öhman, Kirsten Simonsen

• Publisher: Routledge
• Year: 2018
• Print ISBN: 9781138416093
• eBook ISBN: 9781351875530
• Edition: 1
• Topic: Physical Sciences
• Subtopic: Geography
• Index: Geography

While contemporary human geography has widely acknowledged that knowledge has both contingent and contextual character, international literature has tended to blot out differences and reproduce hegemonic Anglo-Saxon discourses. Any interest in destabilizing such power-knowledge systems calls upon interventions from other voices. Nordic voices in particular have not been well represented in current human geography. This book redresses the balance by offering a unique assessment of the geographical research being undertaken in the Nordic countries and by demonstrating the way in which these voices contribute to international debate. It brings together a range of Nordic authors, each of whom has made a significant contribution to such debates, and considers the relationship between production and social institutions in local development. It also examines the ambiguous role of the welfare state in the Nordic countries, issues of social practice and identity and their relationship to spatiality, new approaches to landscape and environment, and the significance of difference and relations of power. Theoretical discussion, illustrated by empirical examples, reveals the interweaving in Nordic human geography of international affiliations and Nordic situatedness.

Part I
Production, Social Institutions and Local Development

Chapter 1
Localised capabilities and industrial competitiveness

Anders Malmberg and Peter Maskell

Since the early 1970s, it has become increasingly recognised that the geographical location of economic activity cannot be properly understood in isolation from its wider socio-economic and technological context, and thus that we cannot understand spatial economic change without linking it to the overall processes of transformation of capitalist production systems, institutions and markets (Massey 1979, Maskell 1986),

Within this broader contextualisation of economic geography, the practice of the sub-discipline has changed substantially over the last few decades, in the Nordic countries and beyond. While the late 1970s and most of the 1980s saw economic geographers being preoccupied with problems related to deindustrialisation and restructuring of traditional industrial core regions, the 1990s has seen a marked turn towards the study of the role of knowledge in creating and sustaining industrial competitiveness, and the role of location in the process of learning.

The advantages of being in the right type of local milieu in general and the benefits of spatial proximity between actors involved in business interaction have been held to explain differences in the innovative performance of firms and industries (Asheim 1992, Feldman and Florida 1994, Saxenian 1994, Morgan 1997, Cooke 1995, Maskell et al. 1998), the existence of industry agglomeration (Lung et al. 1996) as well as the durability of patterns of regional specialisation (Malmberg and Maskell 1997).

In this paper we focus on the impact of geographical location on the ability of firms to create and sustain competitiveness in an era of increased economic globalisation. The paper addresses a series of questions related to industrial competitiveness on the one hand, and the development of regional and national economies on the other. Thus, the discussion will revolve around three inter-related questions:

• What is competition about in today's economy, and how is the performance of firms and industries related to space and place?
• Why do geographical areas (local milieus, cities, regions, and countries) specialise in particular types of economic activity, and why are patterns of specialisation once in place, so durable?
• How can firms in high-cost regions sustain competitiveness and prosperity in an increasingly globally integrated world economy?

In short, the view of the (economic) world that has come to underpin recent analyses of these issues may be summarised in six points (cf. Malmberg 2000):

• Ability to learn and innovate is more important than cost advantage
• Innovation is not just high-tech
• Innovations emerge through interaction within systems of interrelated economic activity
• Spatial proximity matters in such interactions
• Industrial systems are locally embedded
• Local knowledge is more important than natural resources.

In this paper, we will elaborate on some of these issues. In doing so, we will take our point of departure in a competence-based view of the firm, before addressing how localised capabilities play a role in the process by which firms, and systems of firms, develop and retain knowledge, innovation and competitiveness.

The Nordic context

The development of the discipline of economic geography in the Nordic countries can in part be understood as a result of some specific characteristics of the Nordic setting: the small size, general openness, industry structure and relatively high levels of prosperity of the economies of Denmark, Finland, Iceland, Norway and Sweden. At the outset of the paper, therefore, we will briefly discuss some distinguishing features of small, industrialised countries in general, and the Nordic countries in particular.

Small economies differ from larger economies in several ways (Grossman and Helpman 1991). It is to be expected that the size of the regional or national economy exerts some influence on its degree of openness. A country encompassing the globe would be fully self-sufficient in all meaningful aspects of the word. And the reverse is equally true: the smaller the country, the more it will have to depend on the others. Thus, small economies are, as a rule, open economies.

It is therefore not surprising that most small developed countries long ago started actively to advocate the adoption of a non-tariff, non-barrier world trade system (Balassa 1965, OECD 1995). Initially their main motive was presumably to acquire the needed inputs and to secure market access for their products. Subsequently the opening of the economy was found also to be a prerequisite for obtaining economies of scale in the production of goods and intangibles such as knowledge (Archibugi and Michie 1995); for curbing domestic monopolies; for enabling additional product differentiation and for ensuring the continuous international exposure to enhance the overall industrial competitiveness. Furthermore, the small countries' lack of political or military power to imitate or impede any US-style 'voluntary import restraints', when emerging competitors threaten domestic producers (Brander and Spencer 1983), does point towards the same conclusion. Protectionism is simply not a viable option for small, industrialised countries.

In his influential analysis Katzenstein (1985) links the small size of the national economy to a certain inclination towards a policy of free trade and openness, and a strong affinity towards corporatism resulting from a general perception of common fate and the spread of common fears. Additionally, he detects in the small countries a penchant for neutrality; a weakness of the political right (see also Amin and Thomas 1996); a dependence on foreign capital to supplement internal savings, and a tenor of domestic political stability induced by the need to secure access to export markets. As a response to their position in the international economy small countries have developed specific institutions - e.g. for rapid exchange-rate adjustments, etc. - to maintain competitiveness in key industries and mechanisms to compensate domestic losers when readjustment becomes necessary by imported disruptions, etc. (Korkman 1992, Maskell 1997).

The degree of openness of the economy of differently sized countries - size here refers simply to the magnitude of the national economy, measured e.g. as gross domestic product - can easily be demonstrated empirically (see Maskell et al. 1998 for data). Thus, foreign trade is more than twice as important for the group of medium-size countries (like Germany, France, Italy, the UK) than for the large ones (the US, Japan) in relation to their total manufacturing output. And foreign trade is on average more than four times as important for the economically small countries (like the Nordic ones, Austria, Belgium, the Netherlands, Canada, and Australia). This economic openness forces the governments of small countries to devote special efforts to secure their balance of trade, just as big capital investments tend to be undertaken with an eye on foreign rather than domestic trade. Any disruption and cyclical turn in the international economy is immediately reflected internally, favouring the development of indigenous institutions to compensate losers and to flatten the amplitude of the imported disturbance (Katzenstein 1985).

Firms in smaller countries are, moreover, significantly more exposed to foreign competition, than are firms in larger countries. The possibly advantageous long-term effects of a constant high degree of exposure to international competition are sometimes even seen as a triggering factor in the economic development of small countries (Menzel and Senghaas 1980). Others have taken such an exposure as a point of departure when explaining how small countries can become and remain competitive by specialising in a limited number of industries (Porter 1990).

In a sense, small countries are in this respect similar to more narrowly defined regions. It can be argued that the difference between countries and regions is increasingly in degree, rather than in kind (Maskell et al. 1998). This is particularly so for small countries. Their general degree of openness and exposure to international competition makes them in important respects similar to regions, seen as parts of broader economic and political entities.

Small size is also likely to mean that, within each industry, the number of actors is limited. Therefore, it is probable that, in the Nordic context, size is a factor explaining why scholars in economic geography and related disciplines have been particularly interested in the analysis of how networked relations across firms in various industrial systems help create stable specialisation patterns, and how innovation and competitiveness emerge from interactive process with a markedly localised component.

Firms and localised capabilities

Firms are core actors of the industrial world. According to the emerging competence- or resource-based view of the firm (see Penrose 1959, Wernerfelt 1984, Rumelt 1984, Prahalad and Hamel 1990, Foss 1996), competitiveness is built on heterogeneous resources or competencies: on the firm's access to and control over something wanted by others, or ability to do something, which the competitors cannot do as well, as rapidly or as cheaply. Such heterogeneity is often a result of the way firms manage to combine initially homogeneous resources in new and unique ways (Dierickx and Cool 1989: 1507).

No firm is self-contained in the sense that it can operate regardless of all factors in its environment. Some complementary assets are needed and firms engage with each other to obtain these. Firms acquire resources on factor markets at a local, regional, national or sometimes even global level. But as long as not all factors are acquired on global markets, the competitiveness of firms will diverge because of difference in geographical location. The specific combination of localised factors that influence the distribution of economic activity, between and within each country or region, constitute the area's localised capabilities. Thus, firms might differentiate themselves by their location and - as a consequence - by being able to utilise dissimilar territorially specific resources and localised capabilities.

In order to enhance the competitiveness of firms, the specific localised capabilities of the area of location must represent a combination of assets of significant value and rareness. As the locational demand of firms changes over time, the localised capabilities must adapt and transform in order to remain valuable. Hence, capabilities are not just a passive reflection of what has happened in the region or country throughout history. They are also modified or reconstructed by the deliberate and purposeful action of individuals or groups within or outside the area.

Firms interact on markets that are social constructions, embedded in territorially specific institutions, which define and secure property rights and enable economic transactions (North 1994: 360). Well functioning and organised markets for products and production factors can be seen as a specific (non-tradable) localised capability. Localised capabilities thus link the concepts of regions and countries to the concept of the firm.

Firms of a certain kind find some localised capabilities more valuable than other. The originally chosen location of an industry might have been basically accidental. But once in place, the specialised demands from the firms will influence the future development of the localised capabilities, making it advantageous for the industry to remain in the area, and for outlying firms to relocate there (Enright 1994). The market selection mechanisms ensure that firms located in areas where the localised capabilities are specially suited to their needs will have a better chance of survival and growth than will similar firms located elsewhere. Gradual modifications in the built structures, the skills and competencies of the work-force, or the institutional endowment of the area will all tend to make the localised capabilities even more valuable for the firms located there. Consequently their competitiveness vis-a-vis competitors located elsewhere is further augmented.

The process of territorial economic development will, for the same reason, tend to be path-dependent. A well developed local supply base represents, for instance, a set of constraints and opportunities which in practice can be directional for the possible choices a firm might make, just as some distinctive feature of the demand structure in the region or country might further enhance an already exceptional pattern of specialisation. The differences in capabilities between regions or countries will (by definition) be revealed in discrepancies in the competitiveness of firms located there, with consequences for their long-term survival rate. Once in place, localised capabilities will continuously be retained and reinforced by positive feedback loops, as long as they are considered valuable.

Globalisation, ubiquitification and the erosion of localised capabilities

In the following we discuss how formerly valuable localised capabilities might be converted into 'ubiquities'. We argue that the process of globalisation does in fact threaten to erode the localised capabilities of the high-cost areas of the world, thus undermining the competitiveness of firms located there.

Globalisation is a process in which, among other things, the production and exchange of commodities gradually expand beyond the territory of the nation state to include still larger parts of the globe (Dicken 1998). The driving forces behind this process of globalisation are the economies of scale and scope resulting from a deepened territorial division of labour. The process of globalisation is fuelled by increasing efficiency of international exchange of goods and services, resulting from e.g.: improvements in the systems of transport, communication and capital transfer; governmental agreements on the reduction of economic and non-economic barriers (Sykes 1995); expansion in the number, in scale and scope of cross-border inter-firm collaboration and of internationally operating firms (Dunning 1958); and the escalating efficiency in down-stream mass distribution and sales (Kline 1991). In traditional location theory (Weber 1909), a distinction was made between two types of production input. On the one hand, there are factors of economic importance for the operation of a firm for which the costs differ significantly between locations, so called localised inputs. On the other hand, there are materials and other production inputs that in practice are available everywhere at more or less the same cost, which are called ubiquities. Weber used the distinction between localised materials and ubiquities to determine the degree of market-pull on the location of industries: the larger the element of ubiquities in the final product, the more strongly would the potential savings in transportation cost pull the industry away from the sources of raw material towards a location near the customers.

The Webenan distinction still holds, even though changes have occurred over time in the list of critically important location factors. But when the significance of one location factor decreases, the relative importance of some other factor will be rising. Historical illustrati...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• List of contributors
• Introduction: Is there a 'Nordic' human geography?
• Part I Production, Social Institutions and Local Development
• Part II Welfare State, Planning and Human Geography
• Part III Spatiality, Identity and Social Practice
• Part IV Nature, Landscape and Environment
• Part V Difference, Distinction and Power
• Index