Chemical Industry clustering efforts in Central Germany*
*The opinions expressed are those of the authors, the consultancy Competitiveness (www.competitiveness.com).
Chemical industry clustering efforts in Central Germany
Table of contents
1.
Objectives of the case studies ............................................. 1
Why the Chemicals in the Central Germany example can be useful
.................................................................................................... 1
2.
Have the clustering efforts been a driver for innovation in
the Central Germany chemicals industry? ................................... 3
Contribution to the development of lead markets ........................... 3
Help in focusing R+D+I resources ................................................. 4
Contribution to an increased mobility of people and knowledge ..... 5
3.
Successes and failures of the clustering efforts in the
Central German chemicals sector................................................. 7
In defining the perimeter for the clustering effort ........................... 7
In setting the strategies to build a sustainable competitive
advantage .................................................................................... 7
In managing the clustering efforts jointly ....................................... 8
In applying the learning to the whole economy .............................. 8
4.
Learning from the Central German clustering process ....... 9
Implications for the chemical sector .............................................. 9
Implications for the local and regional support institutions ........... 10
Implications for the national and EU institutions .......................... 10
5.
Appendix I: The clustering efforts in Central Germany’s
chemicals industry ...................................................................... 12
A - The chemical industry ........................................................... 12
B - The Central Germany Region ................................................ 13
C - The challenges of the Central Germany chemicals industry ... 15
D - Clustering process in Central Germany ................................. 20
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Chemical industry clustering efforts in Central Germany
E - Present situation ................................................................... 23
6.
Bibliography ....................................................................... 24
Table of figures
Figure 1 Central geograhical situation of Mitteldeutschland ............ 13
Figure 2 Statistical employment analysis (Source: European Cluster
Observatory) ........................................................................... 14
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1.
Objectives of the case studies
“Clusters and, more generally, regional agglomerations are often at the
core of innovative development. It is widely recognised that new firms
thrive in the proximity with other companies, investors, educational institutions and research centres afforded by clusters particularly in the
presence of world class academic institutions. Mobility can be maximised when there is a local labour market that allows regular flows of
people from one situation to another, with accompanying diffusion of
knowledge. As well as the greater opportunity range it is clear that barriers such as the need to move house or schooling for families are removed. However, it also emphasizes that minimising such barriers more
generally will create a more functional society. It is important to ensure
that clusters are defined in terms of the new market and knowledge
relationships needed for emerging sectors to thrive. It is even
counter-productive to reinforce traditional sectorial clusters as these may
inhibit the necessary mobility. Firms in traditional sectors are far more
likely to find innovative growth by forming new linkages and applying new technology to their existing products and services. This
can be facilitated by opening the clusters to cooperation with and learning from other clusters in the same or other sectors.”1
Why the Chemicals in the Central Germany example
can be useful
The case studies presented here by Competitiveness place a special
consideration to define if the clustering efforts analysed have helped
move the companies towards new market and knowledge relationships or just to reinforce or defend acquired positions in traditional sectors.
The Chemicals in Central Germany case provides us an example of a
deep industry transformation from former East Germany standards to
EU level, through individual, regional and national actions, allowing us to
see the role of the clustering efforts in the change and its implications for
the innovative capacity of the new cluster. Whereas the exhaustive and
difficult transformation has enabled the cluster to develop world-class
expertise in several fields, the cluster has not yet managed to capi-
1
http://ec.europa.eu/invest-in-research/action/2006_ahogroup_en.htm
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Chemical industry clustering efforts in Central Germany
talise on the opening opportunities to take a leading role in new service oriented markets.
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Chemical industry clustering efforts in Central Germany
2.
Have the clustering efforts been a driver
for innovation in the Central Germany
chemicals industry?
Nobody will doubt that the evident transformation of the Chemical
Industry in Central Germany, and the clustering efforts of the “Mitteldeutschland Industrial Initiative” have been a success in terms of
building up productivity and innovation capability. What it is not clear
yet is if these will be the basis for the development of new lead markets for chemical applications, developing alternative sources of research and facilitating mobility of knowledge and people among the
industries.
Contribution to the development of lead markets
The immense challenges of the past decades’ restructuring and the
redevelopment process have led to accumulate excellent know-how
in the following areas:
Renovating contaminated industrial sites (clearance and
redevelopment): registering, evaluation, planning and implementation and creation of clean settlement areas
Demolition: project management for the redevelopment
and the disposal of old chemical sites
Environment protection: implementation of present EU and
national directives, laws and regulations (air, water, soil,
noise, waste), organisation of environment management
and the ongoing monitoring of working processes
Assistance in structural change especially for the industrial
regions of the new EU countries.
Support in developing chemical sites: identifying, systematising and describing existing or needed expertise and outlining the technical, organisational, financial and promotional potential for the development of chemical sites.
Despite the fact that this outstanding know-how could be an important source of cost reductions and efficiency building for chemical
sites all over the world, no successful product or service development have been launched from the Central Germany cluster to benefit from their specific competitive advantage. The Chemical industry
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Chemical industry clustering efforts in Central Germany
has benefited at home, however, achieving world-class productivity
levels.
The cluster is well poised to become a strong service-based industry
as the core industry seeks efficiency through outsourcing and splitting of the value chain, as has occurred in the manufacturing of cosmetics and pharmaceuticals. This trend is accompanied by the trend
of the establishment of a new industrial segment for broad services
as well as site-related industrial infrastructure. This is of particular
importance for the SMEs in context of intensification and diversification of their activities, extended market access and business establishment.
Help in focusing R+D+I resources
The main focus of the Central German cluster initiative has been increasing production capacity and in supporting R&D projects. Additionally, the rise of outsourcing agreements from multinationals has
provided impulses for the development of innovation infrastructures.
Several technology and innovation centres are operating in the region, which enjoys a relatively high level of public support for research. The region has recently been promoted as a national centre
for chemical research. Perhaps most noteworthy is the Fraunhofer
pilot plan, which aims at lowering the barriers to innovation and piloting new products.
Notwithstanding those achievements, the clustering efforts have not
favoured a shift from traditional research funds-seekers to new ones
that could bring completely new approaches to traditional industries
(for example the mini-plants being developed in other areas of Germany.)
The clustering efforts have helped in creating a dialog between industry and policy makers of the different landers, on such topics as
innovation, investment support, new enterprises, innovation centres,
or the improvement of general framework conditions.
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Chemical industry clustering efforts in Central Germany
Contribution to an increased mobility of people and
knowledge
The Chemicals cluster has engaged in a significant expansion of inter-industry cooperation since the mid-1990s, when the chemical
industry associations covered all the three states, but their initiatives
were focused on industry, not involving other parts of the value chain
such as suppliers or customers. Such cooperation was sparked by
multinational executives such as Bart Groot of Dow, who made use
of his personal networks2. When BMW decided to locate a major new
factory outside Leipzig in 2001, the leaders of Dow and BMW got
together.
Today, the regional industry as a whole is in fact represented in the
cluster organisation by the networks3, which are involved in such
fields as lobby work focusing on future clusters; deepening regional
cooperation of the chemistry/plastics cluster with science and research institutes in order to strengthen innovation capacity, and development of synergies with other Central German Clusters, in particular automotive, biotech and environment.
Naturally, there are still some improvements to make. For example,
the value chain relationships are created step by step between
chemicals and plastics clusters, but for example not yet for the regional automobile cluster. For example, now that the cluster initiative
is planning to invest in a new plant dealing with issues related to
2
Groot’s personal leadership was an important factor for the clustering process until 2004. After
October 2001 conference, he started inviting people to his home for “fire[side] talks.” People were
invited as individuals, not as representatives of their company or organization, so it was hard for
people to decline that sort of personal invitation. Also, this provided a more open atmosphere to
talk freely. Through informal conversations, the actors began to coalesce around an idea of networks or clusters that would mutually strengthen each others’ businesses and help region as a
whole. Among other personalities, Wolfgang Tiefensee, who had been elected mayor of Leipzig in
1998 and had strong interest in regional cooperation, became an important ally to Groot together
with Peter Claussen, head of a 2001 created BMW plant. Also, as a company, Dow implemented
many training and secondary school programmes knowing that without broader economic development, these actions wouldn’t have meaningful impact.
3
From the business point of view, you may state that the companies involved in the cluster process
have reached an increase of some 10% in their annual turnover, whereas the outsiders have lost
some 10 %.
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Chemical industry clustering efforts in Central Germany
buildings’ insulation in order to respond to the future challenges in
the industry4, the only company in the region specialised in isolation,
Philippina, is not a member of the cluster organisation and therefore
not “inside” the process5. Another peculiarity is that local car manufacturers are not buying plastics pellets from local producers, foreseen to happen only in some 4-5 years.
Other emerging cross-sectorial projects cover for example a product
development project with the food cluster, where launching a the
clustering process has been particularly difficult. Also the local universities are collaborating among each other’s in some crosssectorial areas like in bio-plastics: the food cluster research coordinator is exchanging with the plastics cluster research coordinator.
(Interviews)
It is to be expected that the more intensive cross-sectorial work
would help creating innovative products and services.
Additionally, in coming years as many of the older generation of
skilled labour retires, the chemicals cluster will face manpower and
training challenges, particularly in export oriented and technology
intensive enterprises. The cluster will require greater competency in
knowledge management as the dynamics of high turnover in an extended value chain make themselves felt.
4
Plastics are in many markets, and some new trends are developed related to the climate change,
for example for: integrated development of new car tires, new plastics into lighter cars, new types
of isolation or electricity transfer in buildings, intelligent furniture of food packaging.
5
In fact, the cluster association membership is as high as 400.000 euro in order not to grow too
much and become non-manageable. Despite of the fact that such a fee is impossible for SMEs and
start-ups to pay, the association desires to become the one and only platform for collaboration in
the region.
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3.
Successes and failures of the clustering
efforts in the Central German chemicals
sector
In defining the perimeter for the clustering effort
The undertaken actions have turned more around general policy orientations and role taking of the local actors than answering with concrete projects to the specific challenges in the markets.
Although, the clustering approach has gained credibility as it is answering to the need of creating a favourable environment for economic development and future innovation. Now that the industrial
initiative of the Central Germany has reached the status of a regional development agency, further results can be expected especially if the cross-regional and cross-sectorial collaboration around
specific strategic action lines can be reinforced, taking into consideration the market and not only the industry needs.
In setting the strategies to build a sustainable competitive advantage
According to structural changes that occur in the European chemical
industry in respect to the global trends like globalisation, overcapacity, and decreasing labour cost advantages, some industrial
players estimate that the competitiveness of the core industry can
only be boosted by increased efficiency. In this context, the multinationals will increasingly concentrate their activities on core competences with the consequence of outsourcing of infrastructures and
services. In the long-term, this is accompanied by the trend of the
establishment of a new industrial segment for broad services as
well as site-related industrial infrastructure6. This is of particular
importance for the SMEs in context of intensification and diversification of their activities, extended market access and business establishment.
6
In Saxony-Anhalt only, there are grounds to develop new openings related to the chemical indus-
try in such areas as: plant construction and design, automatisation, process engineering, deconstruction of industrial plants, waste management, and environment protection.
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Chemical industry clustering efforts in Central Germany
Moreover, there is a tendency for splitting up of the value-added
chain (e.g. outsourcing of R&D activities or even production, in particular, in the manufacturing of cosmetics or pharmaceuticals). Today, this trend is already widely developed in other industries, e.g.
telecom or computer sector, but needs some further work in the traditional chemical industry.
In managing the clustering efforts jointly
If the current clustering process is mainly business driven, considering the weight of the multinationals in the region, well oriented public
initiatives might further strengthen local partnership creation for example in encouraging approaches for production intensification in
conjunction with the growing trend for raw materials networks creation and specialisation along value chains: oil/refinery – basic chemicals – plastics manufacturing – fine & speciality chemicals, etc.7.
In applying the learning to the whole economy
The key to the economic development has been the private sector
taking the lead to increase coordinated communication of industry
needs towards the public sector8. The development of the cluster
process provides competitive advantages for all enterprises, however, the SMEs profit in a greater extent from cluster structures
through synergies emerging from cooperation (e.g. through increased information activities or political support in regard to joint
objectives).
In search of synergy potentials, there will be stronger integration and
cooperation between industry and local and regional governments.
The particular advantage of this alliances concerns strategies for
risk-sharing and increased opportunities for financial support. The
importance of PPP models will be further accelerated by reduced
financial support from the Structural Funds.
7
There is also a regional initiative supported by the national government called “BioInstruments
Jena” in the field of biotechnology / chemical industry in Jena-Erfurt-Ilmenau. The network of competence "BioInstruments Jena" has its tradition in the precision mechanics and optics firmly secured in the middle of the 19 th century by people such as Ernst Abbe, Carl Zeiss, and Otto Schott.
8
With the established strategy dialogue, it has been much easier for the regional government to
follow and support the clustering effort.
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4.
Learning from the
clustering process
Central
German
In Germany, the development of educational and training aspects as
well as infrastructures is mostly the competence of states and communities. The support for business establishment and star-ups can
be initiated by all political levels, and the support of innovation processes is normally pursued through programmes at states and national level9. However, it seems that authorities at local level are best
capable of goal-oriented development of funding programmes10 and
the execution of their control, whereas higher authorities are more
suitable of focusing support on specific regions and branches.
It has taken time to get on tracks the clustering process of the Central Germany, in a region covering three administrative areas (states)
and a heavy industrial past, but some of the overtaken actions have
contributed to developing better policies and cutting off barriers to
innovate. Furthermore, the future ambitions seem positively high.
Implications for the chemical sector
The Central German clustering process started in the beginning of
1990. At the time, it was more about relationships and networking,
not about following a specific cluster approach. Still, two chemical
sector specific processes were created on the grounds of these networks: plastics processing in 1997 and strategic dialog with the policy makers in 2000. These resulted later on in interesting developments. For example, one of the cluster development processes in
Saxony-Anhalt, “Chemicals/Plastic”, has successfully led to the establishment of several networks and numerous projects.
9
For example, during 1991-2003, the national government provided fiscal transfers of approxi-
mately 1.3 trillion euros to the Eastern German actors (300 billion euros in tax revenues). 90 billion
euros of it was spent on economic development programs, and the rest on social policy measures,
general budget support to states, infrastructure, etc. The national government has financed a
number of initiatives in specific clusters through the EU subsidized PRO INNO, NEMO, or InnoRegio programmes.
10
During the programme period of 2000-2006, the Central German region was eligible for up to
19.2 billion euros from the European Union, but at the same time the European Commission started
to impose more strict conditions on state aid.
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Chemical industry clustering efforts in Central Germany
Implications for the local and regional support institutions
By the end of 2004, it was estimated that the initiated cluster-building
process had positive economic impact on Central German region’s
profile across Germany and on the rhetoric of local politicians 11. Still,
the private sector estimated that regional cooperation, especially in
the public sector, hadn’t taken off in a bigger way. Therefore, the
industrial initiative of Central Germany started to prepare a vision
and a strategy for Central Germany evoking national government’s
Agenda 2010 for labour market reforms launched at the same time.
Cooperation, for example between biotech actors in Saxon locations
has been encouraged over time, but the cooperation over the boarders is not being promoted systematically.12 This can be estimated
being an unfortunate result because often a specialised niche can
get more successful in a larger regional context, which does not necessarily follow the administrative boarders.
The evolution of the Central German chemical clustering effort is
characterised by a supra-regional approach integrating both the
states of Saxony-Anhalt, Saxony, Thuringia and the chemical sites in
Brandenburg. It is a joint effort of industry, politics and science to
increase investments and innovation capacities along the whole
chemical value chain and to develop the Central German region into
a competence centre for polymers and plastic techniques.
Implications for the national and EU institutions
The first important outcome of the chemical cluster process was the
establishment of the so called “Strategy Dialogue Chemistry” between the regional government and the Association of the chemical
industry in 2000. The strategy dialogue is a joint effort to support the
11
For example, in May 2003, the Minister for Economy and Labour of the State of Saxony-Anhalt11
concluded that The Congress of Chemical Regions11 can be understood as a sign of the debate
about good governance as offer for co-operation and communication between politics, administration and the economy in Europe. The event underlined the fact that a good political framework for
intensive co-operation in regions may help optimising growth, employment and regional development in the chemical sector.
12
BioCity is part of the BioSaxony project of the Saxon Land government. In other parts of Central
Germany small biotechnology agglomerations have been established (e.g. Halle, Leuna, Jena).
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Chemical industry clustering efforts in Central Germany
development of the industry by the administration and the enterprises
to agree on a long-term strategic policy with a particular attention
towards the topics on the environmental and the European policy.
Under the leadership of the Minister President, this dialogue has a
high political priority. It is about a very codified strategy dialog between industry and policy makers on such topics as innovation, investment support, settlement of new enterprises, innovation centres,
or the improvement of general framework conditions through workforce development or cooperation between schools and business.
The essential element of the cluster development is the political
process for the design of the general framework conditions in the
industry’s development. The main pillars of the chemical cluster are:
the network of the chemical parks in Central Germany, part
of a Central European Chemical Network 13 and the European Chemical Regions Network (ECRN)14
and the supra-regional network of plastic manufacturers,
Polykum e.V.15
Still, one may argue that not all the actions are efficient or warmly
welcomed by the industry. At the moment, the national Kompetznetze programme is not seen to give tremendous value to the
Central German chemicals cluster because “everybody is already in”.
(Interviews)
13
The regional chemical parks have joint their forces in the Central European Chemical Network
(CeChemNet). Together with chemical companies, service providers, business associations, scientific and research organisations they combine extensive expertise in the chemical industry and the
successful chemical park management excellence. Most of the working groups of the chemistry/plastics cluster in the Central Germany as are based on CeChemNet.
14
The regional cluster board has been acting as a coordination forum and among other things has
launched a European network of chemical clusters (ECRN)
15
The Polykum e.V. is an association to support the development of polymers and plastic technol-
ogy in the central Germany. It’s task is to strengthen the cooperation between universities, research institutions and the SMEs in the polymer producing industry, enhancing cooperation alongside the value added chain from the special polymer to the processing technology and the innovative product. To support SMEs in the development of new products and in improvement of present
products or technologies, contacts have been facilitated between polymers producers (located
mostly in chemical parks) and polymers processing enterprises (supplier-client-relation).
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5.
Appendix I: The clustering efforts in
Central Germany’s chemicals industry
A - The chemical industry
The products of chemical industry are the base for almost every
manufacturing activity. They can be found in the manufacturing of
paint, medicine, fertilisers, pesticides, herbicides, animal health
products, water treatment materials, colouring agents, manmade fabrics, detergents, disinfectants, polishes, cleansers,
cosmetics, and toiletries. Chemical industry in terms of turnover,
productivity, export, employment and R&D, is the leading industry
with strong influence on other economic sectors. The major part of
the chemical enterprises are SME that are more competitive in comparison to the structure-dominating multinational enterprises.
The European chemical industry, still a world-leader among American and Japanese counterparts with a 30% share, has a strong scientific basis. In fact, the focus on innovation, research and knowledge are still seen as the key elements to increase industry’s competitiveness.
Germany has the largest economy in Europe and ranks third in the
world economy, surpassed by the United States and Japan. The export of goods is an essential part of the German economy and one of
the main factors contributing into its wealth. Most of the country's
exports come from engineering, especially in automobile
engineering, machinery, metals, and chemical goods.
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Chemical industry clustering efforts in Central Germany
B - The Central Germany Region
Mitteldeutschland, Central Germany, is a region encompassing
parts of three states (bundesländers) in south-eastern of Germany:
Saxony, Saxony-Anhalt, and Thuringia16, interacting with three state
governments influenced by three separate political procedures and
programmes. The major cities of the region are Halle, Leipzig, Dessau and Jena. Leipzig is a business centre of the Central Germany
region. Its central location makes it attractive for transportation and
logistics.17 Statistically and geographically the region of Central Germany is a “the real” centre of Europe (See Figure 1 debajo de). Also,
a big part of European culture has its origins in the region: for example Martin Luther, Johann Sebastian Bach or Wilhelm Richard Wagner havd their origins there. Political changes in Eastern Europe in
the late 1980s called “the Wind of Chance” influencing the fall of the
Berlin Wall in autumn 198918 also took place in Mitteldeutschland.
Figure 1 Central geograhical situation of Mitteldeutschland
16
Saxony has population of 4,296,000, Saxony-Anhalt (2,494,000), Thuringia (2,355,000)
17
For example, DHL and leading European mail order company, Quelle, set up there their Euro-
pean headquarters.
18
40 years of communism (1945-1989) resulted in deterioration of basic infrastructure, widespread
environmental degradation, poor capital stock, lower than expected competitiveness of most eastern German companies, and a quasi non existent medium-sized business sector or services sector.
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Chemical industry clustering efforts in Central Germany
Today, the area which was part of the former East Germany is known
as “Chemical Triangle”, one of the modern and competitive centres
in European chemical industry. Important multinational companies 19
locate in the region that makes the state of Saxony-Anhalt the biggest concentrated chemical region in East Germany. Plastics chemistry is the strongest sector in the Central German region with some
800 companies, organised in numerous business networks, particularly in the chemical parks.
The granularity of the clustering efforts is quite different form the size
of a statistical cluster category or geographical NUTS-2 area used in
the European Cluster Observatory, but it is interesting to attempt to
link the Central German clustering efforts to their corresponding statistical cluster category and geographical areas where they have
taken place. See the following table20.
NUTS II Region
Cluster
Category
Employees
Size
Specialisation
Focus
Stars
Thüringen
Dessau
Halle
Leipzig
Chemicals
Chemicals
Chemicals
Chemicals
2 467
3 156
2 115
1 796
0,26%
0,33%
0,22%
0,19%
0,68
4,47
1,73
1,03
0,36%
2,34%
0,90%
0,54%
0
1
0
0
Figure 2 Statistical employment analysis (Source: European Cluster Observatory)
19
Main companies
Dow Olefinverbund GmbH (www.dow.com), 2250 employees, turnover 2,8 billion €
InfraLeuna Infrastruktur und Service GmbH (www.infraleuna.de), 490 / 210 billion €
ZSG Zeitzer Standortgesellschaft mbH (www.industriepark-zeitz.com)
P-D Chemie Park Bitterfeld Wolfen GmbH (www.chemiepark.de)
Bayer Bitterfeld GmbH (www.bitterfeld.bayer.de), 656 / 560 million €
Solvay Chemicals GmbH (www.solvay.de), 4.806 / 1,664 billion €
SKW Stickstoffwerke Piesteritz GmbH (www.skwp.de), 600 / 292 million €
TOTAL Raffinerie Mitteldeutschland GmbH (www.total.de), 650 / 2,3 billion €
Serumwerk Bernburg (www.serumwerk.de)
20
A word of caution is necessary to avoid extracting any conclusions from this table, other than
that the statistical analysis captures the existence of employment in that area and location, and
that further study is necessary.
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Chemical industry clustering efforts in Central Germany
C - The challenges of the Central Germany chemicals
industry
Unlike globalisation and further European integration that will challenge the industry in the upcoming years, past 15 years of the region’s chemical industry have gone through big structural
changes 21. After the fall of the Berlin wall, the old and inefficient enterprises were restructured and competitive and productive locations
for chemical industry have been developed.
Thus, after German reunification in 1990, the region had to overcome
a two-fold challenge:
On one hand, the business was unable to act independently and necessary resources could be procured only in a
political way. The consequences of a politicised economy had to be overcome22.
On the other hand, the traditional industrial region of
Saxony needed fundamental structural change.
The combination of comprehensive chemistry competences and
regional acceptance has created competitive advantages based on
favourable location conditions 23, an infrastructure suitable for production24 and high qualified employees 25. However, the main weak-
21
In 1990, “chemical triangle” plants, which employed some 26,000 people, were in bad conditions
with low productivity rates and no sales or marketing operations. With the exception of Leuna’s
polyethylene plants (manufacturing plastics for Tupperware and shampoo bottles) could not compete globally.
22
There were mainly two alternatives: take the path of an endogenous transformation to a low-
productivity economy or a long, path-dependent process of productive experiences, training and
cooperation in building a completely new economic structure. It became obvious that the region
had to find new fields of economic activity, by readjusting old fields in a manner suitable to market
economy. For example, non-governmental institutions, such as Chambers of Commerce which play
a strong role in Germany, needed to be rebuilt, and incentives for skilled workers were created to
prevent them migrating to the western Germany.
23
Due to past investments, the region had one of most modern transportation and telecommunica-
tions infrastructures in the world, and a workforce eager to keep the industry in the region.
24
Plastics technology firms in Thuringia (west of the region), food processing industry (north),
automotive cluster (north west), IT cluster around Dresden, optical and electronic measurement
equipment…
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Chemical industry clustering efforts in Central Germany
nesses of the regional economy, compared to Western Germany are
unfavourable branch structure, too small industrial basis, little
entrepreneurship, deficits in venture capital equity capital, small
market shares, only one trans-regional important urban centre,
Halle-Leipzig.
The SMEs have been strongly affected by the restructuring process26, which has represented a major challenge but also a chance for
further development. In consequence of structural change, the
chemical sites developed specific know-how for the management of
complex processes for the establishment and management of chemical locations, including the excellence for the revitalisation of old industrial areas, and specific settlement strategy. Today, these experiences could be an important contribution for the enlarged European
Union, but have not been entirely exploited yet.
Overcoming barriers to strategic cross-regional and crosssectorial collaboration
In 2004, a survey conducted among top decision-makers in three
main regional clusters (automotive, chemicals and life sciences)
identified two key goals for the cluster initiatives:
Raise the profile of the region
Increase the level of cooperation in the region, especially
among companies and universities/research institutions
and between companies of different sizes.
The survey also demonstrated that perceived strengths of the region
were good road network, available skills, competitive cost of doing
business and available government support. Thus, mainly due to
Germany’s federal system27, cross-regional initiatives or networks
25
For example, Saxony and Thuringia had the highest proportion of employees with university
degrees out of all German states. In the region, there are 6 universities, 4 technical universities, 14
technical colleges, 9 training colleges (non-science careers), 7 music and art schools.
26
Foreign investors played leading role in this process. The general economic restructuring suc-
cessfully managed to diversify the mono-structures in the former chemical region and led to the
establishment and new SMEs settlements.
27
Germany is a Federal Republic made up of 16 States (Länder). The term of federal states
(Bundesländer) is commonly used colloquially due to its specific mjeaning. In the three free states
of Saxony and Thuringia the government is referred to as the State Government (Staatsregierung),
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Chemical industry clustering efforts in Central Germany
had difficulties in getting approval or funding for joint applications by
any individual state ministry – even after the elections in 2002 where
the same Party held the premiership in all the three states of the
Central German region.
Difficulties in attracting young talents
Even if Halle-Leipzig is a traditional centre of trade and commerce,
the economy of Central German region was shaped by industry until
the early 1990s. Due to the sudden and mainly unprepared opening
of the East-German economy, there was a massive deindustrialisation in almost every East German region28. In fact, from
1989 to 1995, 70 % 90 % of the work force vanished to different industrial branches of East Germany, and the number of industrial jobs
in the city area decreased from 100.000 in 1989 to approximately
10.000 in 2002. By that time, the city of Leipzig hosted approximately
80.000 poor people with total population of 500.000. Finally, the region of Central Germany became an area with the highest unemployment rate in the sate. Economic performance of the region was
still weak in 2005: the focal point of the region, Leipzig, had unemployment rate above 20% while the region had lost 6% of its population compared to the figures in 199029.
This situation also reflected in the relatively low and declining share
of employees in the chemical industry. In fact, the region seems
seemed to lack a distinct articulation of interests from industry with
regard to the development of human resources. This is mainly
caused by the developments forced by the process of restructuring in
the chemical industry and the massive reduction of chemical employment in the past, which has negatively influenced the image of
the employment perspectives.
and in Saxony-Anhalt the term Land Government (Landesregierung) is used. Politics at the state
level often carries implications for federal politics and state elections are viewed as a barometer of
support for the policies of the federal government. The states are responsible for cultural development, law enforcement and the educational system in its entirety, but the powers of the state governments and legislatures in their own territories have been much diminished in recent decades
due to ever-increasing federal legislation. A commission has been formed to examine the possibility of instituting a clearer separation of federal and state powers.
28
Today, industry is no longer the main economic basis of the Leipzig region. In fact, plants barely
exist in the inner cities.
29
Leipzig had lost more than 10%, Halle and Dessau around 20%.
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Chemical industry clustering efforts in Central Germany
In other words, the shortage of qualified employees and young people is one of today’s challenges for the region, and the demographic
development is only worsening the situation: in the coming years,
older employees will leave the enterprises, and no sufficient replacement seems to be easily available.
Simultaneously the growing shift from purely production-oriented direction, high automatisation, and hierarchical enterprise structures to
modern, flexible and increasingly service-oriented structures required, and still does, new understanding for knowledge management and competence creation.
As a result, in addition to the globalisation and European integration,
the future challenges for the export oriented and technology intensive enterprises will be, particularly for the SMEs:
lack of highly qualified employees due to the workforce
aging and decreasing number of young people who enter
labour market
development of innovation potential through for example
staff training, in order to facilitate competences to shape
changing processes
Preventing the specific Central German know-how leave abroad
Considering the increased global competition in the chemical industry, and in particular the labour cost pressures coming from the EastEuropean countries and Asia, it has been estimated that the competitiveness of the traditional chemical sectors, such as manufacturing of
commodity- and petrochemicals, can only be boosted by higher innovation capacity. Furthermore, highest turnover growth rates are generated in the research intensive field of speciality chemicals, active
substances and other chemical products in the opposite to the manufacturing of basic chemicals30.
30
For example, in the manufacturing of pharmaceuticals, 90% of the turnover has been facilitated
in the field of speciality chemicals. The importance of the growing research intensive sector is
visible notably in Saxony-Anhalt, where the majority of scientists work in this field. Also, the main
part of these scientists is working in SMEs comprising manufacturing of speciality chemicals.
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Chemical industry clustering efforts in Central Germany
A number of research institutions31 and applied research and industry-related institutes32 exist in the chemical-related areas. Moreover,
a new technology centre for nano-structured materials (TGZ III) will
be built in Halle for joint research projects33. The Fraunhofer Institute
for Factory Operation and Automation will open a Virtual Development and Training Centre (VDTC) in Magdeburg, devoted to applied
research and innovative services. Further research potentials exist in
the field of biotechnology with the core competence in the Technology and Start-Ups Centre Halle (TGZ).
Thus, the situation is not very optimistic because:
31
Few companies based in Central Germany conduct R&D
there because bigger firms carry out their R&D activity in
their headquarters outside of the region.34
SMEs have difficulties in developing market driven processes and products.
Weak connection between academia and business in spite
of the strong universities that locate in the region.
the Martin-Luther-University Halle-Wittenberg, Ottovon Guericke University Magdeburg, the
University of Applied Science Merseburg and the College “Anhalt”
32
Fraunhofer Institute for Mechanics of Materials Halle; Fraunhofer Pilot Plant Centre for Polymer
Synthesis and Processing, Schkopau; Max Planck Institute for Dynamic of Complex Technical
Systems, Magdeburg; Max-Planck Institute for Microstructure Physics Halle, Research Centre for
Enzymes and Protein Convolution of the Max-Planck Association Halle, Leibnitz Institute for Plant
Biochemistry, Halle, Institute for Plant Genetics, Gatersleben
33
Collaboration between Max-Planck Institute of Microstructure Physics, Martin-Luther University
Halle-Wittenberg and Fraunhofer Institute for Mechanics of Materials
34
Most of the enterprises located in region’s chemical parks are either subsidiaries of large corpo-
rations which conduct their R&D activities in the mother company outside the region, or SMEs
without important research capacities. In this context, there is not only a substantial need for accessible research capacities on site, but also a need for stronger orientation of chemical sites
towards innovative sectors, e.g. biotechnology or medical engineering
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Chemical industry clustering efforts in Central Germany
D - Clustering process in Central Germany
Traditionally, the reference units of German national technological
policy were single firms, technologies or sectors. Similarly, the regional economic policy after the unification has been mainly focused
on the direct support of the enterprises in their investment activities35.
In the mid-1990s the Federal Ministry of Education and Research
(BMBF) has reoriented its technology policy. This reorientation was,
on the one hand, a reaction to Germany's poor economic performance in the mid-1990s and, on the other hand, prompted by the institutional requirements of new technologies (biotech, in particular) that
were incompatible with the existing technology policy framework. The
policy reorientation included the identification of the region as a
new reference unit for technology policy and the explicit recognition of (regional) clustering aspects in support programmes
such as the BioRegio competition36. Thus, except in the context of
the initiative “Kompetenznetze Deutschland”, clusters still do not play
a significant role as a framework in the German national business
network policy.
35
Investments in impressive industrial plants have often been alleviated by a rather ‘permissive
strategy’ of official authorities which had and still have a comparatively weak bargaining position
due to the economic problems of the region. This has successfully facilitated the building up of new
production and has increased the productivity. About 80% of the present equipment has been build
after 1990 at the latest technological state of the art. Still in 2000 approximately 25% and in 2001
20% of the investments to improve business-related infrastructure and companies’ capital stock in
Saxony-Anhalt have been financed by public resources, generated by the national programme
“Gemeinschaftsaufgabe zur Verbesserung der Regionalen Wirtschaftsstruktur“ (GA) – “community
task for strengthening of regional economic structure”. In 2005, GA was made available to cluster
initiatives, and regional strategies below state-level could be supported with federal funds.
36
In 1995-2005, a cluster programme called BioRegio in the field of embryonic and emerging clus-
ters having a geographic focus on Munich, Heidelberg, Rhineland, and Jena was supported by the
national government by 75 million EUR. Despite its relatively small size, BioRegio had an important
symbolic and practical impact on the German biotech innovation system. Even independent observers say that the programme has – more than any other federal initiative – produced rapid,
positive results and stimulated the formation of new enterprises, also giving a significant boost to
Germany's lagging venture capital industry. This is also reflected by the fact that Germany is today
the EU member-state with the highest number of biotech enterprises. The programme was later
complemented by two other programmes: BioProfile and BioIndustrie 2021.
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Chemical industry clustering efforts in Central Germany
At the state level, clusters became an important factor to organise government efforts after 15 years of investments in the basic
infrastructure37. From the policy point of view, the cluster process in
the Central Germany originates from the implementation of numerous projects under “Regional Innovation Strategy (RIS) framework
Halle-Leipzig-Dessau” in 1995,1996. Now RIS is seen as the basis
for the development of cooperation directed towards the support of
innovation support in Central Germany. Actually, already in 1992, an
Action Committee for Central Germany was formed by Chambers of
Commerce of Halle and Dessau, but the states were still at the time
too busy getting fundamental policies and institutions in place in order to take the best benefit out of that initiative.
At more local level, individual cities and counties have their own
economic development efforts, too. For example, Leipzig has organised three key policy levers (investment attraction, innovation/technology and workforce skills) around five cluster initiatives
(automotive, media, energy, biotech, other services). Although a
small but not to be underestimated biotech community38 exists in the
region, the locations cannot be compared with the big concentrations
like Munich.
As a response, and in addition to the initiatives driven by various
public authorities, private sector activated its resources and
networks, as well. For example a plastics manufacturer Dow, operational in the Central Germany region since 1995, started the first
networking processing for plastics in 1997 with the idea to develop
SMEs and to coordinate innovation processes together with local
institutes.
Further on, in April 2000, a group of company executives founded an
association, Regional Marketing Mitteldeutschland GmbH (later:
the industrial initiative of the Central Germany)39, with cities of Leip-
37
Motorways, high speed train connections, upgraded airport, distribution centre, new power plants
with filter systems
38
Biotechnology in Leipzig has specialised and has gained a considerable reputation in regenera-
tive medicine.
39
A not-for-profit organisation financed by membership contributions. Were involved at the begin-
ning: four major cities: Leipzig, Halle, Jena, Dessau, and around 50 large companies (including
Dow, BMW, E.ON, Bayer, Siemens, PriceWaterhouseCoopers, Ernst & Young, KPMG). Updated
info on: www.mitteldeutschland.com
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Chemical industry clustering efforts in Central Germany
zig, Halle, and Dessau – unifying the three states of the region:
Saxony, Saxony-Anhalt and Thuringia. Since 2001, the cluster process in Saxony-Anhalt and the discussion concerning cluster development has been actively promoted by the association, and in 2002,
cluster process became even its “core product”.
To concretize the discussions40, a big conference was organised in
2003 to kick off the clustering process out of the region. Basically, at
that time, many initiatives existed and actors that worked separately
on innovative issues tried to imitate clustering approach at various
state levels. The operational challenge was to build a “common roof”
for all of them and to focus on concentrated efforts, value chains
and collaboration between small and big companies.
By early 2005, the industrial initiative of the Central Germany took
the role of regional (cross-state) economic development agency, and
coordinated three cluster initiatives in the so called “initial phase 41”
(energy/environmental technology, foodstuffs, culture/tourism), and
cluster initiatives in the so called “development phase (automotive,
biotechnology/life sciences, chemicals/plastics).
40
In the beginning, no clear coordination mechanism was created except a statement of intention
from the governors of Saxony, Thuringia, and Saxon-Anhalt to meet every six months.
41
“Initial phase” lasts about 2 years: Identify critical mass of firms, researchers or officials; organ-
ize the most important firms; form a cluster board; choose an engaged cluster spokesperson; form
a general strategy
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Chemical industry clustering efforts in Central Germany
E - Present situation
Today, the industrial initiative of Central Germany serves as a coordination office for supporting and organising activities with companies and research institutes as the key players and driving forces.
They initiate, coordinate, and provide methodology for the inter-state
cluster development, promoting trans-boarder collaboration and aiming to keep qualified work force in the region. The target groups are
state government, universities and R&D agencies, associations,
communities, and cities. Leading companies in the region provide
financial resources, determine the contents of the cluster development by selecting cluster speaker42 and forming coordination committee.
Depending on the interests of the cluster companies, other sectors43,
existing networks and initiatives at the state level are integrated in
projects44. In other words, the regional initiative has broad focus aiming to interlink existing branches of economy. Annual congress
and cluster forum45 bring together all relevant actors of branches.
42
Development of concept of “cluster spokespersons” especially for chemical/plastics, automotive,
biotechnology, and eventually energy/environment, information technology/media, foodstuff resulted from the October 2002 conference.
43
such as training, banking or government
44
The cross-cluster agreement is made in the “Central German Cluster Council” on which sit the
cluster speakers, the coordinating research institutes of the clusters as well as representatives of
the State governments.
45
Regionalforum is mainly public sector and association-driven initiative that grew out of an EU-
sponsored project to develop a regional innovation strategy
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Chemical industry clustering efforts in Central Germany
6.
Bibliography
ChemSME: “SWOT Analysis and Benchmarking Study”. Report of
the European Chemical Cluster for the Support of SME. Post 2005.
Congress Volume of the 1st European Congress of Chemical Regions organised by the European Chemical Regions Network in
Brussels. 21st May 2003.
Dr. Christian Hauser, Institut für Mittelstandsforschung (IfM) Bonn:
“The Europe INNOVA Cluster Mapping Project - Country Report
Germany”. April 2007.
ECRN: “Science & Industry”. Final Report Topic 1. May 2006.
Henning Nuissl, Dieter Rink, UFZ Centre for Environmental Research, Dept. of Economics, Sociology and Law: “Leipzig Case
Study”. URBS PANDENS - Annual Report 2002. December 2002.
Jeffrey Fear, Christian H.M. Ketels: “Cluster Mobilization in Mitteldeutschland”. Harvard Business School Review 9-707-004. October 18, 2006.
Vedrana Miljak, Martin Heidenreich: “The Leipzig Economic Region”.
June 2004
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