Input output and Scottish industrial clusters

Hervey Gibson

Using IO to identify Scottish industrial clustersBased upon:

• Project undertaken for Scottish Enterprise in 1997/8

• Paper on IO in UK cluster identification to IIOA in September 2002 (and BCITUK 1998)

• Brief round up of some cluster IO methods

• Application of a reducing dendritic algorithm to SCOTIO 2002

Clusters are …

geographic concentrations of industrial and related organisations whose linkages enhance each other’s performance

• paraphrases Michael Porter– Competitive Advantage of Nations, 1990

• three components– geography– performance– linkages

Cluster identification for nations

• Porter based on trade highspots :– 3-4 digit level of SITC:– comparative advantage as revealed by shares of world trade– comparative advantage as revealed by trade balance

• Issues– ‘not a statistic’ (means different things in large vs small

countries)– available for physical trade (goods) only

• However– meant Scotland (1992) was the first sub-sovereign economy to

receive full Porter analysis thanks to availability of SCDI export statistics

Subnational – eg BCITUK

• General practice based on employment highspots

• Serious flaws– especially if labour market contains lags (as all do)– and if elasticities inappropriate– if performance ~ productivity then employment is the

DENOMINATOR– addresses within-nation dominance, not international

compettiveness

Linkage methods• linkages that in ‘cluster theory’ promote performance include a wide

range of social, knowledge and informational linkages between people and institutions.

• include – mysteries of trade that Alfred Marshall said children learn unconscously

from the air,– relationships within and between families and the chronologies of

business evolution that Beccatini traced amongst italian artisans, – ‘trust’ that the social anthropologists of clusters look for today

• linkages that appear in the market place and are therefore easily susceptible to economic measurement are those of trade, of transactions between one business and another.

• these are summarised, for current-account transactions of industry groups , in an input-output table.

IO tables

• UK since 1954– 5 yearly– annual early 1970s– killed by Rayner, back to sporadic– reinstated as annual SUTS from 1992 after GDP

debacle

• Scotland– 1973 SCDI/FAI/IBM UK– 1973 (R), 1979, 1989– 1994 and (almost) annually

Cogentsi for Scottish Enterprise, 1998Identified cluster core through highpoints based on global value added

Scotland's revealed comparative advantage 2001 (based on global GVA)

0.00 0.50 1.00 1.50 2.00 2.50

Transmitters for TV, radio and phoneAlcoholic beverages

Office machinery & computersStructural metal products

Metal forging, pressing, etcInsurance and pension fundsPulp, paper and paperboard

Medical and precision instrumentsElectronic components

Water transportMetal boilers and radiators

Bread, biscuits etcLegal activities

Other business servicesPharmaceuticals

Architectural activities and technicalOther land transport

Printing and publishingArticles of concrete, stone etc

Banking and financeMarket research, management consultancy

Computer servicesPublic administration and defence

Accountancy servicesWater supply

Auxiliary financial servicesOther chemical productsShipbuilding and repair

Miscellaneous manufacturing nec & recyclingPlastic products

Salience (log-location-quotient)

electronics, ICTdrink

& food

metal bashing (for oil)

financial & bus srvs

forest products

chemicals

Source DREAMRef/orgs/statag/sco/aeiou/salience

Scoped and sized by tracing thru IO tables

Scottish economic linkagesrelated to oil & gas & energy

Priniting and publishing

Pulp, paper and board

Recreationalservices

ElectricityCoal

Engineeringsvces

Oil & gas extraction

Oil refining &c

Soft drinks

Gas distribution

ElectronicsValue added £mn

Employment (inc self

employment)

Productivity (£000/emp)

Core industriesComputers & office machinery 779 10011 77.814Electronic components 832 12283 67.736Transmitters 293 1504 194.814Receivers 46 3045 15.107Instruments 414 13456 30.767Forward linkages - -Backward linkages 1586 76398 20.760TOTAL 3950 116697 33.848

Dominant link methodSales from Sales to

1 Agriculture 8 Meat processing 12.2 Forestry harvesting 31 Timber & wood products 1a3 Sea Fishing 9 Fish & fruit processing 1b4 Coal extraction 85 Electricity 2a5 Oil and gas 35 Oil refining 222 Textile weaving 28 Wearing apparel43 Pharmaceuticals 117 Health and veterinary services 173 Electronic components 69 Office machinery & computers85 Electricity production 121 Recreational services 2a88 Construction 104 Letting of dwellings 1aa90 Wholesale distribution 115 Public administration97 Transport services 94 Other land transport

103 Letting of dwellings 88 Construction 1aa112 Architectural activities 5 Oil & gas extraction 2113 Advertising 114 Other business services117 Health & veterinary 1 Agriculture 1121 Recreational services 34 Printing & publishing 2a

Sales from Sales to13 Animal feed 1 Agriculture1 Agriculture 11 Dairy products

32 Pulp, paper and board 34 Printing and publishing4 Coal 35 Oil refining &c

113 Advertising 91 Retailing97 Transport services 95 Water transport35 Oil processing 85 Electricity production31 Timber & wood products 88 Construction5 Oil and gas 86 Gas distribution

19 Soft drinks 121 Recreational services92 Hotels & catering 117 Health and veterinary services 103 Owning & dealing in real estate 101 Insurance & pensions101 Insurance & pensions 104 Letting of dwellings

Largest cell in row and in column

After 17 above have

been eliminated

Compare linkages with world IO tables• Individually link-by

link• Forward linkages• Backward linkages

• Hirschman method

Wearing apparel28

Plastic products48

Confectionery16

Design and architectural etc activities112

Bread, biscuits, etc14

Soap and toilet preparations44

Accountancy services110

Advertising113

Other business services114

Computing services107

Metal forging, pressing, etc59

Owning and dealing in real estate103

Auxiliary financial services102

Consultancy and market research111

Furniture81

Printing and publishing34

Banking and finance100

Alcoholic beverages18

Legal activities109

Insurance and pension funds101

UK’s twenty industries with relatively strongest links

Reducing dendritic algorithm

• What is the most distinctive link in the table?

• Those industries are in the same cluster. Unite them

• What is now the most distinctive link?

• continue, reducing the table dimension by 1 until after 127 steps there is only one cluster left

First 20 …NFMS MMORMMFS SPINKNIT MMFS / SPINCLTH WEAVCARP KNIT / MMFS / SPINOTXT CARP / KNIT / MMFS / SPINOGPM J EWLWEAP NFMS / MMORRTRN MELKCLTH / WEAV OTXT / CARP / KNIT / MMFS / SPINARTP PPPBCONC CEMTTGDS CLTH / WEAV / OTXT / CARP / KNIT / MMFS / CONF SUGRWEAP / NFMS / MMOR MTOLSDRK OTFDOSPM IRONPEST OCHMPHRM PEST / OCHMMCHM PHRM / PEST / OCHMPOLY MCHM / PHRM / PEST / OCHM

After 114 combinations it stops making sense• Remaining clusters:

– Banking– Assets (property and education)– Materials – plastics and metal– Personal needs – food and leisure– Aero and telecomms– ‘Public’ services

• Social Work and Refuse Collection never cluster

Thank you

A written paper will follow

hervey.gibson@cogentsi.com