Economic Geography

part resulted in many research projects on industrial districts, both theoretical
and empirical with a focus on comparative analyses of industrial districts in Italy
and the Nordic countries, as well as of districts within the Nordic countries
(Asheim 1992, 1994). The theoretical work emphasized the development of a
concise conceptualization of industrial districts to obtain a specific definition that
distinguished districts from other forms of territorial agglomeration such as clus-
ters and growth poles (Asheim 2000).
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The empirical analyses soon turned my interest towards the innovative capac-
ity of industrial districts. Studies have shown that (firms in) industrial districts can
generate incremental innovations. However, in a globalizing economy it is rather
doubtful whether incremental innovations will be sufficient to avoid lock-in
tendencies and promote a shift to new technological trajectories to secure the
competitive advantage of firms in the districts. In this context it is necessary to
keep in mind that the original rationale of industrial districts was the creation of
external economies of scale to provide a competitive alternative to internal
economies of scale of big companies. External economies concern the productiv-
ity of the single firm and the efficiency of the production system, obtained
through an external, technical division of labour in a system of firms. Thus, it was
cost or locational efficiency and not innovative capacity that is (was) the competitive
(or rather comparative) advantage of industrial districts. One of the constraining
structural factors in such a production system with respect to its innovative
capacity (i.e. moving beyond incremental innovations) is the fierce competition
between a large number of small subcontractors specializing in the same products
or phases of production, and vertically linked to the commissioning firms. This
promotes cost efficiency but do not represent a very innovative milieu, especially
since most of these small firms are capacity subcontractors and not specialized
suppliers (Asheim 1996, 2000).
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Bjørn T. Asheim

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All the way from Marshall’s writing on industrial districts, it has been assumed
that business interactions between client firms and subcontractors (exploiting local-
ization economies) and knowledge flows were co-occurring (and co-located)
phenomena. Furthermore, it has been maintained that local interactions and collec-
tive learning processes, or what is often called ‘local buzz’, largely happens by just
‘being there’ (Bathelt et al. 2004). This might well have been the case in traditional
industrial districts where tacit knowledge dominated and was diffused through
the industrial atmosphere (‘in the air’) created by the ‘fusion’ of the economy and
society (Piore and Sabel), for example, by informal networks run by trust and
civic society based social capital. However, in a contemporary situation where
codified knowledge is becoming more important, and where transnational corpo-
rations (TNC) as well as large(r) local firms dominate industrial districts breaking
up the ‘fusion’ and making informal networks formal, this is probably not any
longer the case. Lately it has been shown empirically that there exist an uneven
distribution of knowledge and selective inter-firm learning due to the hetero-
geneity of firms’ competence bases, which effects the absorptive capacity of firms
as well as diffusion capacity of districts (or clusters) (Giuliani and Bell 2005).
More than ten years ago, in my own empirical studies of Nordic and Italian
industrial districts, I observed differences in the innovative capacity between
districts. While Jæren, south of Stavanger in Norway, has consistently during
many years demonstrated a rather impressive innovative capacity (including
generating radical innovations), especially in the area of robot technology,
Gnosjö in Småland in Sweden as well as the majority of traditional industrial
districts in the third Italy showed low capacity for anything beyond incremental
innovations. These differences were clearly related to the competence bases of the
firms. The higher competence level (especially engineering skills) in the Jæren firms
resulted in a higher absorptive capacity enabling cooperation with universities
nationally and internationally as well as with demanding customers at home and
abroad. The same situation can be found in the engineering industry in Emilia-
Romagna with luxury car manufacturers in Modena, packaging industry in
Bologna, and ceramic tile industry in Sassuolo (Asheim 1994).
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