Industrial Trends, Innovation, Cluster Ecosystem: Transforming Cluster Ecosystem by Building Social Capital in Aviation Valley in Podkarpackie Region of Poland Zbigniew Bochniarz & Katherine Faoro

Parallel 4.2 Topics on New Cluster Trends

12 November 2014

Industrial Trends, Innovation, Cluster Ecosystem: Transforming Cluster Ecosystem by Building Social Capital in Aviation Valley in Podkarpackie Region of

Poland

Zbigniew Bochniarz & Katherine Faoro

Evans School of Public Affairs, University of Washington, USA

Barbara Sieńko-Kułakowska & Grzegorz Pisarczyk

Rzeszow School of Business, Poland

Agenda

1. The research project – Effective Clusters (EC)

2. The concept of Social Capital (SC) as cluster transforming agent toward effectiveness

3. Aviation Valley (AV) in Poland & Washington Aerospace clusters – research fields

4. Verification hypotheses on the role of SC in AV

The main goals of research project: Effective Cluster – the Base for Innovation and Source of Regional Sustainable Development

•Developing an universal methodology for cluster evaluation based on definition of EFFECTIVE CLUSTER

• Elaborating a guidebook of best practices

Phases of the EC project

• Phase 1: Research• New Evaluation model• Guidebook of Best Practices

• Phase 2: Application• Cluster Analysis• Policy Recommendations

• Phase 3: Change• Transforming Cluster• Prospering Region

• Phase 4: SUSTAINABLE DEVELOPMENT

Funding Sources

Project co-financed bythe Polish Government & the European Union - the European Regional Development Fund through the Regional Operational Program for the Podkarpackie Region -2007-2013

Social Capital – a private good

• A private investment in social networks (Bordieu, 1986,1993)

• An individual good that can be traded through social networks (Coleman, 1988)

• Investment in social relations with expected returns in the marketplace (Lin, 2001)

Social Capital – a collective or public good

• lnformal rules and ethical values common for social groups that enable them to act effectively (Fukuyama, 1997, 2000)

• A public good representing social norms and civic attitudes supporting common actions and trust (Putnam, 2000)

• Resources embedded in social networks that can be and are used by individuals for action (Huber, 2008)

Social Capital – a public good

• SC refers to “networks together with shared norms, values and understanding that facilitate cooperation within or among groups.” [OECD 2001]

• SC capital is defined as “institutions, relationships, attitudes and values that govern interactions among people and contribute to economic and social development.” [Grootaert & van Bestelaer, World Bank 2002]

Classifying SC (Rosenfeld, 2007):

• Positive Social Capital: creates economic advantages that are major forces for clustering

• Negative Social Capital: efforts to limit membership in clusters and cultivate insularity or lock-in

Dynamics of Cluster Development (D. Andreoli)

Cluster initiative - promoting economic development by encouraging the positive externalities coming from integration

Cluster Development from a Geographic Perspective (D. Andreoli)

Towards Working/Effective Clusters

Functional Cluster

Inputs: Social Capital, Cooperation, Synergy, Positive Externalities, Knowledge Spillovers,

Innovations

Working/Effective Cluster

Defining Effective (Working) Cluster

• Rich of SC that enables all participants to efficiently cooperate with one another

• Generates maximum positive externalities from…• Co-location (Marshallian externalities)

• Synergy (Porterian externalities)

• Openness to cooperative with other clusters (Jacobsian externalities)

• Leads to knowledge spillovers and innovation

Redefining Social Capital (SC)

• SC is a special type of capital resulting from investments in building relations, institutions and networks that produce collaborative attitudes, shared norms and values, mutual understanding and trust – critical factors for cooperation with other types of capital and thus contributing to sustainable development.

Measuring SC

• The economic value of SC depends on time invested in developing institutions, networks, relations, attitudes and trust within the a certain group of people (from family, through firms, cluster, region, nation to global community) Bochniarz (2010)

• Similar approach proposed C. Roman (2011) with a set of complex indicators assessing its value mainly through surveys

Four groups of indicators measuring SC

1. Indicators measuring associations.

2. Indicators measuring trust.

3. Indicators measuring existing institutions.

4. Indicators measuring results.

Three Hypotheses of Cluster Transformation to be verified in Aviation Valley in Poland:

• Hypothesis 1: The process of cluster development from its functional stage to the stage of the effective cluster is strongly influenced by increases in SC.

• Hypothesis 2: The integration process of a cluster fueled by SC has a positive effect on its economic performance.

• Hypothesis 3: The progress in cluster development accompanied by growing SC contributes to the sustainability of the regional economy.

GEOGRAPHIC LOCATIONCENTRAL/EASTERN EUROPE

Aviation Valley Cluster is located in South-Easternpart of Poland

PODKARPACKIE REGION: Statistics

• Area: 17 846 km2 (113 persons/km2

• Population: over 2 million (urban: 41,5%)

• Largest city: Rzeszów (183,000)

• Population under age of 25: 36%

• Over 150,000 enterprises (SME 99%)

Aviation Valley Cluster (AVC) basic information 2013:

• Established as an association in 2003

• Represents 120 members,

• Offers jobs for 20,000 employees,

• Produces over $2 billion revenues.

AVC

• The Aviation Valley is located in south eastern Poland,

• AVC has 120 members,

• over 20,000 employees,

• over $2 billion revenues.

The roots of AVC

• Central Industrial District (COP) established in the 1930s – mainly for defense purposes

• From 1948 to 1989 – state-run industry mainly for the Warsaw Pact with over 25,000 employees

• Systemic transformation of 1989 required a new value proposition based on SC & shared values

AV Cluster competencies:

• Design, creation and servicing of airplanes and airplane parts,

• creating auxiliary devices

• offering services related to aviation

AVC is relevant part of the World Supply Chain

• companies offer final products such as:• Transportation, agricultural and utility

planes

• Multitasks helicopters

• Light and ultra-light airplanes

AVC Value Chain

• support institutions, consulting:

• shaping production factors, R&D activities

• suppliers and related sectors

• design and manufacturing

• distribution

• servicing

Verification of Hypothesis 1

• Top leaders invested min. 7% of their time for cluster activities => $200,000 in 2013 (some leaders –over 12%).

• The number of cluster members has increased from 18 in 2003 to 120 in 2014.

• The total value of SC created in 2013 was $430,000 and was 7 times higher than in 2004 but with time invested cluster promotion the value of SC was about $1 million

• Conclusion: Investing in SC supports integration of the cluster and increases its synergies and positive externalities

Verification of Hypothesis 2

• The cluster has been growing drastically, with sales quadrupling during the period of 2003–2008 (PAIZ, 2012).

• This unprecedented dynamic is closely tied to FDI, since the majority of sales came out of companies that were privatized by large multinational corporations.

• Conclusion: Progressing integration of the cluster improves its economic performance.

Verification of Hypothesis 3

• The vast majority of the AV products and services exported to the most competitive economies securing relatively high level of salaries of their employees and thus contributing to the wealth of their families

• The prospering AV companies contribute systematically to regional communities.

• The total sales of the AC exceeded $2 billion in 2013.

• Conclusion: Progress in cluster development accompanied by growth of its SC contributes to sustainable development of the whole region.

More informationThe Final EC Project International

Conference – 27-29 May 2015

www.effectiveclusters.eu