Titel presentatie[Naam, organisatienaam]

Working Day - Track: Modern cluster policyA taste of worldwide cluster approaches

Geunwoo Ryu, Keimyung University

Thinking out Innovation of industrial clusters in Daegu, Republic of Korea

TCI Global Conference10 November 2016

Eindhoven

Thinking out Innovation of industrial clusters in Daegu, Republic of Korea

Geunwoo Ryu, Professor, Keimyung University, Daegu, Republic of Korea

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M. Porter (1998, 2011) Business clusters : geographic concentrations of a critical mass of intercon-

nected companies and institutions in a particular field including suppliers, service providers, universities, trade associations, etc. Whereby proximity leads to shared advantages through the aggregation of expertise and spe-cialized resources

In creating shared value-How to reinvent capitalism and unleash a wave of innovation and growth, companies can create shared value opportunities by enabling local cluster development with other critical factors (with Mark R. Kramer)

Jerome S. Engel(2014) CIO(Clusters of Innovation) Core elements of Porter’s industrial agglomeration and extended stage of

development and innovation of the clusters’ constituents (Silicon Valley) 

I. Preview

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Components of a Cluster of Innovation (2014, Global Clusters of Innovation). Entrepreneurs, Mature Corporations, Universities, Industrial research cen-

ters, venture capital, service providers, sharing management, Government and prefecture

Mobility of resources, money, people, know-how/technology, entrepreneur-ial process,

global strategic perspective, alignment of interests-incentives-goals, global ties and bond-network,

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Innovative Creativity Inspirations, Creative imitations, desire & passion to change, talents

(esp. Startup firms), Clusters’ sustainability. Even though most peoples have experiences on impromptu inspirations hardly applicable, an im-promptu inspiration’s very important by using historical data.

Besides fundamental composition of basic operability in clusters with competent managers and brokers, Hardware & software infrastruc-ture, collaboration with international organizations, connected social network etc.

Economic & social progress growth, mutual understanding of cross-cultures, employment promotion, and harmonization between rules based compliance and deregulation etc.

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Business ecosystem & Transitional Strategic Innovative OptionsReceptiveness of cross-cultural diversity and acceptance, esp. policy of em-

ployments.Entrepreneurship, entrepreneur’s passion and courage, leaderships, busi-

ness model including cross-border cooperation for creative shared value.Transformation and development traditional clusters into traded clusters.

Comparative studies reveal presence of strong clusters like traded clus-ters enhances employment and growth to the region in contrast to tra-ditional cluster where local industries serving primarily the local market.

Practices on the cross-border collaborations between clusters, esp. Denmark and Deutsch, Trade Agreement based on clusters between Czech Republic and Serbia, Global and regional Chapters of TCI-Net-work.

Possibility of application with mini-clusters’ experiences in South Korea to other Asian countries by ongoing TCI Asia Chapter.

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Futuristic Vision Green revolution with climate change, forthcoming 4th industrial

revolution with assuring stable employmentNew business opportunity- Mega national plan like as One belt one

road in China, Make in India, Industry 4.0 in Germany and Taiwan Corporate Social Responsibility with anti-corruption policies

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A. A quick review of Korea’s Industrial Policy(KICOX(2010); Kim (2015); Park & Koo(2013)) Evolution of Korea’s Industrial Complex:

Industrial parks have greatly contributed the Economic growth of Korea which is a planned site that is developed and managed to provide industrial location initiated by Government.

Most industrial parks, mainly export orientation, were developed by the government, such as Outward-Oriented Industrial Promotion, Selection of Industries for Promotion, Substantial Support from the Government, Incen-tives for Industrial Park Development, Legal Framework of Support, long-Term Plan for Industrial Cluster Development, Specialized Agencies for In-dustrial Cluster Development etc.

A Blueprint to decrepit industrial complexes be converted into places of creation and innovation, such as industrial complex renovation or eco-industrial park KICOX is in charge of 75 industrial complexes in 6 areas nationwide firmly

support the national economy.(national 41, local 20, foreign 11, agro-sector 3 including East –South mega region, Gumi-Changwon-Ulsan-Daegu-Busan regions)

II. Focusing on evolution of Korea’s industrial complexes into clusters of innovation

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The Industrial complex cluster program

Industrial Clusters in KoreaCurrent status of Clusters

1,124 designated clusters

85,789 companies

2,160,000 employees

GOALS

Cultivation of the world's famous industrial clusters that drive the development of Korean economy

RANGE

STRATEGIES

PROJECTS

Formation period('05~'08)

Construction of industrialcluster base

Growth period('09~'12)

Activation ofcluster network

Independence period ('13-'16)

Construction of au-tonomous

innovative cluster

Construction of Korean cluster model.Establish customizeddevelopment strategyaccording to complex.

Construction of regional cluster.Activation of global network.

Advance network activity. Completion of autonomous indus-trial ecosystem.

Construction of industry-university-institute network

Strengthen R&D capabil-

ities

Strengthen Characteristics

of complex

Improve resi-dence

/ work envi-ronment

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Foodpolis (Korea National Food Cluster)World’s first state-led, state-constructed national industrial cluster specializing in food

Banwol ∙ Sihwa Industrial ComplexKorea’s largest SME cluster, featuring traditional manufacturing as well as high-tech industries

Self-sustaining industrial system created through advancement of 5 industry-based mini-clusters

-Developed the Korean EIPs as a means of reusing cluster-based companies’ waste materials

-Projects with the World Bank and trilateral exchange and cooperation projects with China and Japan continue to be carried out. (Consultations are under way on a Vietnam EIP project.)

Provides one-stop services for the entire food production process, with the goal of developing an R&D-based, export-centered food industry

Industrial Clusters in KoreaKorea’s major national and regional clusters

Economic Value

Creating

Greenhouse gas emmision

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- Government support over KRW 1 trillion annually (till 2018)

Ministry of Land, Infrastructure, and Transport

- Accessibility of clusters, development assistance- Assistance for renovations on outdated complexes

Ministry of Trade, Industry,

and Energy

- Supporting clusters to become more competitive- Creation of Eco-Industrial Parks- Upgrading of cluster structure and promotion of industry-academia convergence

Ministry of Environment - Assistance for improvement of cluster environment

Ministry of Employment and Labor

- Assistance for employees of companies based in industrial clusters

Ministry of Culture, Sports, and Tourism

- Cultural regeneration projects within clusters- Assistance to upgrade Paju Bookcity

Ministry of Education - Development of campuses within clusters

Government strongly support clustersGovernment ministries’ mid- to long-term assistance for cluster-related projects

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What is mini clusters? Mini clusters refer to small group alliances of SMEs, universities, research

institutes, supporting agencies and local government categorized by the similar type of special sectors (e.g. engines, materials ..) in strategic busi-ness or technological goal

As the Korean economy become increasingly advanced, companies de-manded more than industrial real estate and R&D inputs. The KICOX ‘mini-cluster’ program, launched ten years ago, aims to address these needs, enabling collaboration among especially smaller companies located in in-dustrial zones.

In addition, theme clusters are based on specific theme of specialized production to collaborate among different sectors’ firms and institutes

In 2013, 69 Mini Clusters create 59,900 network activities and 7,500 members of Industry-University-Research Institute completed 17,700 projects

III. Knowledge Sharing with mini-clusters’ experiences in South Korea

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Industry-academia-research Cooperation Network to support Businesses

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Case of mini cluster in Daegu Participants: universities, research institutes, resident companies, cluster

managers and (local government) Roles: communication and collaboration for problem solving Achievements: patents, new marketing opportunities and developing business

models Case of a Firm’s Successful Business Method : User-based open innovation

Besides developing new products-implant denture with specialty, acquiring knowledge on unskilled areas to realize innovative ideas, gathering patients and dentists based information using international network, interactive com-munication between internal and stakeholders, utilization of O2O connected networking platform, community between dentists, financial supports from Techno Park in prefecture.

In this case, it is possible to enact, only if product user and producer as prod-uct attributes is all the same if not market forces larger, proactive producer leading and changing users’ preference into new product)

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KICOX is a specialized institution that operates and supports the industrial complexes that have led the dramatic growth of the Korean economy for close to fifty years.

To improve facilities for high-tech, convergence-based industries

To establish creative, inno-vative clusters

To create a sustainable-growth-supporting management system

To support the growth of companies through innovation

Main Objectives

Home to the Korea Industrial Complex Corporation (KICOX) Korea Industrial Complex Corporation

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Hub of major national industries in Korea Daegu serves as the central pillar of the Korean economy

Major Industries such as Electronics(Samsung, LG), Textile & Fashion(Kolon), Steel(POSCO), Automobiles and Shipment(Hyundai), and Machinery(Doosan, Rotem, GM) are all centered around Daegu.

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National water industry cluster The cluster, a hub of national water industry, support for key technology development, technology verification, commercialization initiatives, entry into overseas markets.(150,000sqm, KRW 300 billion in investment, construction to be completed in 2018)

As a National Industrial Complex has been established in Daegu, the city could grasp the opportunity to convert the root infrastructure of industry, rein-force its structure and expect to return of high-qualified workforces to Daegu.

Major industrial clusters in DaeguDaegu National Industrial Complex

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Creation of an innovation cluster through the convergence of the ma-chine parts industry (the region’s pri-mary industry) and the robotics industry (strategic industry)

Korea Institute for Robot Industry Ad-vancement (National promotional agency) : Development of robot innovation cen-ter, R&BD for commercial technolo-gies, Entrepreneurship support

Major industrial clusters in DaeguDaegu Robotics Cluster

Percentage of products developed on to succeed 77% (As of 2013–2015)

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Daegu Techno-polis has the goal to increase the population and promote local development by inducing employment and developing regional economic impacts in order to achieve technical innovation of region as well.

With Mechatronics industry, Seongseo is aiming to reinforce the competitiveness and inno-vative technology of allocated companies in the area by organizing and operat-ing 4 mini-clusters.

- IT base intelligent automobile industry has been set to develop construction equipment and au-tomobile components.- It has a huge advantage of pro-viding workforce by having the largest number of universities where offering the industrial re-lated subjects and majors

3. Major industrial clusters in Daegu

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Daegu-Gyeongbuk Medical Innovation Foundation has been striving for the successful establishment of Medivalley (Medical Cluster), securing excellent brains for core research centers as well as forming cooperative networks with universities and government-invested institutes.

Suseong Medical District, one of the special economic districts in Daegu-Gyeongbuk Free Economic Zone (DGFEZ), is to become the leading free economic district for high-quality health-care service, medical research and devel-opment (R&D), software and information-technology (IT) industries in Korea and Northeast Asia.

Major industrial clusters in DaeguDaegu-Gyeongbuk Medical Inno-vation Valley

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Model of industry-academia-government cooperationExcellent cooperation between local academic institutions, businesses, and government organizations

Strong academic infrastructure

13 academic universities9 technical schools

5,200 faculty members

138,000students

Research

Academic

KICOX

Daegu-GyeongbukFree Economic Zone Authority

Daegu Center for Creative Economy & In-novation

Korea Academic Society of Industrial Cluster

World Association for Triple Helix & Future Strategy Studies

Local universities, schools

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Limitations: Sustainability of the futureBottom-up and need based approachEffective ‘long-term’ relationships with global and regional stakeholdersEfficient communication system building

- Government Institutional Setting- Global and National level coordination

IV. Discussion and small word of cautions

Caution1_Risks embedded in the heavy handed top-down cluster policies Especially economic sustainability measured in terms of productivity

and value-added for resident companies and clusters Caution2_Overlapping specialized industries in Metro Regional Economic

Areas may increase a risk and volatility arising from global economic cy-cles, e.g. slowdown of global economies, especially the US and China Agglomeration or diversification: a problem of choice for regional devel-

opment

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Requiring continuous efforts for innovation initiated by resident companies and their voluntary funding combined with government’s funding

Increasing an intense tri-partite collaboration, at least, between universities, re-search institutes and resident companies whiling cluster managing agencies function as facilitators

Enabling a bottom-up approach of developing sustainable innovation capacities based on local comparative advantage and competitive advantage

V. Policy Recommendations

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- What is the experience with clusters and cluster-based economic development

approaches across Asia? Is there evidence of an “Asian model”, distinguished

from approaches used elsewhere? - Do Asians have an appetite for the creation of an Asian ‘learning community’ of

practitioners in this field?

VI. Further Discussions on Asian Models of Industrial Clusters NRF-TCI-World Bank Group, Workshop at Singapore, 6th June 2016

- It is not helpful to talk about an ‘Asian model’ of cluster-based economic devel-

opment. While there are systematic differences between Asia and western

OECD countries, there are also large differences within Asia. - Asia government has a stronger role and fewer private or private-public institu-

tions to manage cluster-specific activities. it is likely that also the size and in-

ternal organization of a country matters; regions often play an important role in

cluster-based efforts.

Douglas Zeng, Dr., The World Bank’s Trade and Competitiveness

Christian Ketels, President of TCI, Professor of Harvard Business School

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Reference 1. Current Situation and Challenges of Domestic Indus-trial Complex

Upon comprehensive planning, designation and a group of developed land to establish as a group such as factory‧ knowledge industry ‧ information and communications in-

dustry etc. and education ‧ data processing ‧ circulation facility ‧ culture ‧ medical treatment ‧ sightseeing ‧ exercising ‧ welfare facilities etc.

Domestic Concept

It had started in U.K. to rise improvement in productivity through upgradation of labor

and living environment.

Spread to the USA and Eu-ropean countries are active industrial development in

the 20th century

Spread to the developing countries rapidly after

World War Ⅱ.

After Industrial Revolu-tion After the 20th Century After World War Ⅱ

Appearance theory of in-

novation clus-ter

• National competitiveness for Regional Industry-Academic Cooperation In-novation Clusters.

• Geographically adjacent businesses, universities, research institutes and local government cooperation network of various players, including catalyst role in in-novation activities.

Building innovation networks for Industrial Innovation Cluster with the Industry-University-In-stitute Collaboration by an integrated industrial complex projects around the national indus-

trial complex

It fulfill the role of industry complex into innovation cluster since it was launched in 1960’s which is started in U.K. after the Industrial Revolution

Industry Complex conception and background

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Industrial complex promoted industrial development and national economic growth for more than 50 years from building Guro industry complex in 1964.

Step

Indus-try

Role

1960’s 1970’s 1980’s 1990’s 2000’s

export-led light industry

Heavy chemi-cal  in-

dustry

 Industrial structure ad-

justments

Takeoff in in-dustry devel-

opmentExpansion of indus-trial development

and growth

• Textile ∙ Rag wig

• Petrochem-istry, Steel,

• Machinery

• Electronics, automo-biles, au-tomobile.

• SW, IT,Semiconduc-tor

• InformationCommunica-tion, life sci-ence

• Guro Indus-try Com-plex

Ulsan, Changwon, Yeocheon,

Onsan, Geoje, Pohang, etc.

Banwol, Sihwa, Namdong, Gun-

san, Gwangyang, Daebul, Gunjang

• Gwang-ju high-tech, TP

• Urban high-tech, Osong, Ochang.

2010’sNew industrial development

• integration Knowledge Services

• Innovative and Specialized in-dustry complex

Industry Complex has contributed in 1 trillion export and $20,000 GNP per capita for 50 years.

source : KICOX(2016)

Mechanical, electrical, electronic industry and non-manufacturing

etc. Petroleum, chemical and steel, transportation equipment, etc.

light indus-try

National economic development through industrial complex development

Reference2. Current Situation and Challenges of Domestic Indus-trial Complex

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Division

Designated statusmoving-in

enter-prise

(Compa-nies)

employ-ment(perso

n)Production (a billion)

Export(1 million

$)Number Area(km2)

Content 1,124 1,402 85,789 2,160,761 978,932 386,281• Among 1,124 industrial complex, 41 national industry complex , 597 general industry

complex, 19 urban high-tech industrial complex, 467 agricultural industrial complex.• By type of industrial complex, general industry complexes are over than 50% in all of in-

dustry complex, national industry complex take over than 50% by designated area.

• Efficient management and operation supporting service to residential companies

• Promoting industrial complex development & build up, Upgrading industrial structure of the complex

• Fostering Industry-academic cooperation network clus-ters

• Establishing Environmentally Ecological industrial park (EIP)

• Research on Industrial Location Policy and development, etc.

• The end of 2014 : Total 30 , designated area is 657km²

• by regional groups : Gyeong-gi Province are most frequent in six.

• By park : Sihwa industry complex are maximum section in 124km²

• By manic state : under construction complex in 15, Completed complex 4, undeveloped complex in 1.

In Korea, There are 1,124 industrial complex, Korea industrial complex corporation handle 41 national industrial complex.

Operation Status and main business of the industrial complex.

Reference3. Current Situation and Challenges of Domestic Indus-trial Complex

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Reference4 Limits to Growth according to the development path of clusters and industrial complex.Although industry complex carried out the roles in process of national economic devel-opment, it is needed new adaptable model to overcome the limits of existing growth and development on the path

U

The growing period(Regional base for

growth)

The transformation period

(Build up new clus-ter)

The maturing period(diversified industrial

structure)

The beginning period(Physical base to

Manufacturing Sec-tor)

Complex Emerging

Large Scale Complex

Maturing Complex

breakaway/bankruptcy Deindustrialization

Promote initial ex-port-led growth and heavy chemi-cal industry in Guro, Ulsan, coun-try southeast area, industry complex, etc.

Pursuit Balanced National Development and spread develop of industry complex.

Advancement of industry struc-turepolicy and de-velop new indus-try complex

New Adaptable Model

17% 4%7%31%

1980’s 2010’s2000’s1970’s

GDP average annual growth

rate

11%

1990’s

Post-industrial com-plex

Old development path New development path

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Despite its outward growth, the decline of the core industries such as the sagging in-dustrial parks and the delayed growth of new industrial growth sectors is only decreas-ing due to the decreasing competitiveness of the industry.

Major company downsizing, overseas transfers because of consider deterio-rating economic growth

Downsizing, overseas transfers

- While companies are hesitant to invest by a sluggish economy, downward trend in the bank loans or stock is-suance, corporate bonds.

Occurrence a hollowing out of the country caused by building over-seas facilities in China etc. and moving overseas with cooperative companies

- Accelerate in reduction in corporate presence or reducing production func-tion with regional industry complex as the center.

While operate company and employ-ments are increasing, employer per company decreased.

An increase in the number of small businesses in industrial parks

- Operating companies in an industrial complex increase an annual average of 10.3 %. , employment growth rate 6%

Small businesses in the industrial complex's tenant has increased

- Employee per operating company 2001 41.2 person -> 2015 23.6 person (- 42.8%)

Through Recycling complex Innova-tion park, an attempt to upgrade in-dustries of companies entering the in-dustrial complex

Base industry estate acceleration

- Developing higher value-added of the tenant industries, industrial parks, propulsion and convenience facilities and infrastructure in the industrial complex, support facili-ties, etc.

Small business major metropolitan area with a high percentage of national industrial complex artist small increase in rental companies in the case of alti-tude delay.- 2000~ 2015 Tenant Growth rate in capital area (Seoul 19%, Namdog 8.2%, Banwol-Siwha 16.3%)

The industrial complex, contribute to the development of the nation's economy under demand that the new changes due to environmental changes.Government is carrying out upgrading industry complex, trying to seek industrial restructure acceleration in the future

Insight

Recent Changes in Industrial Complex According to Environment Change

Reference5 Current Situation and Challenges of Domestic Industrial Complex

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Globalization of

manufacturing

Building a plant in low-wage countries using the wage gap between countries, production, and sales expansion.Direct investment equal with transfer production and marketing activity is increasing in China, South Asia, East Europ, American and so on.International expansion in import and produce raw-material and subsidiary materials.

Accelerate of opening markets : Local community such as ASEAN, EU is expanding and FTA is spreading in the whole world. Reducing barriers to cross-border trade, investment since the inauguration of the WTOExpension of the unification of the world market trends

Market globalizatio

n

The rapid development of the communication, transportation technology collaboration extends the scope of global levels.Major company is building global network and extending with a local subsidiary as the center.In terms of global production and marketing, distribution, cooperation, research and development.

Globalization of

collaboration

Time to support in-

dustrial complex

strengthen-ing a suit-able coop-

eration sys-tem for

globaliza-tion.

Globalization is deepening consistently in local production and sale of the product etc.

Intensifying globalization of industry

Reference7 External environment changes

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Reference8 Domestic industrial type and competitiveness

National industry complex

General industry complex

Ulban high-tech industrial

complex

Agricultural

 industrial

complex

Foreign Investm

ent Zone

free trading region

Free Economic

Zone

Purpose

National infrastructures and advanced

technology industries.

Local eco-nomic re-vitaliza-tion, pro-motion of industrial distribu-tion to ru-ral areas.

High-tech industries, including

knowledge, suspect, culture, suspect,

information and

communication industries.

increase the income of farmers and fishermen

Promotion of foreign investmen

t

Promotion of regional

development and

attracting foreign

investment, trade

promotion, and

international logistics

Facilitation.

Management of

foreign investmen

t enterprise

s and improving the living

conditions.

AppointerMinistry of

Land

Mayors ‧Governors

of provinces

Mayors ‧Governors of

provinces

Mayor‧Governor

‧The head of a Gu

Mayors ‧Governors

of provinces

Ministry of Industry,

Trade, Energy

Ministry of Industry, Trade, Energy

Target area

 Underdeveloped

areas that require

promotion, industrial

and advanced industrial sites as good a

period of local

development.

 Employments, also in terms of

the balance

necessary for the

development of areas

in the event.

High-tech industries to foster good urban areas.

Location conditions are

in good areas in

the military in the event,

the learned

Investors who want to foreign investme

nt and industrial

areas.

Port, airport

grounds, existing

industrial complex.

Settlement likely area and attract foreigners.

*

( 단위 : 개 , 천㎡ )

Site TypeComplex number Designate area

number Specific gravity Number Specific

gravity

Nation 41 3.6% 789,805 56.3%General 597 53.1% 530,487 37.8%

Urban high - tech 19 1.7% 6,223 0.4%

Agriculture and industry

complex 467 41.5% 75,595 5.4%

Total 1,124 100.0% 1,402,110 100.0%

( 단위 : 십억원 , 백만 달러 , %)

Site TypeProduction Export

2014 2015 Percentage Change 2014 2015 Percentag

e Change

Nation665,686 593,880 -10.8 281,511 230,347 -18.2

General 339,813 333,172 -2.0 152,151 143,177 -5.9

Urban high - tech 188 939 398.7 1 282 23,637.5

Agriculture and industry

complex 50,762 50,941 0.4 12,777 12,475 2.4

Total 1,056,449 978,932 -7.3 446,4397 386,281 -13.5

Source: KICOX, 2015 4Q