Discussion Papers 2006. No. 52.
Clusterisation Processes in the Hungarian Automotive Industry
CENTRE FOR REGIONAL STUDIES
OF HUNGARIAN ACADEMY OF SCIENCES
DISCUSSION PAPERS
No. 52
Clusterisation Processes
in the Hungarian
Automotive Industry
by
András GROSZ
Series editor
Zoltán GÁL
Pécs
2006
Discussion Papers 2006. No. 52.
Clusterisation Processes in the Hungarian Automotive Industry
ISSN 0238–2008
ISBN 963 9052 62 0
2006 by Centre for Regional Studies of the Hungarian Academy of Sciences.
Technical editor: Ilona Csapó
Printed in Hungary by Sümegi Nyomdaipari, Kereskedelmi és Szolgáltató
Ltd., Pécs.
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Discussion Papers 2006. No. 52.
Clusterisation Processes in the Hungarian Automotive Industry
CONTENTS
1 Introduction .................................................................................................................. 5
2 Clusterisation process and the cluster as a development instrument ............................ 7
3 The automotive industry as a cluster forming sector .................................................. 15
4 Experiences of automotive clusters in Europe............................................................ 19
4.1 Welsh Automotive Forum (WAF)...................................................................... 21
4.2 Verbundinitiative Automobil (VIA) ................................................................... 23
4.3 Automobil Cluster Styria (Acstyria)................................................................... 24
4.4 Automobil Cluster Oberösterreich (AC)............................................................. 26
4.5 Automotive Cluster Vienna Region (ACVR) ..................................................... 28
4.6 Summary of foreign experiences ........................................................................ 29
5 Clusterisation in the Hungarian Automotive Industry ................................................ 31
5.1 Clusterization process in automotive industry.................................................... 31
5.2 The spatial concentration of Hungarian automotive industry ............................. 32
5.3 The qualitative aspects of clusterisation in the automotive industry of
Transdanubia ...................................................................................................... 40
5.3.1 The progress of automotive supplier relations............................................41
5.3.2 The role of innovation, research-development and training .......................43
5.3.3 The promotional factors of clusterisation .................................................. 45
5.4 The competitive factors of automotive industry in North-Transdanubia ............ 47
5.4.1 Manufacturing factorial conditions .......................................................... 47
5.4.2 Market demand conditions ....................................................................... 48
5.4.3 Supplying and complementary industries................................................. 50
5.4.4 Corporate strategies .................................................................................. 51
5.5 The Central European automotive cluster .......................................................... 52
6 The Pannon Automotive Cluster (PANAC) initiative ................................................ 56
6.1 The foundation of PANAC initiative.................................................................. 56
6.2 The services of PANAC ..................................................................................... 61
6.2.1 Providing training and specialist training projects ................................... 62
6.2.2 Providing specialist events ....................................................................... 63
6.2.3 Providing information and communication services ................................ 63
6.2.4 Providing diagnostic and consulting services........................................... 64
6.2.5 Providing technology transfer services...................................................... 64
6.2.6 Providing marketing and PR services, internationalisation ....................... 64
6.2.7 Fostering cooperation and development capital ........................................ 65
7 Conclusion.................................................................................................................. 65
References........................................................................................................................ 69
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Discussion Papers 2006. No. 52.
Clusterisation Processes in the Hungarian Automotive Industry
List of figures
Figure 1 The different phases of clusterisation process................................................... 9
Figure 2 The network of car development (actors and relationships)............................ 18
Figure 3 The spatial concentration of automotive industry in Hungarian
counties 2003 .................................................................................................. 38
Figure 4 The spatial distribution of automotive businesses in North-
ransdanubia,
2003................................................................................................................. 39
Figure 5 The spatial distribution of jobs in automotive industry in North-
ransdanubia and Central-Hungary................................................................... 40
Figure 6 The concentration of automotive industry in Central Europe ......................... 54
Figure 7 Car manufacturers in the environment of Gyır and Audi Hungária
Motor Kft. ....................................................................................................... 55
Figure 8 The corporate scheme of PANAC................................................................... 58
Figure 9 The geographical location of PANAC members in year 2004 ........................ 59
Figure 10 PANAC and its network of associated organisations and institutions ............ 61
List of tables
Table 1
The major data of the largest car manufacturers, 2004 ................................... 33
Table 2
The major data of automotive industry in Hungary between 1999–2004 ....... 35
Table 3
Location Quotient (LQ) values in Hungarian automotive industry
in years 2001 and 2003 ................................................................................... 37
Table 4
Some major indices of the region’s automotive industry ................................ 52
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1 Introduction
During the past few years the interest for regional clusters and for their role in
economic development has grown to an extremely high level both in science and
in the community of economic development expertise and business operation
managers. This continuously growing attention is originating from the tough
competition both on regional and international level in the globalising world
economy, from the disfunctioning of traditional regional development models and
regional policies and also from the emergence of successful clusters in different
enterprises and industries worldwide. As a result of getting into the focus of at-
tention the rise and penetration of cluster-based economic policies is seen almost
everywhere in the world and on the other hand a real explosion is going on in the
literature of regional clusters and regional clusterisation.
At the beginning of the 21st century the major centres of world economy are
consisting of such areas where companies, suppliers, institutions, universities and
state organisations working and cooperating within the same sector are creating a
critical mass and their close cooperative relations are granting competitive ad-
vantages in the international competition of the globalising world (Lengyel, 2000,
2001; Lengyel–Buzás, 2002; Lengyel–Deák, 2002, Porter, 1990, 1998, 2000).
These regions having recognized in due time that economic growth can be
achieved by successful economic restructuring, modernisation, by building coop-
erative networks and regional clusters instead of the implementation of the tradi-
tional sectoral model of industrial policy (Upper-Austria, Baden-Württemberg,
Bavaria, Finland etc.) could gain significant competitive advantages in global
competition (Bergman–Feser, 1999; Boosting innovation… 1999, Enterprise
Clusters and Networks 2002; Rosenfeld, 1995, 2002).
In Europe’s economically boosting countries – as well as in overseas areas –
concentrated cooperation systems are getting into a key position during the or-
ganisation of regional economies. Owing to this fact several hundred clusters
have been registered worldwide (The Competitiveness Institute 2004). During the
past decade several initiatives have been established for gaining advantages from
clusterisation in several countries of Europe such as Austria, Germany, Denmark,
France or Finland. Due to their success more and more information is heard on
the formulation of new regional and industrial clusters and their governmental
support (Nikodémusz, 2002; II. Országos Klaszter konferencia 2003; Grosz, 2003;
Lengyel–Rechnitzer, 2002).
During the past few decades for adapting industrial clusters to the require-
ments of the global market and for increasing their competitiveness industrial
clusters have developed into one of the most essential instruments of economic
development policy and for some years – due to the relatively easy localisation of
their geographical dimension – they have a vital role in regional development, i.e.
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Grosz, András : Clusterisation Processes in the Hungarian Automotive Industry.
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the implementation of regional policy as well (Dıry, 2005; Dıry–Rechnitzer,
2002; Lengyel–Rechnitzer, 2004; Rechnitzer, 1998; Steiner, 1998).
Today in almost all segments of socio-economic life the role of networks con-
sisting of different companies, organisations, institutes are highly appreciated.
Due to the rapid development of the Internet and other communication channels
the maximal utilisation of the potentials of tight cooperation systems has an ex-
tremely high importance. Since the 1990s cluster-oriented development, one of
the most definitive instruments of economic development, has been targeted at the
deepening and intensification of cooperation among different enterprises working
within the same industrial sector or value chain (from SMEs to large multina-
tional firms), private and public research and educational institutes, economic and
regional development organisations and other firms rendering various services
and also at launching and financing common research projects.
The author of this paper is going to investigate and follow clusterisation proc-
esses in the field of Hungarian automotive (car and car part manufacturing) in-
dustry having traditional fundaments in Northwest-Hungary but the emergence of
foreign direct investments and the specialisation of automotive services acceler-
ated its development process during the past ten years. The investigation of the
clusterisation of Hungarian automotive industry raises the following questions:
− What are the major features of the spatial concentration of automotive
industry in Hungary?
− At which phase is the clusterisation of automotive industry now?
− What factors are fostering the clusterisation of this sector within the re-
gion?
− What factors and processes are hindering the transition of clusterisation
process into a new phase?
− How can the clusterisation of the Hungarian automotive sector be inte-
grated into international but most of all into the East Central European
clusterisation processes?
The empirical research of regional and industrial clusters and clusterisation
will be based on the very strong cooperative ties between motor vehicle
manufacturing and its satellite industries (i.e. automotive industry) and their
essential background supply services, R&D capacities and the different actors,
organisations and institutions directly involved in the development of this sector.
My selection of the automotive sector is motivated by two reasons. The first is,
that due to the automotive industry’s dimensional features, characteristics and
structure, its claim for a high-tech supplier industry, the wide circle of its indus-
trial and servicing linkages and its need for continuous R&D activities originating
from globalisation-based intensive international competition, the major features of
clusterisation may easily be identified in automotive industry. The technology
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Discussion Papers, No. 52.
applied within this sector and the major trends of the past ten years are clearly
verifying the fact that the importance of regional and industrial clusters will fur-
ther increase and they will be the key factors of the efficiency and success of
automotive industry. The second reason of my choice of the automotive industry
is explained not by general or global tendencies but rather by Hungarian proc-
esses. One of the major consequences of the economic restructuring in the period
after the change of regime was the dynamic development of engineering industry,
namely motor vehicle and car part manufacturing. The regional concentration
processes, the dominating features of clusterisation, may clearly been identified
within this sector. In the history of Hungarian clusterisation Pannon Automotive
Cluster seated in Gyır may be regarded as one of the most successful initiatives.
2 Clusterisation process and the cluster as a development
instrument
As a summary of the different terms and approaches of clustering highlighting its
common features, we can conceptualise clusters as a spatially concentrated coop-
eration system of competing and cooperating independent economic actors (busi-
ness enterprises) and non-profit institutions, organisations (institutes of higher
education, research institutes, professional associations, development agencies
etc.) organised on a line of industrial sector or value chain that may significantly
increase both the actors’ and their whole region’s competitiveness level. This
definition is surpassing the simple network approach of horizontal relations mani-
festing through the various cooperation activities of business enterprises within
the same market and industry (e.g. common acquisition, R&D, marketing and
sales policy). This is rather more an intersectoral system, a network of business
enterprises of different or complementary activities organised along a special link
or knowledge bases of a value chain.
The term cluster has double meaning in the relevant literature: this word de-
scribes a process (clustering) and its ‘final product’ (cluster) at the same time
(Grosz 2003a). Thus, during the analysis of the model of clusterisation its process
and timely features should not be neglected. Starting from the term cluster clus-
terisation process may be interpreted as a spontaneous, in the majority of cases
self-sustained socio-economic development process running in several sub-peri-
ods resulting in the above-mentioned territorial cooperation on the basis of wide
range of cooperation and synergies and the participants may benefit all of the ad-
vantages of this cooperation structure. Just to mention some examples for the
spontaneously starting clusterisation processes: film industry in Hollywood, gam-
bling in Las Vegas, financial services in New York, London and Frankfurt, car
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industry in Detroit, software industry in Silicon Valley or the intensive concen-
tration of traditional handicraft industry in Northern-Italy.
In fact the formation and evolution of new regional clusters and clusterisation
itself are slow processes, sometimes lasting even for several decades having some
general phases and development stages in the majority of cases. An observatory
study on regional clusters has identified six common phases which according to a
publication of the European Commission can be summarised as follows (Regional
Clusters in Europe 2002).
Naturally, these development phases are theoretical they have been formulated
on the basis of the similarity of development trends and structural changes in the
majority of clusters. This means that in reality the development of a cluster does
not necessarily follow these phases closely but may be stimulated by similar
driving forces (Figure 1).
− The first phase which could be defined as the period of pioneer enterprises
is characterised by the emergence and foundation of new business organi-
sations. During this initial stage several new enterprises standing on the
grounds of a special local knowledge basis are founded on the territory of a
certain region. Characteristically, they are followed by several spin-off en-
terprises.
− The second phase is the evolution of cluster specific environment when the
increasing concentration of business organisations is attracting a growing
number of special supplier and service provider businesses. This is creating
a cluster-oriented intermediary and supplying industry formulating the sec-
ondary level of clustering consisting of a network of supporter companies.
The concentration of businesses also contributes to and promotes the for-
mulation of a special labour market standing on the basis of a large-scale
but competitive and well-trained labour and their rotation will ease the in-
formation flow among the participant firms as well.
− During the third phase the further development of clusterisation generates
new organisations or institutions to assess the specific demands of clustered
business organisations and on the basis of demands they provide specific
services through creating the necessary local preconditions of competitive-
ness. The physical infrastructure of clusterisation is gradually being set up.
− By the recognition and for gaining profit from the advantages of this milieu
the cluster has a strong gravitation force on its local environment. This
makes several non-clustered businesses to join the cluster and relocate their
site into the cluster ‘dominated’ region which besides attracting external
firms is still an ideal place for the foundation of new enterprises. Besides
attracting new enterprises the cluster’s gravitation force is manifested by the
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mobilisation of highly qualified, specifically trained professional labour
force.
− By the recognition and for gaining profit from the advantages of this milieu
the cluster has a strong gravitation force on its local environment. This
makes several non-clustered businesses to join the cluster and relocate their
site into the cluster ‘dominated’ region which besides attracting external
firms is still an ideal place for the foundation of new enterprises. Besides
attracting new enterprises the cluster’s gravitation force is manifested by
the mobilisation of highly qualified, specifically trained professional labour
force.
− The fifth phase of clusterisation is the period of establishing a non-market
based relational capital between clustered enterprises and various non profit
oriented organisations and institutions to facilitate the local circulation of
information and knowledge.
Figure 1
The different phases of clusterisation process
Development
phase
Radical renewing or
decline of the cluster
Working
Local circulation of information,
clusters
knowledge, social capital
Developing
Gravitation effect of local
competitive advantages
clusters
New organisations for
Potential
cluster specific demands
clusters
Policy driven
Creation of cluster specific
clusters
environment (suppliers, labour)
Formation of pioner firms based
Wishful thinking
on special local knowledge
clusters
Time
Source: The author’s own edition on the basis of Regional Clusters in Europe (2002).
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− And finally as in case of life cycles and life diagrams (product life cycle,
corporate life diagram) clusters also have a breakdown period which does
not necessarily mean the total failure or closedown of clustered enterprises
or the termination of the cluster itself but rather a stagnation period when
both the key sector and of the operation method of clustered enterprises,
organisations and institutions need radical changes for sustaining of their
competitiveness on the long run.
Naturally, if a cluster is unable to meet these challenges its regression or
termination is unavoidable. At the same time there are several examples in
everyday life when a cluster was able to respond the challenges by radically
transforming the economic profile of its enterprises and by restructuring its
institutional relation system between its enterprises and their various satellite
institutions and organisations, i.e. was able for reclusterisation just as in case of
the renewal of the Swiss watchmaker industry responding to the challenges of
East-Asian digital watch industry, or in case of the transformation of Detroit car
industry after the decline of the fordist paradigm, or in case of the restructuring of
the machine tool industry in Baden-Württemberg with the emergence of
electronic chips (Tichy, 1998) .
Lengyel agrees with Berg-Braun-Winden on the cyclical nature and a kind of
life cycle approach of clusterisation in the Hungarian literature (Lengyel, 2002),
which starting from critical mass emergence following through specialisation, the
launch of knowledge overflow and through the formation of a clustered structure
enables the enterprises of cluster to enter the market with high quality products
and services. This process definitively strengthens clusters, creates new enter-
prises and extends the corporate system of the existing actors. Lengyel is on the
opinion that the life cycle of clusters is determined by the life cycle of their key
product and their applied technology and by the radical changes in their adapta-
tion to the external market conditions (Lengyel, 2002). On the basis of these crite-
ria Lengyel reduces the number of the above-listed six development criteria to
four: (1) embryonic or initial phase; (2) growth or development phase; (3) mature
or advanced phase; and finally (4) declining phase.
Depending on the current phase of a clusterisation process, on its critical mass
(corporate, service and institutional), on the intensity and scale of their interrela-
tionship, on the degree of positive externalities and synergic effects of clusterisa-
tion Enright defines different cluster types on the basis of their development level
correlating to some extent with the above-mentioned phases (Figure 1) (Enright
2001):1
1 Buzás has a similar categorisation of clusters according to development level but he uses these
terms in a different way. He adds the notion of latent cluster to the categories of operating,
advanced and potential cluster. He interprets it as ‘the availability of economic actors is sufficient
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− Working clusters: These are clusters with enterprises that do have all the
critical mass of local knowledge, professional expertise, specialised labour
force and agglomerative advantages granting competitive advantages for
them against those enterprises that are not participating in a cluster. Oper-
ating clusters are based on the common knowledge of local competitors,
suppliers, customers and institutions cooperating within the cluster. The
participants of clusters are generally competitive in international markets
too. Advanced clusters have high R&D potentials and innovative skills
(Buzás, 2000).
− Developing clusters: These are clusters that do have the critical mass of
enterprises within an industrial sector enabling them to benefit from certain
advantages of clusterisation but the intensity of cooperative relations and
information circulation within the cluster is too low for benefiting the real
advantages of clusterisation deriving from its geographical concentration.
Although developing clusters do have their own R&D capacities and infra-
structure they are insufficient yet for granting success for the cluster and its
enterprises. The reasons of underdevelopment may be explained by several
factors: insufficient professional knowledge at the majority of local firms,
the absence of interaction between enterprises and persons, the absence of a
common vision for the future or the unwillingness of participating enter-
prises to find a common basis of interest or to make use of the common
motivations.2
− Potential clusters: These are clusters that do have the majority of or several
elements and factors necessary for the formation of a successful cluster but
these elements should further be improved and enhanced to achieve posi-
tive agglomerative effects. In Buzás’ opinion mostly the initial steps should
be made at this stage and the actors have not yet recognised the potentials
of clusters that may increase the competitiveness of their business or their
own region (Buzás, 2002).
− Policy driven clusters: These are clusters having been created by the central
or regional (federal) government either for generating or catalysing clus-
terisation process on the basis of critical mass or local knowledge through
an organic development process. Policy driven/created clusters are rather
such kind of initiatives to be formed with the aim of launching a clusterisa-
tion process and those operating and developing clusters having been
for formulating a cluster but due to the absence of a real driving force there is no real need for
the establishment of cluster, thus the economic sector does not exploit its potential capacities’
(Buzás, 2000 p. 116).
2 Enright used the term ‘latent clusters’ (hidden, smouldering) for the group of developing clusters
but in my opinion the term of Buzás (Buzás, 2000, 2002) would be more suitable as it reflects the
current state and development of the clusters of this phase more precisely.
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achieved significant results through their organic and independent clusteri-
sation do not belong to this category. Policy should only provide support
and an adequate environment for their development.
− ‘Wishful thinking clusters’: In most cases these are policy driven clusters
lacking not only the critical mass needed for clusterisation but other ele-
ments or factors as well that would contribute to organic development. In
case of wishful thinking clusters the chances for starting up a real clusteri-
sation process are very low.
However, this kind of clusterisation apart from economic actors may be
facilitated by special political measures and instruments. Therefore, regional and
industrial clusters are not only cited and interpreted in professional literature but
clusters and cluster-oriented development are more and more often used as
instruments of regional development, business development and comprehensive
economic development. In the USA and West-Europe network and cluster-
oriented economic development with the promotion of clusterisation are one of
the most dominating economic development trends since the 1990s because they
want to facilitate the intensification of cooperation among different enterprises
working within the same industrial sector or value chain (from SMEs to large
multinational firms), private and public research and educational institutes,
economic and regional development organisations and other firms rendering
various services and also at launching and financing common research projects.
It may also be observed that for the facilitation and acceleration of clusterisa-
tion central government organisations or even regional actors preferably establish
a special organisation, institution in a concrete corporate formation. This organi-
sation is responsible for the establishment of an efficient partnership system
within a cluster through providing special customised services to the needs of the
industry, sector or value-chain by improving communication and the local circu-
lation of knowledge and by catalysing synergic effects. To achieve these targets
the Automotive Cluster Vienna Region defines its corporate structure and task as
follows: ‘The Automotive Cluster Vienna Region (ACVR) is a network of such
innovative companies whose activity is related to the novelties of transport and
motor vehicle technology. ACVR through its initiation of cooperation and
launching projects is facilitating and contributing to the cooperation of firms par-
ticipating in the growing market of automotive industry. With its comprehensive
information, marketing and cooperative services ACVR provides a background
assistance for firms enabling them to fully concentrate on their primary activities’
(ACVR 2004).
As a general rule, the profile of these organisations may vary depending on the
special features of the region, industry or value chain they are embedded into.
They may also differ by the development phase of their clusterisation process.
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They may be labelled in several ways, either as technology centres or regional
innovation agencies or competence centres and similar tasks are performed by
different business promotion organisations, foundations and federations. In sev-
eral cases these new foundations are established within the corporate framework
of a competent regional development, economic development or business devel-
opment organisation and have been labelled as ‘clusters’ nowadays. Only within
the automotive industry sector several such organisations have been operating all
over Europe such as: Automotive Cluster in Wales, Automobile Cluster
Oberösterreich, Automobil Cluster Styria and the Automotive Cluster Vienna Re-
gion (Grosz, 2000).
During the past years following West European examples but mainly Austrian
patterns several clusterisation initiatives have been launched (among others) in
the following sectors: automotive industry, wood and furniture industry, elec-
tronic industry, meat processing industry, mechanotrics, thermal tourism, fruit
processing, building industry environmental technology etc.), and they also
propagate themselves as ‘clusters’ and in the majority of cases they are linked to a
regional development and business development organisation or to a leading en-
terprise or entrepreneurial group of an industrial sector. The demand for the de-
velopment of clusters as instruments of successful economic development is rep-
resented in almost every Hungarian region’s regional development programme
and also is a part of the Hungarian government’s economic development con-
cepts.
Although rather rough and diverse interpretations exist for clusters, their
common dimensions – geographical proximity, the cooperative relations of firms,
institutional relations, individual competence and their associated intensive spe-
cialisation and labour division may unambiguously mark out such a theoretical
framework that enables clusters and clusterisation to be interpreted as an eco-
nomic model trying to describe a certain economic ecosystem. Besides their eco-
nomic modelling function, clusters and clusterisation as economic development,
business development and regional development instruments also have vital im-
portance. In this case a cluster is backed up by an organisation or institution hav-
ing its own objectives and priorities, functioning as an independent organisation
with its own management, in several cases with the mission of catalysing the tran-
sition process of clusterisation from one phase to another.
Clusterisation may be characterised as a long-lasting, automatically starting
and self-sustaining process consisting of different phases depending on the extent
and intensity of interactions among participants, on the sophistication degree of
labour division and on the complexity level of specialisation. The application of
cluster as an economic model in the paper determines those dimensions that can
serve as a basis for the evaluation of the clusterisation of Hungarian automotive
industry. For this reason our empirical survey will focus on the general research
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criteria of clusters: the degree of their geographical dimensions, the density of
business organisations, the intensity of horizontal and vertical relation system, the
activity scope, the development level, the ownership structure and the innovative
capacities. On the other hand the research field marked out by the competitiveness
determinants of the Porter rhombus model, i.e. the general and special factorial
conditions of the global competitiveness of the concentration of Hungarian auto-
motive sector, the conditions of market demand, the intermediary and comple-
mentary industrial sectors with corporate strategy and competition and all quali-
tative processes hindering or even stimulating and promoting the clusterisation of
automotive industry.
Corporate networks have definitively a leading role in clusterisation as their
typological character depends on the number and role of participants, on the di-
rection, intensity and target of cooperative relations. With a smooth transition
from simply profit-oriented, narrow, hard networks through the open long-term
target oriented soft networks leads the way towards clusters.
Clusterisation may be influenced by political instruments and measures; both
the ignition of clusterisation and the transition process between the different
phases of clusterisation may be stimulated and accelerated. Clusters may develop
only through the application of cluster policy coupled by a decentralized decision
system. For this reason during the application of regional development policies
demand regulated cluster-oriented development is well recognisable, and it is
featured by cluster-based approach, high degree of decentralisation, the minimi-
sation of the central state’s role, the dominance of local actors and the promotion
of bottom-up initiatives. This cluster-based economic development is significantly
differing from the traditional sector-based model considering its objectives, appli-
cable instruments, intervention areas and directions.
At the same time, it should be taken into account that cluster-based approach,
cluster-oriented policy and its instruments are typical only for the regions of ad-
vanced socio-economic development, and their direct adaptation is not applicable
for underdeveloped, lagging regions and countries but in all types of regions the
synchronisation and balance between inter-firm cooperation and competition, the
basis of economic development, is a key issue.
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3 The automotive industry as a cluster forming sector
The history of today’s cars looks back to a 200 year history. The ‘horseless carts’
of the 19th century changed into motor vehicles equipped with the most advanced
technique and technology. The safety and the economic petrol consumption of our
cars are guaranteed not only by car manufacturing and its supplying industries but
also by the latest technologies of electronic and computer industry and sometimes
even by space research and armaments industry as well.
Due to its demand for an extensive supplier network automotive industry is a
leading economic sector of some national economies, its role in world economy
and its worldwide relations makes it one of the most profitable ‘enterprises’ of the
world. During the mid–1990s only in the European Union automotive industry
provided 1.9 million jobs in car manufacturing sector and 950,000 in car part
manufacturing. In other industries being in a direct dependence from automotive
industry (transportation, commerce, insurance) the number of employees was 8
million. The extreme importance of motor vehicle manufacturing is proved by the
fact that six per cent of the employees in the European Union’s processing indus-
try are working in this sector but its share from the total output of processing in-
dustry is higher making up to seven per cent. Just like in Europe the number of
directly employed in the automotive sector is 6.6 million: this is 5 per cent of the
private sector. The share of automotive industry from total employment in the
European Union, the USA and in Japan is nearly 1.5% and its weight from the
total GDP is estimated as 2% (European Competitiveness Report… 2004).
If following Nefiodow’s advice we extend our research to all sectors involved
directly and indirectly in the automotive sector we can see that its weight is even
greater, because as an intermediary sector it has a major role in chemical industry,
plastics industry, electronics, steel industry and also in transport, transportation or
even in commerce and other financial services (Nefiodow, 2001). As the compila-
tion of a car requires about 10–12 thousand components, this sector’s develop-
ment affects several other sectors, practically it has major impacts on the devel-
opment of the whole economy. Car manufacturers are among the largest purchas-
ers of aluminium, copper, iron, steel, lead, plastics, rubber, textiles, electronic
components (e.g. cable bundles).
Due to globalisation and the changes in the economic paradigm of the past few
decades fundamental restructuring processes have taken place in different indus-
trial sectors having an influence not only on final product manufacturing firms but
their suppliers’ network as well (Analysis of Transnational… 1999). These trends
are more relevant for vehicle industry. Global final product manufacturers, the
famous worldwide big car manufacturer companies are under a constant pressure
of cost minimisation and innovation. This pressure is originating from the side of
consumer demands and expectations as consumers always seek for better and
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cheaper products they previously had. Car manufacturers are trying to beat these
challenges and their increasing R&D costs by an increasing volume of car pro-
duction. To achieve that they continue the concentration process starting from the
creation of a strategic alliance system following through a common agreement
based fusion process until the acquisition of competitors. The number of inde-
pendent car manufacturers reduced from the value of 60 in the 1960s to the value
of 17 by now and car industry professionals do not exclude the possibility that in
a few years’ time only 5–10 big car manufacturers will remain in the market.
Where have the hundreds of US small car manufacturers of the early 1900s gone?
Naturally, significant cost reduction in car manufacturing may be achieved
only by a partial transferring of the car manufacturers’ load onto the back of car
suppliers. This means the extension of R&D for the whole production line. Not
only the demand for significant curtailment of costs but also the quality improve-
ment of products does require full optimisation on the whole vertical line of sup-
pliers (starting from raw material manufacturers, continuing with component part
manufacturers and system suppliers until final product manufacturers). Despite
automotive industry may not be considered a high-tech industrial sector, 20% of
industrial R&D activities is closely bound to the automotive sector. This figure is
30% in Germany a dominating country of the automotive sector (European Com-
petitiveness Report… 2004). The processes of the past decades radically increased
the competition among suppliers, narrowed the pyramid of suppliers and also re-
shaped their structure.
The present well-functioning partnerships are undergoing a change, new stra-
tegic partners are needed and in several cases car part related industries are run-
ning separately or partly independently within the car manufacturer’s corporate
organisation scheme. The independent running of car part business within car
manufacturing process has resulted in a continuously increasing share of goods
acquisition from external suppliers.3 The top manufacturers’ cooperative ambition
is shown by lowering the number of direct primary suppliers but this is reshaping
the whole corporation structure scheme. It may clearly be seen that suppliers ca-
pable for the delivery of complete, systemised car part packages (system suppli-
ers) (e.g. complete brake or air conditioning systems) are enjoying preferences in
selection. Due to the fact that the lower levels of the vertical cooperation chain are
also heavily loaded with complex tasks the firm’s intellectual and technical de-
3 In Germany all car manufacturers have increased their acquisition share from external suppliers
during the past few years and at the same time they were continuously reducing the output
volume of main and part modules on their main assembly line system increasing in this way the
share of external acquisitions to a value of 55–60%. General Motors created an independent
organisation from its Delphi car part branch operating with 30 billion USD sales revenue and
Ford Company underwent a similar procedure with the incorporation of Viston, a company with a
branch in Hungary, into an independent organisation.
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velopment capacities and potentials, therefore the availability of adequately
trained labour, i.e. human resource factors have key importance here (Analysis of
Transnational… 1999).
Jürgens is on the opinion that this process will further be accelerated and will
trigger further positional changes in the automotive sector of the whole value
chain. Car manufacturers will become brand integrators and assembly specialists
and will also coordinate the major tasks of development. At the same time tech-
nology and continuous development are turning into key issues for supplier too
stimulating raw material, spare or component part suppliers to develop into ex-
perts of their own technology (Jürgens, 2003). Along with the ongoing concen-
tration specialisation, another even more powerful trend may be observed in the
sector which should exclusively stand on the basis on complex labour division
and cooperation systems.
Despite the ongoing concentration process the majority of European suppliers
– principally the community of tertiary level car part suppliers – are small and
medium-sized entrepreneurs. As a result of the afore-presented transformation
process in the vertical production system the future perspectives and chances of
the whole motor vehicle industry will largely depend on the innovativeness and
competitiveness of this SME sector. These geographically concentrated coopera-
tive networks labelled as technological cooperation networks or individual clus-
ters have very important role in increasing the competitiveness of this SME sec-
tor. The final objective of these cooperation initiatives is to provide assistance to
SMEs in getting an easier and cheaper access to relevant technological informa-
tion and to business and economic services needed for their development and for
the increase of their competitiveness. Government funded organisations have an
important role in the organisation of networks and clusters even in the most de-
veloped countries and we should learn as much as possible from their examples to
successfully adapt them into the Hungarian environment.
In our era of tough competitions for meeting quality and timely factor driven
demands companies and manufacturers need more instant information about the
functioning of their own corporate system and environment. Today car companies
are facing various challenges such as the slowness of global economy, weak or
weakening car markets, toughing competition and changing demands. To preserve
their market positions the actors of car industry cannot just relax and watch the
ongoing rapid changes of their environment but they should instantly react to the
challenges of market. At the same time not only the globalising economy but also
the competition for the consumers’ choice does force companies for making hard
resolutions. Under the pressure of tough competitions transnational motor vehicle
companies are investing millions of dollars into R&D serving as a basis for prod-
uct development granting continuity for model changes and into technology de-
velopment ensuring a more efficient production system. At the same time on the
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grounds of the aforementioned changes besides major car manufacturers secon-
dary and tertiary suppliers with companies providing specific services have an
increasing role in development activities (Figure 2). As we have seen it develop-
ment specialists and technology service providers have growing importance in
this matter. Although automotive industry today cannot be regarded as a newly
emerging industry the application of high technology is still playing a very im-
portant role in this sector.
Figure 2
The network of car development (actors and relationships)
Car manufacturer
development division
System suppliers
Integrated services
(e.g. brake, control system,
(integrated, complex and wide
gearshift, air condition etc.)
range engineer services)
Parts and module suppliers
Other engineer services
(e.g. plastic, rubber, glas,
(unique, specialised services,
metal parts, cables etc.)
e.g. design, prototype etc.)
Consulting companies
Szoftver providers
(e.g. project management,
(e.g. CAD planning system,
TQM, simultan planning etc.)
SAP system etc.)
Source: The author’s own edition on the basis of Rentmesiter (1999).
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As a summary we can state that for the continuity of daily work and produc-
tion (preference of just-in-time systems) and for the coordination of R&D the
geographical proximity of car manufacturers and their satellite organisations con-
sisting of system and module suppliers, raw material suppliers and other indus-
tries with the whole sector’s spatial concentration have strategic importance. This
geographical concentration with the evolution of networked cooperation systems
are catalysing clusterisation by creating such new organisations and institutions in
the region that will contribute to gaining maximum profit from the advantages of
synergic effects resulting from their automotive services and activities. For exam-
ple in several cases the sector’s territorial concentration is followed by trainings,
in most cases specialist trainings, by the harmonisation of higher education with
the demands of automotive sector, by the establishment of new university or pri-
vate research facilities, by the foundation of cooperation research complexes and
competence centres, by building supplier parks providing adequate background
facilities for suppliers etc. For contact maintenance and for facilitating informa-
tion flow among enterprises, a bottom-up schemed network of federations, asso-
ciations, professional organisations further catalysing clusterisation by their spe-
cific services (meetings, databases, information services etc.) is being formulated.
4 Experiences of automotive clusters in Europe
Automotive industry is strongly concentrated geographically both on global and
regional levels. From the EU’s 15 old member states nearly 50% of value-added
revenues in automotive industry are originating only in Germany. This territorial
concentration – partly because of the foreign direct investments of German car
manufacturers4 – may also clearly be observed in the countries of East Central-
Europe, particularly in the Czech Republic, Slovakia and Hungary where auto-
motive industry has a leading role in industrial specialisation.5
Everyone associates automotive industry and its spatial concentration with the
name and seats of the largest American car companies (General Motors, Ford and
Chrysler having merged with the German Daimler Corporation). However, due to
4 In the past five years more than one quarter of German car suppliers’ new enterprises started up in
East Central-Europe (European Competitiveness Report… 2004).
5 Despite the yet very small contribution of East Central European countries to the output of the
European automotive industry this sector has a very important role in these countries’ domestic
industry and national economy. In the Czech Republic the contribution of automotive industry is
10.9% to the gross industrial value-added production. In Hungary this figure is 10,1% and in
Slovakia it is 8.2%. Regarding that mostly car assembly oriented, i.e. low value-added yielding
activities have been relocated into these countries they have even higher contribution to industrial
sales and exports (European Competitiveness Report… 2004).
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the aforementioned restructuring processes, new territorial concentrations of
automotive businesses and institutions are emerging in several other places than
Detroit in America, Europe and Southeast-Asia as well. In Europe an intensive
clusterisation process may be observed both in the countries of high industrial
development (Germany, Italy, France) or in certain regions, districts of certain
small states. Just a few examples for the latter phenomenon are the Bavaria, Turin
region, Basque, North-England, Wales, Austria or even the Czech Republic and
Slovakia having pushed themselves to the frontline of automotive industry during
the past few years. In several cases clusterisation processes created other clustered
organisations working in another corporate scheme in such countries as for exam-
ple Germany (VIA, BAIKA, Automotive Saarland), Spain (Basque, Catalonia),
Austria (AC, CDT, AOEM, ACstyria, AVCR), Slovenia (AC Slovenia), France
(Cluster des Vehicules Industriels) or England (Northwest Automotive Alliance)
(Grosz, 2000).6
This paper is going to present examples from Wales, North-Rhein-Westphalia,
Styria and Upper-Austria with the activities of their satellite organisations, to
demonstrate foreign practices to contribute to the successful research of Hungar-
ian cluster initiatives. We selected Wales Cluster Initiative because, as we will see
later, the potentials and problems of the Welsh Economy are in many aspects
similar to the phenomena of today’s Hungarian economy, and we are on the
opinion that learning from the Welsh model of innovation-oriented economy and
business development may significantly contribute to the successful management
of Hungarian problems. We also consider the presentation of the initiatives of
Austrian motor vehicle industry very important because they were the most im-
portant reference areas for Transdanubian automotive clustering in Hungary. Es-
pecially the example of Automobil Cluster founded some years ago in Upper-
Austria was the most useful adaptation model for the start-up of Hungarian initia-
tives. The experiences of the German and Austrian clusterisation models in auto-
motive industry may be useful from the aspect that foreign direct investments
originating from these countries had and still now have key importance in the dy-
namic development of the Hungarian automotive sector operating in whatever
forms of its corporate structure be a multinational firm, car manufacturer, secon-
dary or tertiary supplier or small and medium-sized enterprise.
6 The acronyms of the above-mentioned automotive cooperation formations – some of them will be
introduced in details later – are the abbreviations of the following initiatives: VIA: Verbundinitia-
tive Automobil Nordrhein–Westfalen, BAIKA: Bayerische Innovations- und Koopera-
tionsinitiative Automobilzuliefererindustrie, AC: Automobil Cluster Oberösterreich, CDT:
Cluster Drive Technologie, AOEM: Österreichisches Zulieferforum, ACstyria: Automobil Cluster
Styria, AVCR: Automotive Cluster Vienna Region, AC Slovenia: Automotive Cluster Slovenia.
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4.1 Welsh Automotive Forum (WAF)
Until the 1980s the role of Wales in the UK was restricted to the provision of ag-
ricultural and heavy industrial inputs. For this reason heavy industry, namely coal
mining and steel making were dominating Welsh economy. After World War II
the government’s subsidisation of heavy industry greatly contributed to the estab-
lishment of manufacturing industry which task was assigned to the Welsh Devel-
opment Agency (WDA) in year 1976. The government’s support was designated
for terminating coal and steel related jobs and opening new jobs in manufacturing
industries with the financial subsidisation of European, American and Japanese
direct investments. At the initial phase of this programme due to the dominance of
foreign direct investments the Welsh branches of consumer goods manufacturers
with semi-skilled labour were the leading organisations of manufacturing indus-
try. The relatively low wages, the low skills of labourers and the European Un-
ion’s funding significantly increased the competitiveness of Welsh economy.
Later on foreign enterprises equipped with high technology created adequate con-
ditions for building a supplier network of small and medium-sized enterprises and
for a quick growth of jobs within these enterprise categories. The different gov-
ernmental subsidisation programmes greatly contributed to these processes
(Cooke, 1998).
The majority of capital was invested into car assembly and car module manu-
facturing and also heavy sums were invested into electronics industry. Several
leading car manufacturers built engine manufacturing plants and assembly lines in
Wales (e.g. Fiat, Opel, Renault, Saab and Volvo). On the basis of these major in-
vestments the region grew into a major European centre of car engine and com-
ponent manufacturing. These Welsh firms – as indirect or direct suppliers – were
able to establish strong cooperation with investment projects that have been im-
plemented by these foreign car manufacturers. Besides Welsh car manufacturers
British car companies (Rover, Jaguar, Ford, Nissan, Toyota, Honda, GM and
Peugeot) also did have an important role in accelerating the building of networked
cooperation in motor vehicle industry. As a final word we can say that the major-
ity of native Welsh and newcomer automotive businesses were functioning as
external suppliers for final assembly plants located outside Wales.
In Wales, innovation and technology policies, infrastructure development with
the building of their associated networks were the key development factors of en-
gineering – or to be more precise – motor vehicle manufacturing industry. During
a ten-year period between 1985 and 1995 with the support and an active initiation
of WDA 9 supplier associations and 8 supplier groups were established with ad-
ditional 8 business networks. One of them is the Welsh Automotive Forum
(WAF) setting up the target of channelling the opinion of Welsh suppliers, the
organisation of idea and experience exchange forums, and in general the integra-
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tion of the actors of motor vehicle industry. Since 1990 WAF has been directed
by an appointed manager. The operation of WAF in the start-up phase was funded
both by the WDA and the government of the United Kingdom but since 1998 a
membership fee has been paid by participant enterprises amounting up to 70% of
the revenues of the budget. From the major features of the Welsh Automotive
Cluster Cooke is emphasizing the extremely strong concentration of motor vehi-
cle industry, the intermediary and end user generated demand, the presence of
auxiliary sectors in the region, the building of supplier networks ranging from car
module manufacturing to the assembly of complex systems, the public-private
partnership both in R&D and professional training, and an efficient distributive
infrastructure of financial subsidies (Cooke, 1998). On the grounds of these
premises today automotive industry is one of the fastest growing economic sec-
tors in Wales. Those big multinational car companies having settled down here
have 170 local suppliers. Of them 40 are primary or secondary level system and
module part suppliers. Today the number of staff employed at car companies is
exceeding the value of 25 thousand.
After the foundation of the Welsh Automotive Cluster economic and regional
development agencies set the surveying of the demands of newcomer foreign en-
terprises their primary task. Their decisions were motivated by their efforts to
fully meet the multinational companies’ and their satellite minor suppliers’ re-
quirements towards the region’s human resources. They set the learning from for-
eign companies’ experiences their primary objective. The application and adapta-
tion of ‘best practice’ in foreign partner regions (for example in Baden-Württem-
berg) and the monitoring of major competitors (Ireland) were great help for the
Welsh automotive cluster.
The strategic objective of the development of business infrastructure was the
embedding of foreign companies into the economic system of Wales. WAF’s bu-
siness development services paid special attention for SMEs focusing on their
innovative skills. Permanent innovation, quality centred production and the intro-
duction of a highly efficient production system in SMEs greatly contributed to the
enlargement of potential and existing supplier networks and created a rapidly in-
creasing number of new jobs in this sector. The introduction of quality assurance
systems (ISO 9000 for example) meeting the demands of big companies, ac-
creditation and – especially in our age of information – electronic data circulation
and e-commerce among entrepreneurial networks were in the focus of attention at
WAF (Cooke, 1998b).
The presence of Japanese – and to some extent German – firms who unlike
North-Americans were actively building good supplier relations was very impor-
tant for permanent innovation based production and cooperation systems. The
Japanese were even ready to bring machinery and experts with them just for
strengthening the ties of cooperation with WAF. The Welsh Automotive Cluster
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has been proved very useful, especially in such areas as research-development
and innovation. More than 40% of the enterprises of WAF are getting technical
development information from their own partners (customers, vendors), 32% have
established corporate associations, cooperative networks and have collaborated
with higher education (technical universities) in their technical development pro-
jects. Within the cluster owing to good partnership relations between higher edu-
cation and economic sectors the newcomer companies of the region – except for a
part having very important research-development plants – are not engaged in ba-
sic research because they are going to adapt the primary research results of the
University of Wales into practice. Besides corporate R&D laboratories several
university laboratories are doing applied researches. A significant part of technol-
ogy transfer at the region’s enterprises is implemented by corporate networks and
by institutes of higher education.
4.2 Verbundinitiative Automobil (VIA)
North-Rhine-Westphalia concentrating one-third of the German automotive in-
dustry is a critical mass within the European automotive sector. Nearly 800 auto-
motive enterprises are operating here with 200 thousand permanent jobs. The
North-Rhein-Westphalian government facing problems in economic and indus-
trial restructuring was the fist to implement cluster-oriented industrial policy to
tackle the recession of automotive industry and to beat down the rise of unem-
ployment and to stop the transformation process of the supplier chain system.
For facilitating the restructuring of regional economy and for increasing the
region’s and automotive suppliers’ – principally the SME sector’s – competitive-
ness the Ministry of North-Rhein-Westphalia established Verbundinitiative
Automobil Nordrhein-Westfalen (VIA) in 1993. This initiative has been founded
by the representatives of car manufacturers and suppliers and later it was ex-
panded by new members: chambers, various alliances, trade unions and minis-
tries. After five years of successful operation it was transformed into an inde-
pendent organisation. VIA’s essential mission is providing assistance to everyday
cooperation projects between car manufacturers and suppliers (Analysis of Trans-
national Networking… 1999).
Until 2000 750 enterprises had participated in the initiative and had launched
more than 280 cooperation projects. Of them 55 projects were subsidised by the
government of North-Rhein-Westphalia with a sum of 20 million deutsche marks.
The assistance of the government was very important for SMEs as without it they
would have been unable to launch successful innovation projects and their mar-
keting. The government’s assistance was targeted at SMEs as it is clearly seen
from the financing system of cooperation projects. While the government was
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financing up to 40% of the SMEs’ total project expenses, big companies were
receiving far less amounts of financial compensation from the government and
big car companies received no compensation at all. The intensity of cooperation
between car module, car part suppliers and car manufacturers has significantly
increased.
The initiative provided the following services for members:
− Project definition, project preparation and project description for enter-
prises and their cooperation partners,
− Partner finding service for the implementation of the existing project plans,
− Building and assistance to cooperation networks for the successful imple-
mentation of projects
− Monitoring governmental (ministerial) funding opportunities and informing
enterprises of them,
− Consultation and assistance to the preparation of tenders.
The projects’ generated knowledge transfer, the new opportunities of market
and innovations all increased the competitiveness of suppliers operating mostly in
the corporate structure of SME. The region’s technology centres and science
parks (their number is over 60) are providing excellent facilities for technology
enterprises, ‘spin-off’ firms and for the R&D activity of automotive suppliers.
The transfer of the latest development results is fostered by projects assisting to
the cooperation between enterprises and higher education and research centres.
4.3 Automobil Cluster Styria (ACstyria)
The establishment of the automotive cluster around Graz (Automobil Cluster Sty-
ria – ACstyria) following the example of North-Rhein-Westphalia was also initi-
ated by the provincial government. Following a survey commissioned by the
Ministry of the Economy of Styria and carried out in 1994 revealing the develop-
ment potentials of automotive industry, the largest automotive companies of Sty-
ria who have recognised the cluster as a great chance for improving their supplier
network were ready to build a cooperation network.
ACstyria was established with the assistance of the Styrian government in the
summer of 1996. Governmental subsidy was granted to ACstyria during the first
two years of its operation under the cluster management of Steirische Wirtschafts-
förderung (SF6-Styrian Enterprise Agency). Seeing the success of the first two
years ACstyria members decided to maintain their cooperation system after the
expiration of state funding period and created an independent, self financing
cluster management organisation funding from membership fees to be paid on
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annual basis. For ensuring a smooth transitional period into self financed funding
the government subsidised those services that membership fees were insufficient
to cover. The government is still co-financing projects that are reinforcing the
network’s innovative and economic structure or increasing the competitiveness of
automotive sector (Analysis of Transnational Networking… 1999).
Until 1999 the everyday management tasks of ACstyria were performed by
SFG. The Advisory Board having decision competences in strategic issues con-
sisted of the representatives of the biggest car manufacturers (BMW, AG, VW-
Audi AG etc.) as buyers, of the management networked suppliers, SMEs of the
most active research institutes and naturally, of the representatives of Styrian
government, the major financing agent of ACstyria. ACstyria GmbH, the inde-
pendent self-sustaining economic organisation was founded in year 1999. Among
the members of the one director led ACstyria were various suppliers (Magna – a
system supplier, Krenhof – a car module supplier), technology service providers
and advisors (AVL, TCM), an advisory organisation (Agiplan Group) and other
corporations engaged in professional interest representation (IVS) and economic
development (SFG).
Since the foundation of cluster more than 190 firms with 13 thousand jobs
have participated in this partnership network. The current number of partners is
98 and additional 200 are participating in the cluster as ‘visitors’ (they have been
registered in the database or may join the common R&D projects if they wish). As
these visitor companies are not charged by membership fee they are not eligible
for using services free of charge. Along with enterprises the major local R&D and
innovation organisations (e.g. the Technical University of Graz, Joanneum Re-
search Institute) and external expertise have also joined the partnership network.
Cluster members are eligible for all services of the cluster free of charge but
since 1999 these services are available for membership fee paying organisations
only. Other businesses showing interest for the cluster’s activity may also get pro-
fessional support through their cooperation with a cluster-member and are eligible
for various cluster services such as:
− Communicational platform (a full database of cluster members)
− Information services (market trends, EU development sources, a periodical
bulletin of the cluster)
− Assistance to common projects (in R&D and quality affairs mainly)
− Cooperation partner finding services
− Marketing and PR activities both in domestic and international sites
− Organisation of specific training programmes and study trips
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4.4 Automobil Cluster Oberösterreich (AC)
They are outstanding in performance, in professional skills and in innovation.
Upper-Austrian suppliers have good reputation worldwide. These features will
keep on being improved with internal corporate innovation and it will transfer
various professional information and resources for automotive specified networks
in Upper-Austria. AC is mostly backing up and promoting the innovation poten-
tials of SMEs.
Along with ACstyria this cluster is another extensive cooperation network of
automobile industry in Austria with high capacities in Linz-centred Upper-Austria
which considering the number of members and jobs is by far larger than the
automotive cluster of Styria. Automobil Cluster Oberösterreich (AC) was founded
in 1998 only but by now it has grown into Europe’s most successful cooperation
network. The sector’s concentration density is illustrated by the fact that Upper-
Austria earns 40% of the total value-added of the Austrian automotive sector. The
enterprises (car manufacturers, commercial vehicle manufacturers and their sup-
pliers) of the network with nearly 300 members employ a total staff of nearly 80
thousand in the region. The annual revenues of clustered enterprises are exceed-
ing the total value of 16 billion euro. Alike in North-Rhein-Westphalia, here 80%
of new jobs have been opened in the SME sector.
Although a survey carried out in 1993 has highlighted the very strong concen-
tration of car companies here and revealed their relationship system, until the late
1990s no steps had been made for the intensification of inter-firm cooperation
partnerships. For the first time it was the strategic programme of Upper-Austria
having been prepared in 1998 which targeted cluster-oriented technology and in-
novation policy at increasing the innovation potentials and the competitiveness of
SMEs by building a more intensive cooperation partnership between the region’s
incoming enterprises and the local organisations of research and technology
(Strategic Programme Upper Austria 2000+, 1998).
The intensification of entrepreneurial partnerships, the ameliorating of the
automotive sector’s general environment, the increase of the competitiveness of
regional suppliers, the preservation of jobs and the region’s advantages for at-
tracting new enterprises are the primary objectives of Automotive Cluster of
Oberösterreich. AC has the aims of intensifying cooperation between enterprises
and technology transfer organisations (universities, research institutes, innovation
centres) and providing assistance to SMEs all thy need for their development. The
management of AC is performed by Oberösterreichische Technologie- und Mar-
keting Gesellschaft (TMG – Upper-Austrian Technology and Marketing Com-
pany) established by the Government of Upper-Austria with the purpose of as-
sisting to the utilisation of the region’s innovative potentials and attracting new
companies into the region. This management organisation is in a continuous
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growth; today nine experts are managing directly the cluster’s activities. The gov-
ernment’s generous subsidisation granted free of charge membership for AC
members and other organisations during the first three years of its operation. To-
day an annual membership fee of 500, is charged for SMEs and EUR 1000, for
big companies. These are cheap and affordable prices for all types of economic
organisations in this sector. However, for this fee the German Agiplan Consulting
Co – on the basis of their demand-offer analysis strategy is providing a wide pal-
ette of services for cluster members. These services may be arranged into five
categories
− Providing information and communication services for partners in several
forms ranging from printed and electronic periodicals, journals through
factory study trips until the access of supplier catalogues and cluster mem-
ber databases. These services are aimed at providing various information
customised to the members’ needs and at intensifying the circulation of in-
formation among members. TMG is hosting an extensive corporate data-
base with detailed information on its member companies and another data-
base on the accessibility of Austrian and international research institutes
with their technological specialisation for an easy finding of cooperation
partners.
− It goes without saying that efficient innovation and R&D require ade-
quately trained labour. This motivates AC to organise various – automotive
industry related – training programmes, professional events, seminars and
study trips. Professional education programmes, trainings, the organisation
of events, conferences, workshops and study trips – with special regard to
facilitating the exchange of experiences and common learning – are also
organic parts of AC’s training and event organisation activities.
− The automotive cluster’s assistance to the preparation, development and fi-
nancing of cooperation projects is one of its most popular services because
it enables enterprises for cooperating in several areas (R&D, manufactur-
ing, marketing, logistics, quality assurance, information technology etc.)
through refunding some of their expenses. The amount of refund is de-
pending on the project’s contribution to the general competitiveness and
innovation potentials of the region’s automotive sector but may not exceed
40% of the project partners’ total expenditure. Minimum three enterprises
(without any size limitations) or research or educational institutes should
enter into project partnership. Minimum one small and medium enterprise
should be involved into the project but it may come from outside of the re-
gion as well.
− Marketing and PR activities are focused on the automotive cluster’s
positioning in domestic and international markets. This category may be
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Discussion Papers, No. 52.
extended by such activities as the publication of the cluster’s informational
and promotional materials, regular PR activities and the promotion of the
cluster’s member organisations to manufacturers and primary level suppli-
ers.
− And finally, the presence on international markets is also an organic part of
the cluster’s services. For this purpose the cluster is providing professional
assistance to its members to participate on international automotive exhibi-
tions, markets, market visits and building contacts with local organisers.
Setting up contacts with other international car manufacturer and supplier
networks (e.g. BAIKA or VIA) are also associated with this area.
By now the cluster has completed more than 40 cooperation projects, more
than 220 companies have developed new products, new modules, new systems
and they are still developing new processes and continually improving their skills
for meeting the demands of automotive industry. The Upper-Austrian Automotive
Cluster is not else than an innovative leading edge behind the domestic supplier
sector and a strong partner organisation for car manufacturers and system
suppliers. Since its foundation in 1998 the cluster has grown into the most
extensive network of automotive industry and this is evidently may be verified by
the size of its corporate staff. Innovative cooperation projects are the key areas of
the automotive cluster’s activities in organisational, quality and qualification
fields. Common optimisation, new products and processes have not only opened
the way towards quality development and radical cost reduction but also
demanded long learning processes. Since the foundation of the automotive cluster
30 projects have successfully been completed with the contribution of more
than120 partners. The following companies may be considered as the cluster’s
major member organisations: BMW Motoren GmbH, MAN Steyr AG,
Voestalpine Stahl GmbH, Rosenbauer International AG, AVL List GmbH, BRP
Rotax GmbH.
4.5 Automotive Cluster Vienna Region (ACVR)
The Automotive Cluster of Vienna was founded in November 2001 by the coop-
eration of Ecoplus, The Lower-Austrian Economic Development Agency and the
Foundation for the Economic Support of Vienna. As a technological cluster,
ACVR identifies and keeps an eye on key technologies offering high development
potentials in the region. Within the automotive sector ACVR pays special atten-
tion for telematics, logistics, micro- and nanotechnologies and the alternative so-
lutions of automotive technology.
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Increasing the number of added-value car modules, with the share of R&D and
the innovative activity of companies joined in the cluster are the major functions
of ACVR. ACVR initiates and coordinates cooperation among cluster members
and provides marketing services for a greater harmonisation of products and ser-
vices. The cluster’s international cooperation with the new member states of EU
(Hungary, Czech Republic and Slovakia) deserves special attention. The avail-
ability of the cluster’s website besides German in other languages such as Eng-
lish, Hungarian, Czech and Slovakian is a clear indicator for the cluster’s readi-
ness for international teamwork and its efforts for the intensification of crossbor-
der cooperation.
The cluster set the concentrating of automotive experts into the Vienna region
and the launch of innovative projects as primary objectives. The Vienna region
has plenty of experts who are successful network builders. Automotive experts
with extensive quality and project management experiences are maintaining con-
tacts with a great number of suppliers. Recently the cluster has set up new con-
tacts with entrepreneurs, R&D and educational institutes, policymakers and their
supporting organisations. The attention of the networking experts of ACVR is
focused on ‘Intier’ area comprising such fields as telematics, design, materials,
security and human-machine relationship. ACVR has an ambition of developing
into the ‘innovation engine’ of Europe. The Slovak, the Czech and the Hungarian
partners with their building of large car manufacturing plants are also getting
closer to the practical realisation of this idea. All network activities are targeted at
increasing the value adding potential of members increasing with them the com-
petitiveness of Vienna region as well.
Since 2005 ACVR has been providing several information, marketing and co-
operation services in its Centre of Transport and Logistics Technology
(TECHbase Vienna) functioning as a focal point of automotive sector. Besides
TECHbase the cluster with some of its cooperation partners is planning to build
two additional technology centres for automotive suppliers. ADC (Automotive
Design Centre – ADC) is designated to provide various external and internal de-
sign services because the interrelationship between design and technology is an
issue of growing importance for automotive suppliers. The Centre for Industrial
Relations will provide help for companies during their partner selection, manu-
facturing profile change and quality assurance period.
4.6 Summary of foreign experiences
Of the above-presented examples the Welsh case is the most important as Hun-
gary is facing similar problems today to those that Welsh economy has already
tackled down. The spectacularly inflowing foreign direct investors and multina-
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tional firms especially in electronics and car industry were doing their best to
make use of the comparative advantages of high-skilled but compared to the
European average relatively cheap labour. For this reason the majority of foreign
investments were directed into high import and low value-added producing sec-
tors (as simple assembly activities), with zero embeddedness of foreign compa-
nies into regional economy and apart from a few cases – multinationals were un-
able to build up their domestic supplier chain systems. Thus, the inflowing rela-
tively high technology and knowledge was unable for pushing Welsh economy
forward sufficiently and it was a real threat that foreign enterprises bound with
weak ties to regional economy will relocate their sites into developing countries
when losing their comparative advantages.
The present problems of Hungary’s dual economy were successfully elimi-
nated by the above presented network development, common development, inno-
vation project and regional innovation system based strategies and their applica-
tion was a great progress towards the integration of multinational firms, towards
the quick penetration of innovation and R&D results through the supplier chain
system and towards increasing the competitiveness of SMEs. Regional cluster
policy may have an important role in it, because – as it is seen from the examples
of foreign partners – with building an adequate economic and business environ-
ment – they can assist to their business development, to the reforming of their
subsidisation policy and to facilitating the networking of business partnerships
and to the enhancement of the structural system of regional policy.
Foreign case studies also prove that only networked business partnership sys-
tems may operate in the hope of success. To increase the competitiveness of
SMEs special attention should be paid for the development of their innovative and
R&ð capacities and this may be done most efficiently by the promotion of
knowledge transfer in their common research projects with large companies –
their own customers – and with technology centres, research institutes and univer-
sities. Clusters should offer such advantages – especially for SMEs – that entre-
preneurial networks could never do alone. Product and production oriented inno-
vation should be the ultimate objective of cooperation as they are the key factors
of competitiveness. Network building is a multi-dimensional process which
means that besides enterprises various institutions and organisations (public and
private universities, research institutes, automotive associations, chambers and
business development agencies etc.) should be involved into the cluster.
The financing of political actions is a very delicate issue in all platforms. The
political supporting of clusterisation with the active subsidisation of cooperation
initiatives, as we have seen it from Welsh, German and Austrian examples, has
major importance in cluster building. In all of the above-presented examples the
initiation and support of either a regional government (North-Rhein-Westphalia’s
Ministry of Economy, Technology and Transport) or a government-bound eco-
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Discussion Papers, No. 52.
nomic development organisation (WelshDevelopment Agency – WDA, Steieri-
sche Wirtschaftsförderung – SFG, Technologie und Marketing Gesellschaft –
TMG) was needed for the establishment of a cooperation network or for its suc-
cessful management in the first years of its operation. Enen in developed coun-
tries the foundation of a self-sustained economic organisation is recommended
only in case when its participant actors have been convinced on the necessity of
its existence and have been aware of the benefits their partnership may grant for
them.
5 Clusterisation in the Hungarian Automotive Industry
5.1 Clusterisation in automotive industry
In Hungary almost every regions or microregions have plans for the support of
economic networks or clusterisation or for the establishment of independent
cluster organisations. Several experiments have been made so far for the applica-
tion of cluster-oriented approach to some extent in several economic fields and
sectors or for transforming potential or latent clusters into operating clusters or in
some cases developing clusters into operating clusters. Of Hungarian clusterisa-
tion processes or developing clusters, perhaps it is the automotive cluster that may
be regarded to be in the most advanced phase. In this chapter we are going to re-
veal the details of the clusterisation of Hungarian automotive industry to find an
answer for our hypotheses we have set up on the automotive industry in the North
Transdanubian region and on its cluster-oriented development potentials. In our
empirical research we are going to analyse the territorial concentration of auto-
motive industry on the basis of secondary data to verify that the sector’s geo-
graphical concentration, one of the essential criteria of clusterisation has already
taken place. This will be followed by an analysis on the qualitative features of
clusterisation on the basis of interviews having been prepared in various car in-
dustry enterprises or other organisations engaged in automotive sector and its de-
velopment. This qualitative analysis of clustering comprises several areas, such as
the intensity of cooperation among members in the emerging automotive cluster
of North-Transdanubia and between cluster members and other non-clustered or-
ganisations, the parameters of R&D activities, the information flow within the
cluster and the major determinants, the stimulating and inhibitory factors of the
cluster’s competitiveness.
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5.2 The spatial concentration of Hungarian automotive industry
During the 15 year period since the change of regime in Hungary the direct in-
vestments of foreign-owned companies have had outstanding impacts on the
modernisation of Hungarian economy. The number of enterprises with over 50%
share of foreign capital stock is estimated as 17 thousand and the number of staff
they employ is over half million (550 thousand) making out as much as 19% of
the total jobs. The share of foreign capital in registered capital stock is over 30%
on nearly half of the country’s territory while nearly half of the total value-added
is earned by these companies. Their importance is even higher in foreign markets
with their 76% share from the total import and 80% share of the total export.
Good geographical positions, advanced infrastructure, relatively cheap but
high-skilled labour, old industrial traditions and last but not least the flexibility of
local management urge foreign direct investors for concentrating their financial
investments in Budapest, in its agglomeration and in North-Transdanubia. In the
latter region, principally in Fejér, Gyır-Moson-Sopron, Vas and Komárom-
Esztergom counties a very intensive industrial development process has been go-
ing on which is featured not only by geographical concentration but by strong
sectoral dominance as well. Various indices, such as the total amount of foreign
investments, gross production value or export sales revenues are verifying the
leading role of engineering sector in regional economy. Computer manufacturing,
electronic module part manufacturing, car and car component part manufacturing
have outstanding role within engineering. Between the mid–1990s and the early
2000s the annual growth rate of car module part production was 30–40%. These
four sectors totalled up to 80% of the output of engineering industry (Baráth–
Molnár–Szépvölgyi, 2001).
In the early 1990s vast investments were made into automotive industry in
Hungary. Several foreign companies selected North-Transdanubia for their op-
eration site. It was large multinational firms who were the first green field inves-
tors by relocating a part of their capacities to Hungary for selling cars on Euro-
pean markets. Suzuki opened a manufacturing branch in Esztergom with an in-
vestment value of over 500 million euro to introduce their new model into the EU
markets. Ford built some car part assembly lines (gearshift, electronic engine ig-
nition system, fuel pumping system, linear sparking coil etc.) in Székesfehérvár7 a
city with old engineering traditions from the past (Ikarusz, Videoton) trying to
find a way out of crisis by introducing a new, supply-oriented economic policy.
Opel having been merged with General Motors has built an engine factory in
7 As a result of corporate restructuring at Ford car part manufacturing has been outsourced into an
independent firm and the Székesfehérvár plant now is working under the name of Visteon
Hungary Kft.
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Szentgotthárd just on the Austrian border with an investment of half billion EUR
was producing car parts was also involved in car assembly for some years. Audi,
a member of Volkswagen syndicate located the manufacturing of its latest engines
into Gyır, another city of significant engineering heritage (Rába), and launched
the manufacturing of Audi TT and Roadster here too in 1998 and later on these
two brands were extended by the new A3 model. Owing to these investments to-
day worth of 2.3 billion euro Audi Hungarian Motor Ltd. became the leading
manufacturer of Audi engines (Table 1).
Table 1
The major data of the largest car manufacturers, 2004
Name
Audi
Suzuki
Opel
Products, items
engines
cars (93 thousand)
engines
(1.480 thousand ),
(456 thousand),
cars (23.589)
cylinder heads
(461 thousand)
Sales revenue
3.924
890
560
(million EUR)
Statistical average of
the number of employ-
5074
2045
739
ees (people)
Hungarian suppliers
below 10%
25%
10–20%
Value of investments
until the end of year
2.335
550
655
2004 (million EUR)
A sample of the Hun-
Temic, Jung, LuK,
Benteler, Ryowa,
Sapu, Leoni, Lear,
garian suppliers
Ikarus Préstechnika,
SEWS, Rába Mór,
Pemü, Temic,
Hydro Alumínium-
Summit, U-Shin,
Kaloplasztik, Bakony
technika, Sokoró
Stanely, Toyo, Ajkai,
Mővek
Ajkai Elekronikai
Source: The author’s own edition.
These big car manufacturers settled down in Hungary between 1990 and 1994
were followed by additional global and medium automotive suppliers and sub-
contractors whose majority also decided to open a branch in Hungary. VAW8
established a green-field plant for servicing Audi in Gyır, while Sumimoto was
founded as a supplier for Suzuki in Esztergom. Several other multinational firms
8 Due to changes in the ownership of the parent company VAW Aluminiumtechnika Kft the
company now is operating under the name of Hydro Aluminiumtechnika Kft.
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followed a similar strategy and this has still been a part of their practice during the
past few years (Grosz, 2001, 2002, 2003).9
Besides foreign-owned companies traditional Hungarian firms of automotive
industry should also be mentioned here, whose position has been consolidated
after the change of regime. Rába Jármőipari Holding Rt. [Rába Automotive
Holding] looking back to a 100 year history is profiled in under-carriage manu-
facturing (the world’s fourth biggest under-carruage manufacturer) and in car ac-
cessory manufacturing (Rába is the most important supplier for Suzuki and Opel
in Hungary). Although Ikarus Rt. is mostly profiled in bus manufacturing they
think in a similar way to Rába – they should be more active system suppliers by
integrating Hungarian small and medium-sized enterprises. Besides Rába and Ika-
rus the region has several other SMEs engaged in automotive industry trying to
establish supplier partnership with big companies with more or less success.
Just like in the European Union 6% of the total jobseekers in processing in-
dustry find employment in motor vehicle manufacturing and by adding to this the
data of all its related industries we can calculate with a figure of over 85 thousand
jobs. The sector’s share from the gross value of industrial production is even
higher, exceeding the percentage value of 15%. Table 2 is showing that vehicle
manufacturing sector is still a dynamic one. Nearly one-fourth (23.9%) of foreign
direct investments into the industrial sector are targeted at the automotive sector.
By the end of year 2002 their absolute value exceeded the sum of 3.4 billion euro,
the highest of all countries of East Central-Europe. The sector is strongly export-
oriented its export share is exceeding 90%. The major destination of exports is the
European Union, principally Germany.
According to CSO (Central Statistical Office) data 478 car companies were
operating in year 2003. Of them 353 pursuing car manufacturing as main profile
(KSH TEÁOR 3400) and 125 firms were directly involved into automotive in-
dustry by manufacturing car electronics products and car batteries (KSH TEÁOR
3140 and 3161). For methodological reasons our survey on the concentration of
automotive sector is limited to these sub-sectors only which – as it is excluding
enterprises involved in car industry as a second job only or without any regard to
sales markets and chain positions are categorised by the statistical nomenclature
into a different from the automotive industrial sector (electronics industry, chemi-
cal industry, synthetic material industry, glass industry etc.). Private businesses –
as they are registered in a separate database – will also be excluded from our sur-
vey because their number and impacts on the global features and concentration
9 Just to mention some examples of the major foreign automotive suppliers: Alcoa, Albert Weber,
Continental Teves, Delphi Packard, Denso, General Electric, Hammerstein, ITT Automotives,
Konorr-Bremse, Lear Corporation, Leoni, Luk-Savaria, Michelin, Souftec, Tyco, United
Technologies Automotive, Weslin etc.
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level of the automotive sector is too low to have any significance on our research
results.
Table 2
The major data of automotive industry in Hungary
between 1999–2004
1999
2000
2001
2002
2003
2004
Processing industry
Value of production (billion HUF)
7,887
10,525
11,329
11,442,
12,430
13,832
Percentage of export from total sales
57.0
58.8
59.8
59.8,
61.5
63.3
(%)
Total number of employees (people) 742,899
752,562
752,562 746,963,
735,465
714,369
DM Vehicle manufacturing
Value of production (billion HUF)
1,341
1,630
1,698
1,661,
1,913
2,048
Percentage of export from total sales
90.1
91.7
91.7
90.2,
90.1
91.1
(%)
Total number of employees (people)
39,796
40,403
43,443
45,153,
47,332
48,114
34 Motor vehicle manufacturing
Value of production (billion HUF)
1,294
1,578
1,640
1,595,
1,829
1,949
Percentage of export from total sales
92.3
93.4
93.1
92.2,
92.3
93.0
(%)
Total number of employees (people)
32,051
33,179
36,101
36,133,
38,342
39,758
34.3 Road vehicle, engine
and module manufacturing
Value of production (billion HUF)
262.9
346.2
394
413,
494
571
Percentage of export from total sales
85.5
87.7
87.8
87.9,
88.8
89.5
(%)
Total number of employees (people)
21,456
22,011
24,053
24,698,
27,413
27,793
Source: The author’s own edition on the basis of CSO (Central Statistical Office) data.
When analysing the spatial distribution of automotive enterprises at the first
glance it seems that the degree of their spatial concentration does not follow the
quantitative indices of their location as 40% of car companies is situated in Cen-
tral Hungary, 13% in Central-Transdanubia and 11% in West-Transdanubia, and
even South-Transdanubia’s 10% share from the total number of car companies is
still a high figure while the representation of all the other planning-statistical re-
gions in automotive industry is 7–8%. However, the analysis of the spatial distri-
bution of automotive industry bound jobs instead of the number of businesses is
much more important from the point of our survey as it is in a stronger correlation
35
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Discussion Papers, No. 52.
with the importance of automotive businesses. In year 2003 the total number of
automotive jobs was about 54 thousand on national level. 60% (38 thousand) of
jobs were available in motor vehicle manufacturing and the remaining ones in car
electronics and battery manufacturing categorised into car industry section in sta-
tistical nomenclature. The territorial distribution of car industry jobs is a valid
indicator of the sector’s geographical concentration. Here the weight of Budapest
agglomeration – which region is generally over-represented in all areas of life due
to its heavy economic dominance – is less than 9% and even Pest County’s share
from the total number of automotive jobs is only 13% from the Central region’s
21.5% percentage. At the same time West-Transdanubia’s 31.5% share Central-
Transdanubia’s 26% percentage of the total number of automotive jobs are clearly
demonstrating the two region’s nearly 60% contribution to total employment of
domestic automotive industry concentrating less than 25% of the total number of
Hungarian automotive businesses at the same time. This is a definite indicator of
the concentration of elite automotive companies in Central and West-Transdanu-
bia. 21 from the total of 31 car companies with over 500 employments are seated
in these two regions and four are located in Budapest or Pest County.
The geographical concentration of automotive industry can be measured by the
application of location quotient (LQ) a specific indicator discussed in my presen-
tation of the scientific literature showing the relative weight of a sector in total
employment. On the basis of the location quotients of motor vehicle manufactur-
ing or automotive industry the core area of Hungarian automotive industry may
clearly be identified (Table 3).
Both in motor vehicle manufacturing and automotive industry the LQ value of
1 is exceeded in West-Transdanubia and Central-Transdanubia only, i.e. here the
total number of automotive jobs compared to the total number of all jobs was
higher than the national average. As I have mentioned, international literature
verifies clusterisation process over the LQ value of 1.25 but in our case Table 3
clearly shows that in year 2003 in both regions the relative share of motor vehicle
manufacturing was 2.4–3 times higher than the national average and in case of
automotive industry this value was more than two and half times higher than the
national average.
On county level the degree of concentration level is extremely in Gyır-Moson-
Sopron, Fejér, Komárom-Esztergom and Vas counties as LG is exceeding the
value of 2 in all. Only Veszprém County has a lower but still significant LQ index
while Zala County is out of the trend range because foreign direct investments
here are principally bound to electronic industry and the role of car companies is
less dominating. From the remaining areas of Hungary only Pest County, partly
integrated into the economic space of Hungary’s core area, and its neighbour
Heves County – owing to the heavy investments of the past few years – are
showing some definite signs of concentration in the automotive sector.
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Discussion Papers, No. 52.
Table 3
Location Quotient (LQ) values in Hungarian automotive industry
in years 2001 and 2003
County
Motor vehicle manufacturing*
Car industry**
2001
2003
2001
2003
Budapest
0,341
0,332
0,336
0,317
Pest
0,978
1,101
1,842
1,640
Central-Hungary
0,474
0,504
0,650
0,613
Fejér
3,430
3,095
2,868
3,001
Komárom-Esztergom
2,854
3,066
3,013
2,779
Veszprém
1,233
0,898
1,689
1,447
Central-Transdanubia
2,561
2,384
2,519
2,442
Gyır-Moson-Sopron
6,041
5,851
4,488
4,727
Vas
1,152
1,632
2,200
2,034
Zala
0,166
0,243
0,218
0,296
West-Transdanubia
3,057
3,112
2,681
2,744
Baranya
0,544
0,439
0,419
0,444
Somogy
0,091
0,088
0,063
0,063
Tolna
0,607
0,000
0,420
0,006
South-Transdanubia
0,408
0,216
0,300
0,211
Borsod-Abaúj-Zemplén
0,386
0,419
0,269
0,388
Heves
1,417
1,157
2,098
1,843
Nógrád
0,274
0,549
0,196
0,391
North-Hungary
0,638
0,638
0,737
0,781
Hajdú-Bihar
0,041
0,071
0,028
0,052
Jász-Nagykun-Szolnok
0,270
0,200
0,415
0,532
Szabolcs-Szatmár-Bereg
0,425
0,532
0,296
0,376
Northern-Great Plain
0,237
0,268
0,229
0,300
Bács-Kiskun
0,935
0,949
0,844
0,848
Békés
0,703
1,256
0,486
0,886
Csongrád
0,382
0,437
0,269
0,310
Southern-Great Plain
0,686
0,863
0,553
0,678
Hungary
1,000
1,000
1,000
1,000
* Motor vehicle manufacturing: TEÁOR 3400 Manufacturing of motor vehicles (3410 3420,
3430).
** Automotive industry: motor vehicle manufacturing + manufacturing of other engine and car
electronics.
*** The data of enterprises involved in car industry as a second job only or with main automotive
profile but engaged in supplier sector only are excluded from the table.
Source: The author’s own edition on the basis of CSO (Central Statistical Office) data.
37
Grosz, András : Clusterisation Processes in the Hungarian Automotive Industry.
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Discussion Papers, No. 52.
In the mirror of the ongoing processes in these two latter counties we can defi-
nitely state that in Hungary the North-Transdanubian region is the core area of
automotive industry spreading its arms towards the North-Hungarian region as
following the line of M3 motorway. These counties have the largest number of
employments in automotive sector with outstanding values in Gyır-Moson-
Sopron, Komárom-Esztergom and Pest counties and in Budapest as it is clearly
seen in the figure below (Figure 3). A territorial comparison of output values or
export sales revenues would result in an even higher degree of concentration than
LQ indices.
Figure 3
The spatial concentration of automotive industry
in Hungarian counties 2003
Editor: The author’s own edition on the basis of CSO (Central Statistical Office) data.
Foreign-owned enterprises have definitive role in the sector’s spatial concen-
tration who coming to Hungary can find favourable conditions for starting up
their business in North-Transdanubia, Budapest and around its agglomeration
(due to their more advanced infrastructure system, economic restructuring pro-
gress and labour market) but it should also be noted that due to big socialist com-
panies and their background industries these areas were in a better position in the
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Grosz, András : Clusterisation Processes in the Hungarian Automotive Industry.
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Discussion Papers, No. 52.
past as well than Hungary’s other parts. Figure 4 and 5 are indicating the spatial
distribution of enterprises and their employed staff within the core area of North-
Transdanubia and they are also demonstrating the dominance of some industrial
centrtes (Gyır, Székesfehérvár etc.). However, and fortunately, not only big cen-
tres but also several minor settlements could successfully join the economic dis-
tribution of labour.
The changes of the past years (increasing minimum wage, faster increasing
wages than productivity, the unavailability of high-skilled labour in certain re-
gions etc.) and better investment prospects in other developing countries than
Hungary (East-Europe, the rising countries of East-Asia) are lowering the chances
of building new, big and labour-intensive plants in automotive industry. However,
the increase of labour skills still creates better chances for attracting production
systems of higher value-added and of advanced technology.
Figure 4
The spatial distribution of automotive businesses
in North-Transdanubia, 2003
Editor: The author’s own edition on the basis of CSO (Central Statistical Office) data.
39
Grosz, András : Clusterisation Processes in the Hungarian Automotive Industry.
Pécs : Centre for Regional Studies, 2006. 72. p.
Discussion Papers, No. 52.
Figure 5
The spatial distribution of jobs in automotive industry in North-Transdanubia
and Central-Hungary
Editor: The author’s own edition on the basis of CSO (Central Statistical Office) data.
5.3 The qualitative aspects of clusterisation in the automotive
industry of Transdanubia
With statistical data it is easy to prove the spatial concentration of Hungarian
automotive enterprises and the specialisation of engineering industry with car ac-
cessory and background industries in North-Transdanubia. At the same time the
authors of clusterisation literature are on the firm opinion that geographical con-
centration is a necessary but not sufficient precondition of regional and industrial
clusterisation. Besides geographical proximity clusterisation has several other
major distinctive features such as a sophisticated system of labour distribution, a
wide-scaled and extensive cooperation system, common R&D projects a collabo-
rative partnership system between enterprises and non-profit organisations and
last but not least an efficient information and knowledge circulation system.
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In the following part of this paper a survey will be presented concerning the
intraregional supplier relations, the major features of enterprises’ R&D activities,
their relationship with educational and training organisations, the key stimulating
factors of clusterisation and other processes hindering or working against the
building of a classical and well-operating regional cluster system.
Due to the specific nature of the processes to be analysed our survey is based
on the special literature of clusterisation and on interviews having been at local
automotive enterprises. Various actors of automotive industry at different posi-
tions have been selected as the subjects of interviews but our selection cannot be
regarded as a representative one. Among others we have visited Hungary’s two
biggest foreign-owned car manufacturers: Audi Hungária Motor Kft [Audi
Hungária Motor Ltd] and Magyar Suzuki Rt. [Hungarian Suzuki Co.]. Hungarian-
owned big companies are represented by Rába Jármőipari Holding /Rába Motor
Vehicle Holding/ famous for its vehicle under-carriage manufacturing and as the
most important Hungarian supplier for Suzuki and Opel with a strategic ambition
of qualifying for the position of primary system integrator. Our sample has been
extended with Albert Weber Hungária Ltd a typical German lease-work based
company without any own products. Hungarian-owned firms are represented by
Akai Elektronika Kft. [Ajka Electronics Ltd] a medium-sized Hungarian and for-
eign market oriented automotive supplier, by some minor relatively successful
firms in Gyır (Jankovocs Hidraulika Kft, Borsodi Mőhely Kft) and by HNS Kft, a
technical development company. Along with enterprises several other organisa-
tions engaged in automotive sector were interviewed (a cluster organisation, an
innovation centre, an industrial park and an university) for a further refinement of
data provided by big firms.
5.3.1 The progress of automotive supplier relations
Unfortunately the extent and intensity of the economic partnership of North-
Transdanubian enterprises is below the desirable level yet but its trends of the past
few years have progressed positively. For methodological reasons originating
from the distinctive features of the automotive sector we should separate products
processed during the car manufacturing cycle from non-serial materials, products
and services involved indirectly only into the production cycle. This latter group
is usually substituted by domestic suppliers after the first few years of the multi-
nationals’ operation in Hungary but the unfortunately the contribution of these
non-serial fixtures to net sales revenue is very low. Almost all interviewed Hun-
garian companies reported on a low share of their subcontracts with multination-
als in the delivery of directly used and fitted serial fixtures but at the same time
they are maintaining business contacts with several Hungarian business organisa-
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Discussion Papers, No. 52.
tions. At Audi the delivery share of serial fixtures is still below 10% originating
principally from Hungarian branches of foreign-owned enterprises. Sokoró Kft
seated in Tét is the only Hungarian supplier for Audi. Magyar Suzuki Rt is the
only exception of the aforementioned trend because in Suzuki’s case better posi-
tions in the EU markets demanded the presence of at least 50% of domestic value-
added. This made Suzuki build and develop a domestic network of supplier in-
dustries right after its emergence in Hungary.
The majority of serial fixtures are imported from other countries through the
branch’s relation with its parent company. Nevertheless, the high import rate of
fixtures characterises not only foreign-owned companies but Hungarians as well.
At Rába the share of acquisitions from West-European and North-American sup-
pliers is 50% as buyers’ qualitative demands require such brands of specific mate-
rials and commodities that Hungarian companies are unable to meet.
The purpose of the Hungarian branches of foreign-owned vehicle module
manufacturers having settled down in the 1990s was not just servicing big com-
panies only but their decisions were motivated by the same reasons (favourable
conditions for production, site-building) as big multinationals. Their customers
are the biggest West European car manufacturers and global car module manu-
facturers (Mercedes, BMW, Audi, Renault, Volkswagen etc). But in the past few
years the economic background of car manufacturing has started to change. While
in the earlier period cheap and high-skilled labour, tax exemptions, favourable
location were the key factors of site selection, today with the fading of these old
comparative advantages new, other benefits are emerging originating from logis-
tics, delivery costs and networked cooperation which should be based on a geo-
graphically more concentrated acquisition partnership system. Owing to these
circumstances, during the past years several new firms immigrated into the region
targeting the local market of automotive industry and this tendency seems to be
growing in the sphere of small and medium-sized enterprises. At the same time
this trend is slowed down by the construction of a special car industry park in the
nearby Slovakia designated for hosting right that type of enterprises.
Companies coming to Hungary have no decision competences on acquisition.
This is explained by the multinationals’ standard application of global sourcing,
locating only production, logistic and quality issues into Hungary and in this way
Hungarian branches have narrow or no competences in their company’s corporate
strategy issues. The absence of decision competences in acquisition, development
and sales issues is a strong limitation for their activity scope implanting certain
dependencies into the region’s economic structure. Today several big firms are
trying to forestall this situation by involving domestic supplying industry and
suppliers. Such an example is seen at Opel in Szentgotthárd or Audi in Gyır but
these efforts have achieved very little results so far. The purpose of these pro-
grammes is to prepare as many Hungarian enterprises – with adequate qualifica-
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Discussion Papers, No. 52.
tion – as possible for successful competition in the parent company’s global
sourcing tenders. The establishment of Pannon Automotive Cluster was motivated
by similar to the aforementioned reasons.
Insufficient capital stock is the biggest problem of domestic entrepreneurs in
joining to West European and global car and car module manufacturers. In prac-
tice these problems are experienced in the introduction of various quality assur-
ance systems and in the fields of auditing and diagnostics. Today in car industry
several quality assurance certificates are required to verify the firm’s compliance
with extremely high European quality standards. For SMEs the acquisition of
these certificates demands heavy developments. Besides the compliance with high
qualitative and technological standards just in time production and precision are
the other weak points of Hungarian firms. All these are limiting the growth po-
tentials of intraregional supplier networks in short-term period. By following a
consistent strategy and through continuous development these small automotive
enterprises building themselves up almost from zero level were more successful
and efficient than these big traditional Hungarian companies and have won sub-
contracts from several worldwide-famed car companies (just a few to mention:
Karsai Holding Rt., Borsodi Mőhely Kft., Jankovits Hidraulika Kft., Rati Kft.,
Ratipur Kft., Macher Kft.). All these Hungarian-owned enterprises are strongly
focusing on developments. It is mostly the Hungarian-owned car companies that
preferably build their supplying industry on the network of domestic suppliers.
The members of the North-Transdanubian automotive cluster are maintaining
an intensive export but still with a high percentage of imported components. The
intensity of intraregional business relations is low but some steps have been made
to involve local suppliers into production. In case of Hungarian-owned SMEs the
involvement of partners located at a short distance is a dominating trend now and
on customer side a growing number of Hungarian firms are receiving orders from
foreign companies. The most important domestic products delivered as inputs for
car manufacturing are car body elements, window glass, electronic devices, cable
harnesses, safety belts and seats. However in general the intensity of labour dis-
tribution and partnership among the automotive companies of North-Transdanu-
bia is still below the level desirable for a well-operating and successful cluster.
5.3.2 The role of innovation, research-development and training
Automotive enterprises show a great diversity in the intensity of their innovation
and R&D activities. Companies employing leased labour and making profit from
car module assembly only usually never or at a minimum level invest into R&D.
Companies with leased labour have no development plans at all but in case of
subcontracted manufacturing the development of production processes may be an
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important issue but developing own product brand is also missing from their pal-
ette of activities.
Today a growing number of big multinational companies are starting to re-
place their low-skill based assembly businesses with high added product manu-
facturing plants. Following Audi’s engine development centre Luk Savaria, a
Szombathely-based company also starting its development activities here with
Magna Steyr an exclusively development oriented business in Gyır and the Kec-
skemét branch of Knorr-Bremse, a German brake system manufacturing company
also founded a product development centre in Budapest building intensive coop-
eration relations with the local universities’ research institutes and facilities. Also
an engine research and development centre was opened by Audi in year 2001 op-
erating with a staff of 100 with the purpose of improving the synchronisation of
production processes and optimizing manufacturing costs.
Automotive companies are doing their best to build good relations with uni-
versities, above all with the Budapest University of Technology and Economy,
with Széchenyi István University in Gyır and the University of Veszprém10 Be-
yond the supply of high-trained labour (providing assistance to practical trainings,
the establishment of a scholarship system, practicing facilities and the develop-
ment of educational background) this kind of cooperation also comprises the
common solution of the technical problems of manufacturing, cooperation in de-
velopment but these collaborations have not yet been established officially, they
have rather an ad-hoc character. The new Research Centre of Motor Vehicle In-
dustry Electronics and Logistics being built with a financial subsidy of 400 mil-
lion HUF will probably be a great step towards their formalisation. Along with
the Research Centre of Cooperation targeted at building partnership relations
between large companies and the university, a new Competence Centre will be
built with the cooperation of the University, the Industrial Park in Gyır and the
Innovation Centre targeted at facilitating technology and knowledge transfer to-
wards SMEs.
For filling up their skilled labour reserves big companies together with higher
education attach great importance to professional training. The Hungarian profes-
sional training system is not suitable for meeting the demands of big companies
but this phenomenon is not limited to this sector only but emerges as a general in
10 On 14 June 2005 Audi Hungária Motor Kft was awarded in the Hungarian Parliament for its
outstanding cooperation in R&D with Hungarian universities. Audi has been maintaining
intensive cooperation with Hungarian universities and colleges. The company together with
Széchemyi István University has launched Practicing Programme targeted at practical engineer
trainings. The channels of knowledge transfer are as follows: lecture series, lab equipment, R&D
assignments and scholarships for professors and students. Budapest University of Technology and
Economy is another very important cooperation partner of Audi also in R&D, in training and
retraining (e.g. lab modernisation with a new engine diagnostic equipment).
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all fields of the economy. For these reasons some firms are trying to contribute
somehow to professional training either by providing onsite practical training fa-
cilities or by handing over their machinery or equipment for educational purposes
or – as in case of Audi – by participating in the preparation and launching of a
new training programme (motor vehicle manufacturer). Trainings and technology
development should be the ultimate priority areas of the development of Hungar-
ian enterprises. In the last few years the core area of clusterisation is rather more
facing shortages in skilled labour while Hungary has gradually lost its long-last-
ing competitive advantages in the accessibility of relatively cheap but high trained
professionals.
5.3.3 The promotional factors of clusterisation
The presence of all the elements of the vertical system of automotive industry
beginning from the largest car and global car module manufacturers down to level
of small businesses specialised to a small segment of automotive industry is a
positive phenomenon from the medium-term perspective of clusterisation. Along
with the new branches of foreign companies the contribution of Hungarian com-
panies to the potential automotive cluster building is fairly great as their number
with companies, firms, businesses providing background industrial support and
services amounts to several hundreds. By now services have been embedded into
an extensive partnership system but the network of domestic suppliers – because
of the absence of adequate certifications dependant from their technology devel-
opment level should – should further be developed significantly. Various initia-
tives have been implemented so far for the assessment of their technology devel-
opment progress and for the elimination of the development problems of Hun-
garian SME sector (see for example the initiatives of Audi, the Pannon Automo-
tive Cluster and the Hungarian government).
Institutes of higher education (principally universities) and research institutes
integrating a wide range of knowledge capacities may have an outstanding role in
yielding higher value-added by stimulating continuous innovation and R&D ac-
tivities. In West-Hungary Széchenyi István University in Gyır is the most active
player in this field having already had an extensive relation system in the earlier
period of its operation and still regarding the maintenance of intensive partner-
ships an issue of strategic importance. This motivated the University to be one of
the founders of Pannon Automotive Cluster in year 2000. Several firms have built
a strategic partnership system (Audi, Rába) not only for providing better practice-
oriented training facilities but also for participating actively in the R&D activity
of enterprises. Along with Széchenyi University several other universities (e.g
The University of Veszprém, the Budapest University of Technology and Eco-
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nomics) are participating in joint R&D projects. The researches having been made
at the latter site urged Knorr Bremse, a German brake system manufacturing
company to establish an own product development centre. Universities with their
training facilities are significantly contributing to the supply of high-trained la-
bour continuously needed for filling in the labour demands of the automotive
sector.
The region has no research institutes directly involved in automotive industry
or in any of its related fields but during the past few years several firms in the re-
gion have established their development sections (Knorr-Bremse, Andi, Luk-
Savaria and Magna Steyr) that beyond the development of their own corporate
products and processes might even be suitable for implementing external projects
pushing in this way forward the region’s industrial development process.
North-Transdanubia – as a result of the foreign direct investments of the past
ten years – has become one of Hungary’s most industrialised regions. This proc-
ess may strongly promoted and facilitated by the partnership network of industrial
parks in West and Central-Transdanubia that have full coverage within the region.
By now the all the region’s major and minor cities have an industrial park with
excellent facilities and good infrastructure suitable for meeting the demands of
foreign investors. They have become the target areas for several domestic inves-
tors in the past few years. This increased their popularity among automotive en-
terprises and now the industrial parks in Gyır, Szombathely, Székesfehérvár,
Veszprém, Tatabánya, Esztergom and Oroszlány are hosting several automotive
businesses.
The foundation of Pannon Automotive Cluster (PANAC) stimulating the
global collaboration of the local automotive sector – through its organisation and
management functions – is another positive phenomenon. PANAC is an innova-
tive network based cooperation of businesses and organizations with interests in
the automotive industry organized on a voluntary basis, founded on mutual bene-
fits. It is an initiative that may be regarded as a specific instrument of network-
oriented regional and business development. PANAC has implemented several
services for promoting and stimulating the clusterisation of automotive industry.
PANAC enjoys the support of the region’s automotive businesses and the local
actors of (regional) economic development. The number of businesses joining the
cluster is in a continuous growth and had exceeded the value of 70 by year 2004
(see Chapter 6 Figure 9). Cooperation with Austrian clusterisation initiatives of
similar profile (e.g. in Upper Austria, Vienna and Graz) through the exchange of
experiences may contribute to the cluster’s successful operation and may increase
the efficiency of its services. The following section is providing some information
on the foundation of PANAC, on the founder organisations’ structure and on the
palette of services providing and to be provided by PANAC.
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5.4 The competitive factors of automotive industry in North-
Transdanubia
What are the major competitive factors of North-Transdanubian motor vehicle
and car accessory manufacturing? How are they promoting clusterisation or to
what extent are they hampering these tendencies? I would like to outline the sec-
tor’s major competitive factors by the presentation of Porter’s classic rhombus
model (Porter 1990). A detailed analysis was shown of its relationship and appli-
cability to clusters in my presentation of Lengyel’s paper in the overview of rele-
vant special literature in my paper’s first chapter. Our analysis is focusing on the
factors of market-based demand, on the background (accessory) or intermediary
sectors of motor vehicle industry and on corporate strategies.
5.4.1 Manufacturing factorial conditions
From the aspect of corporate input factors the competition factors of automotive
industry have significantly changed in North-Transdanubia in the past 10–15
years. In the first 4–5 years after the change of regime the region’s outstanding
geographical position with its good transport and communication infrastructure
were the key sources of development in the automotive sector. This could not
have taken place without the old traditions of engineering and motor vehicle
manufacturing and without the abundance of high-trained and cheap factory
workers having lost their job during the crisis of machine industry. Because of the
diverse geographical location of the supplier and satellite firms of Rába and Ika-
rus they were available and ready for work through the whole region of North-
Transdanubia.
The position of the labour market of automotive industry is quite contradic-
tory. The workers’ professional skills are on a higher level than the Hungarian
national average but the majority of workers is employed in production-line
manufacture. Being a traditional industry the wages in this sector cannot be re-
garded as high especially in comparison with jobs in Budapest, in service sector
or in computer industry. The knowledge intensity of manufacturing in the region
may be regarded as average. At the same time today this sector is facing growing
shortages of high-skilled labour which has increased the gravity and commuting
zone of major automotive employers to a radius of 50-60 kilometres. Shortages in
skilled labour are one of the major factors responsible for Hungary’s and its
greater region’s losing the competition for the investments of the world’s leading
car manufacturers. Therefore, the immigration of big companies and their creating
several thousand new jobs for the region is unlikely in the near future. Shortages
in skilled labour have negative impacts on the long-term development strategy of
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companies either. In the future this factor will significantly contribute to the im-
migration and development of SMEs employing a relatively small staff but manu-
facturing high value-added products.
However, labour shortages may also positively affect clusterisation making
automotive companies compete with each other for skilled workers. This can be
verified by the flow of practical experiences, knowledge, information and skills
among these companies. Now we can declare that the mobility of labour, princi-
pally in the sphere of medium and bottom-level managers is the primary indicator
of the knowledge and information transfer of clusterisation in North-Transdanu-
bia. From the two major trends of the mobility of labour one is the migration of
low positioned workers from small businesses towards modernised, complex
technology-based ventures offering the perspectives of promotion in some cases.
The other is the migration of medium-level managers with high skills, many years
of experiences and wide contacts from large and medium-sized companies to
smaller businesses.
Along with labour market issues the improvement of the general economic
background of production was continued by creating a milieu capable for meeting
the specific demands of automotive sector. Along with industrial parks, innova-
tion centres, general business development services this milieu will comprise new
organisations and services such as the Pannon Automotive Cluster (for detailed
information see the following section), the new Research Centre of Cooperation
in Motor Vehicle Industry, the Competence Centre of Mechatronics in the Indus-
trial Park if Gyır by the initiative of Gyır Innovation Centre and a plan of an
automotive supplier park. These new services and organisations are generated by
the sector’s spatial concentration and specialisation and by the demands of the
emerging new businesses just in the same way as specified in our description of
the 3rd and 4th phases of clusterisation.
5.4.2 Market demand conditions
Market demand conditions – as it has been described in the previous chapter – can
be analysed by the quantitative indices of demand (market size and growth
speed), by the quantitative parameters of local demand (the segmentation and the
complexity of demands, the number of customers) and by the expectations of do-
mestic and high quality demanding end users. From the aspects of demand clus-
terisation has fairly good perspectives in the North-Transdanubian region as on
the one hand primary and secondary suppliers (car component, module or acces-
sory manufacturers), big car manufacturers, final assemblers and small automo-
tive businesses who all serve for them as a potential demand basis.
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On the other hand by extending the automotive core of North-Transdanubia
into a Gyır-centred circular area within a radius of 400 kilometres one can see
several other giant concentrations of automotive plants besides the Hungarian
Audi, Suzuki and Opel. Within a 4-5 hour distance of Gyır several other big car
manufacturing plants are located such as Volkswagen (Bratislava), Renault (Slo-
venia), Opel, BMW and Mercedes in Austria, the affiliates of Peugeot, Citroën
and Toyota in Slovakia and the Czech Republic, the new plants of Hyundai-Kia in
Slovakia and Hyundai in the Czech Republic being now under construction. The
Czech Skoda Company is not located too far from the edge of this circle either.
Owing to the recently emerged and quickly growing output of car industry in the
near future by year 2006 4.5 million personal cars will be manufactured annually
in East Central-Europe. Of them 900 thousand will be produced within a 120
kilometre radius of Gyır. The scale of potential market demand in engine manu-
facturing will even be larger as by year 2006 within a 300 kilometre radius the
potential volume of engine manufacturing will approach 3.5 million, with an out-
put capacity of 2.5 within a 160 kilometre radius from Gyır. The majority of
these capacities immigrated into North-Transdanubia in the past 10–15 years and
produced enormous growth dynamism. An analysis of car manufacturing plants
(Mercedes, BMW, Toyota and Volkswagen) reveals that qualitative expectations
and complex requirements have high representation in demand factors.
Due to these circumstances more and more can be heard of the rising of an
‘East Central-European automotive cluster’ which on one hand may be inter-
preted as an eastward expansion of South-German automotive concentration but
on the other hand giant multinational car companies (principally Japanese, South-
Korean, French and American automotive syndicates) and the strengthening local
engineering businesses play an increasing role in this process. This emerging new
potential East Central-European automotive cluster may cover the Austrian,
Czech, Slovakian, South-Polish and North-Hungarian industrial districts.
Multinational companies imported new technologies into clusterisation cores
but they have not yet integrated into the local and regional economy. Further-
more, they are still collaborating with their old, West-European suppliers and in-
volve a very low percentage of Hungarian or North-Transdanubian businesses
into their supplier network. This goes back to several reasons. The immigrating
multinational firms started to build their Hungarian supplier networks in varying
sizes. It was Suzuki that has built the largest Hungarian network of suppliers pro-
ducing now value-added products and services in a rate of over 35%. This figure
at the other three companies – in spite of all efforts – is below 10%. Only Rába
and Ikarus have real chances to be employed as primary suppliers for multina-
tional companies but small-scale businesses may rather function as secondary or
tertiary suppliers only.
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5.4.3 Supplying and complementary industries
The intensity of cooperation between enterprises of the same value chain in
manufacturing and development is still low. Several other industries of the region
may directly or indirectly be involved into car module manufacturing (e.g. elec-
tronic, synthetic material, glass industries etc.). Although very few partnerships
have been established with universities and knowledge intensive business service
providers several positive practices may be cited as examples for their good per-
formance. One of the major reasons for the stagnating of partnerships is the entre-
preneurs’ still high suspicion in other businesses’ honesty and fairness.
In the past few years several initiatives have been launched for fostering busi-
nesses to provide higher value-added products and services and now they are
starting to yield results and be implemented now. One of them is the Automotive
Supplier Park project planned to be implemented as a green field investment at
the Industrial Park of Gyır with the support of Pannon Automotive Cluster. The
park will provide a site and physical infrastructure facilities specifically for back-
ground and complementary industries and for primary, secondary and tertiary
suppliers. The fact that additional automotive (car manufacturing) capacities have
been and will further be built not only in North-Transdanubia but all around in the
neighbour countries of East Central-Europe within an easy reach of Gyır (Brati-
slava, Trnava, Nitra) further increases the Park’s importance and opens bright
prospects for the automotive industry of North-Transdanubia.
The Mechatronic Competence Centre operating on the basis of the wide-scale
cooperation of the region’s different automotive businesses has been established
in the institutional framework of the Gyır Industrial Park’s Centre of Innovation
and Technology with the sponsorship of Széchenyi University and the cluster or-
ganisation with the purpose of creating high value-added supplying industry. The
Competence Centre has a mission of classifying the competences of different or-
ganisations of automotive and engineering industries and making them accessible
for SMEs so as they increased their innovation skills and competitiveness. Unlike
the Competence Centre which is now in the planning phase yet the Research
Centre of Cooperation in Motor Vehicle Industry, Electronics and Logistics is
now under construction and can be realised through the partnership of Széchenyi
University with the greater region’s big and medium-sized enterprises. The Re-
search Centre of Cooperation has been established for coordinating R&D between
big companies and universities, for transferring of R&D results into practical ap-
plications and for stimulating synergy between higher education and real econ-
omy.
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5.4.4 Corporate strategies
In North-Transdanubia about 200–250 enterprises are engaged in automotive in-
dustry in direct way. Most of them are SMEs employing a staff of 50-60 but some
of them are bigger. North-Transdanubian automotive enterprises are strongly spe-
cialised. The majority are focusing on car module or accessory business very few
are manufacturing a wider palette of products, product families or brands. The
most typical product families are engines, gearshifts, cylinder heads, exhaust
pipes, alloys, cable bundles, seats and door locks.
Two groups of motor vehicle manufacturers exist in North-Transdanubia. One
is foreign-owned final product, module and car accessory manufacturers, in most
cases their production line is equipped with top level technology and advanced
infrastructure and they have substantial amount of capital resources for the further
modernisation of their plants. The second group consists of Hungarian businesses
– not only SMEs but big companies as well – continuously hit by the scarcity of
capital resources, who cannot afford spending their resources for modernisation
needed for meeting those quality standards that are essential for their entering into
partnership with multinational firms. The Hungarian supplier network is charac-
terised by old fashioned technology, small-scaled and fragmented capacities low
value-added products and services low complexity products and minimal affinity
for partnership and cooperation. Therefore, the majority of domestic enterprises
are unable to compete with foreign-owned firms emerging on international mar-
kets. Unfortunately the majority of Hungarian SMEs are operating without even a
medium-term strategy focusing on daily survival only.
The region has no independent R&D organisations, institutes or companies
though – as it has already been said – certain companies are doing some efforts to
establish R&D centres in Hungary. With the region’s changing potentials the ear-
lier strategies based on low labour, site building and maintenance costs are under
revision now giving a way to new priorities as increasing value-added product
manufacturing and gaining the comparative advantages of logistics, partnerships
and supplier networks From the series of examples demonstrating this trend the
emergence of development activity11 or the initiatives for the assessment and
development of domestic suppliers (Suzuki, Audi, Opel) are notable. Foreign-
11 In year 1999 the Kecskemét branch of the German Knorr-Bremse brake manufacturing company
built a product development centre in Budapest. The centre is actively cooperating with the local
universities’ research staff and services. The activity scope of Audi in Gyır was extended by
engine development and an engine development centre was built for this purpose employing 100
engineers for research. In year 2002 Luk Savaria also built a development centre and the Austrian
Magna Steyr company migrated a development plant into Gyır because of the high concentration
of automotive industry. Several other automotive businesses have similar intentions concerning
their product development.
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owned companies are strongly export-oriented while Hungarian firms set partner-
ship building with Hungarian branches of multinationals their primary objective.
Competitiveness is based on low labour costs and other production elements. New
enterprises are still immigrating into the region. This may positively affect the
long-term local competitiveness of firms and also the intensity of their clusterisa-
tion.
5.5 The Central European automotive cluster
Of the new enterprises founded by German automotive suppliers more than one
quarter are located in the East Central-European region. Although the contribution
of East Central-European countries to the development of European automotive
industry is low the role of automotive sector is still high in their domestic industry
and national economy. In the Czech Republic the contribution of automotive in-
dustry to of total value-added industrial production is 10.8%, in Hungary 10.1%
and in Slovakia it is 8.2%. Considering that in these countries the majority of new
businesses are profiled in assembly with low value-added products and services
their contribution to domestic sales and exports is even higher (European Com-
petitiveness Report…) (Table 4).
Table 4
Some major indices of the region’s automotive industry
Country
Number of
Sales revenue,
Investments,
Personal cars,
Trucks, vans,
employees,
million EUR
million EUR
items*
lorries, items*
people
Austria
38,100
10,400
977
118,650
47,650
Czech Republic
98,061
12,661
697
436,297
5,422
Hungary
32,843
6,765
1,003
122,338
3,778
Poland
74,400
7,749
518
306,847
15,214
Romania
45,551
405
88
75,706
19,546
Slovakia
50,200
4,334
565
281,160
187
* Data of year 2003.
Source: The author’s own edition on the basis of OICA data.
52
Grosz, András : Clusterisation Processes in the Hungarian Automotive Industry.
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Discussion Papers, No. 52.
As it is written in European Competitiveness Report an automotive develop-
ment pole has been emerging in Central Europe which comprises some areas in
the Czech Republic, the major parts of Austria (Lower and Upper-Austria, Styria)
the suburban zones of Katowice and Krakow in Poland, Hungary’s northern parts
(North-Transdanubia, Budapest, the North-Hungarian region). At its earlier stage
the investments of German automotive firms dominated the region (the emer-
gence of WW group, Opel with its extensive supplier network) but today a grow-
ing number of French and East-Asian automotive firms are coming to Hungary
(Peugeot/Citroën, Toyota, Hyundai who will be followed by their supplier net-
work).
In some countries the total vertical system of automotive industry has been
built up. As the Czech example is demonstrating the immigration of purely as-
sembly and car manufacturing lines has been followed by high-trained manpower
and advanced technical/technology infrastructure supporting researches. The spa-
tial concentration of automotive sector in North-Transdanubia has approached
such a level when along with the existing factors of attracting new businesses into
the region – such as the comparative advantages of geographical location, ad-
vanced technical infrastructure, state subsidisation – the density of automotive
companies, their concentration, the increasing potential and existing supplier ca-
pacities, the better utilisation of vendor-customer contacts and the intensifying
partnerships become further driving forces for the start-up of new automotive
businesses. From this aspect it is useless to differentiate the countries of Central
European automotive clusterisation because the whole region can be interpreted
as a homogenous development pole of automotive industry. Today the growing
scale of cooperation networks in automotive industry makes it difficult to separate
Czech, Slovakian or Hungarian automotive industries from each other as they are
maintaining contacts with the same actors of automotive industry and the ties they
are bound to each other are getting stronger. The opening of new manufacturing
plants in Slovakia will intensify this process as their new factories in Trnava and
Zilina are located at almost equal distance from North-Hungary and South-Poland
who may be the potential suppliers of their background and complementary in-
dustries.
Just as if to verify this theory Sungwo Hitech a South-Korean supplier for
Hyundai Motor and Kia Motors is building a new car manufacturing plant with an
investment of 2.5 billion Czech Crowns (106 million EUR) in Ostrava a city at
the Czech and Slovak border for the support of Kia Works being under construc-
tion in Zilina with an investment of 1 billion EUR. The company’s decision was
motivated by good infrastructure and the availability of high-trained labour in the
Czech Republic (Figure 6).
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Grosz, András : Clusterisation Processes in the Hungarian Automotive Industry.
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Discussion Papers, No. 52.
Figure 6
The concentration of automotive industry in Central Europe
Source: European Competitiveness Report (2004).
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Grosz, András : Clusterisation Processes in the Hungarian Automotive Industry.
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Discussion Papers, No. 52.
Analysing the development of automotive industry from the viewpoint Gyır or
the North-Transdanubian region from the aspects of the spatial concentration of
domestic automotive sector it seems that the capacities of West-Slovakian auto-
motive plants are offering favourable prospects for Hungarian automotive enter-
prises in North-Transdanubia. Considering geographical proximity (100–200
kilometres) and good infrastructure facilities in West-Slovakia a city like Trnava
may be a better alternative for Peugeot/Citroën Company than East-Hungary
(Figure 7).
The greatest challenge for domestic automotive industry, principally for auto-
motive companies and car module manufacturers is how they can cooperate with
giant car manufacturers who may become their potential market at a distance of
100–200 or 300–400 kilometres from them, how may benefit from the potential
advantages of clusterisation and how may foster its further development so that
the sector may really become the European pole of development capable for tack-
ling its South-East Asian competitors.
Figure 7
Car manufacturers in the environment of Gyır and Audi Hungária Motor Kft.
Source: Pannon Automotive Cluster 2004.
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Grosz, András : Clusterisation Processes in the Hungarian Automotive Industry.
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Discussion Papers, No. 52.
6 The Pannon Automotive Cluster (PANAC) initiative
During the clusterisation process of the North-Transdanubian automotive industry
the territorial concentration of enterprises within the region was followed by the
emergence of special services customised to the demands of automotive industry.
Of them Pannon Automotive Cluster (PANAC) initiative has an outstanding role
in the automotive sector. This is an organisation with own corporate and man-
agement system to further catalyse this clusterisation process through its special
services and activities with the purpose of transforming this developing cluster (as
classified by literature) into an operating cluster, capable to utilise the positive
effects of clusterisation in their full dimensions within the shortest period of time.
This section is going to provide a detailed presentation on the historic background
of this initiative, its activities for the promotion of clusterisation and its palette of
services so as to see what cluster-specific services are available within the region
now and to evaluate the initiative’s role in clusterisation process.
6.1 The foundation of PANAC initiative
In Hungary the idea of an automotive or motor vehicle industry cluster was born
at the end of year 1999 for the first time. It was formulated by some local policy-
makers and politicians on the basis of a study trip to the Upper-Austrian Automo-
tive Cluster (Automobil Cluster Ober Österreich) in Linz (see Grosz 2000 for de-
tails) where they could learn its activities and operation. By recognising the po-
tential advantages of an emerging networked cooperation system of a similar type
in North-Transdanubia the largest car manufacturers (Audi, Opel) became the
parent organisations of this initiative. They were soon followed by Rába in Gyır
which – on the basis of its active participation in a supplier programme with the
coordination of MVA [Hungarian Business Development Foundation] – had al-
ready had some experiences in the field of supplier chain management.
This cluster initiative won significant political support along with economic
sector from the associations of automotive organisations, from the region’s busi-
ness development agencies and from the West-Transdanubian Regional Devel-
opment Council and its working organisation under the name of West-Pannonian
Regional Development Agency having been established on the basis of the Par-
liamentary Act on Regional Development and Physical Planning passed in 1996
amended in year 1999. During the preparatory phasis of PANAC a comprehen-
sive survey was carried out by Ipargazdasági Kft. (A nyugat-dunántúli jármőipari
vállalkozások...)
The survey covered the whole area of West-Transdanubia but excluded Buda-
pest-centred companies. The survey covering 150 companies of the automotive
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Discussion Papers, No. 52.
and background sectors was aimed at informing them on the cluster initiative and
its purposes. Moreover, the survey collected the primary data of automotive busi-
nesses, assessed the potential needs for future cluster services and cooperation
project initiatives and on the basis of results it formulated a proposal for concrete
cluster services. The survey categorised enterprises into two groups (vehicle in-
dustrial suppliers and priority vehicle industrial suppliers). Except for some ele-
ments the questionnaire had similar questions for both categories. The majority of
enterprises gave positive feedback for the initiative and almost all of them indi-
cated their will of joining the initiative (A nyugat-dunántúli jármőipari vál-
lalkozások...).
Following several coordination processes with regional top manufacturers the
cooperation agreement on the foundation of Pannon Automotive Cluster
(PANAC) was signed at the end of year 2000. The Ministry of Economy (today
named as Ministry of Economy and Transport) joined to the Cluster as an external
co-financing agent. The diversity of the participators’ interests partly eases and
partly makes things difficult for PANAC. Along with vehicle and component part
manufacturers (Audi Hungaria Motor Kft., Opel Hungary Autóipari Kft., Magyar
Suzuki Rt.,12 Rába Jármőipari Holding Rt., Lux-Savaria Kft) additional members
joined the cluster such as the representatives of financial sector (Citibank, HVB
Bank), West-Pannonian Regional Development Agency as a major actor of re-
gional development and also of local and regional economic development and
Ipargazdasági Kft as a consultant. The entrance of Széchenyi István University,
the region’s most important institute of technological higher education operating
as a university since 2002, into the cluster as a founder is another major event.
Siemens Rt and Fiat Worldwide Purchasing Rt were also among the founders of
PANAC.
The Cluster Management is responsible for operative actions and for the coor-
dination of operative services incorporated into West-Pannonian Regional Devel-
opment Agency as a special division operating in an independent economic ac-
counting system. Founders are entitled to bring decisions over fundamental stra-
tegic issues. Cluster Committee is the major forum of decisions composed of the
founder, later joined enterprises and organisations and a representative of the
Ministry of Economy. Figure 8 is demonstrating the cluster’s corporate scheme.
Besides founders and joined members marking up the strategic directions of
cooperation associated members are the primary beneficiaries of the initiative.
12 Magyar Suzuki Rt not only joined PANAC initiative as a founder but also contributed to the
organisation of Xentral-Hungarian Automotice Cluster (Esztergom Cluster) aimed at improving
the competitiveness of SME sector, at the coordination of development on the basis of the
infrastructural facilities of Esztergom Industrial Park and at the deployment of Suzuki’s business
partners into the park. For this reason this may rather be regarded as a Suzuki-centered local
supplier network than a regional cluster.
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The accession to the initiative (partner membership) is not limited by any special
conditions. Enterprises agreeing with the initiative’s objectives and wishing to use
its services – from any part of Hungary – may become members upon the pay-
ment of a single registration fee and an annual service fee.13 However partner
membership is limited to manufacturing capacities seated in Hungary and to
functioning as manufacturer. A special registration mechanism operates for com-
mercial and service companies who will be recommended to partner organisations
upon registration.
Figure 8
The corporate scheme of PANAC
Founders: 12 members
Automotive industry: Audi Hungaria Motor Ltd., Luk Savaria Ltd, Suzuki Hungary Co., Opel Hungary
Automotive Ltd., Rába Automotive Holding Co., GM-Fiat Worldwide Purchasing Ltd., Siemens Co.
Consultancy: Consulting & Research for Industrial Economics Ltd.
Financing: Citibank Hungary Co. HVB Bank Hungary Co.
Higher Education: Széchenyi István University
Regional Development: West Pannon Regional Development Council
Central Govenrment:
Cluster Committee:
Other Pannon Clusters:
Ministry of Economy and
representative of
Wood and Furniture,
Transport
Founders and Ministry
Thermal, Mechatronic,
Logistic, Textile, Öko,
Renewing Energy
external experts,
PGK – Pannon
management partners,
PANAC
Business Initiative
service providers
Co-ordination Office
Enterprises: Existing and Potential Cluster Members (more than 80 members)
Source: The author’s own edition.
13 30,000 HUF one-time registration fee should be paid by small- and medium-sized enterprises
while private businesses should pay double of this sum amounting to 60,000 – HUF. The
registration and cluster database entrance fee for commercial and service companies is 100,000
HUF. The annual service fee for all types of economic organisations has been set to 30,000 HUF
alike.
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Discussion Papers, No. 52.
Pannon Automotive Cluster sees the cluster as a trusted partnership system. In
this sense its operation is based on the distribution of information and knowledge
on the grounds of mutual benefits. In the first year of its operation of PANAC was
focusing on the introduction of its initiative in a greater public, on advertising its
activities and services for potential business partners and on increasing the num-
ber of its membership through several events, and meetings. As a result, by now
70 members have joined the initiative which currently has nearly 80 nembers now
as a total (Figure 9).
Figure 9
The geographical location of PANAC members in year 2004
Eger
Esztergom
Gyır
Debrecen
Budapest
Veszprém
Székesfehérvár
PA
C N
or A
e C
A m
r a
e g
a térség
Kecskemét
Szentgotthárd
PA
FoN
u A
n C
d
ea
rla
s p
ító tagok (8+4)
PA
a N
r A
tnC
e p
rsa
rtner tagok (49)
PA
ReN
g A
isC
t
e regi
d s
z
Str
e á
r l
vti s
c z
eo
lg
P á
r l
ota
v t
i ó
d k
e (
r 1
s 7)
Szeged
Pécs
Source: The author’s own edition on the basis of data provided by PANAC.
The weight of the nearly 80 members and PANAC itself is illustrated by the
number of staff they employ. In year 2004 it was about 38 thousand and it is a
very high figure considering that the total number of jobs is 50 thousand in the
Hungarian automotive sector. Being aware of the fact that any business organisa-
tions can participate in the cluster initiative without the necessity of choosing
automotive industry as a main profile (e.g. synthetic material industry, metal
processing etc.) this is still an outstanding value. The data of participating enter-
prises show that the members’ total annual sales revenue amounts to an approxi-
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Discussion Papers, No. 52.
mate value of 5 billion euro. Naturally, the majority of this sum is earned by the
largest car manufacturers (Audi, Suzuki and Opel). Two-thirds of PANAC mem-
bers are producers and manufacturers but 27% are running R&D services, which
is very important from the cluster’s future perspective. The pattern of the PANAC
partner organisations’ size category may be regarded as typical. 29% are large
companies, 34% are medium-sized enterprises and 37% are small businesses em-
ploying less than 50 personnel. Today, partly owing to the various services,
training and consulting activities of PANAC – the members’ competence in qual-
ity-related issues (disposition of quality assurance certificates) is by far above the
Hungarian average.14
Cluster members, associated organisations and institutes as project partners
collaborating in cluster services and common projects, research institutes of basic
and applied research, universities (e.g. Széchenyi István University), professional
organisations (e.g. MGSZ, MAJOSZ etc.), the regional-level representatives of
business development sector (MVA, IDTH, Chambers etc.) through their joint
programmes, and the key actors of central and regional economic management
through the realisation of development concepts and programmes (see Figure 10)
are all functioning as further connection points for the initiative, for the manage-
ment and members of cluster.
At present the funding of PANAC’s functional operation which is closely
linked with the accomplishment of operative tasks is the initiative’s most serious
problem. As cluster membership fee is only a minimal cost for enterprises and
founders pay no charges at all, only very low resources are available to be spent
for services. Only two organisations, the Ministry of Economy, supporting the
cluster from the very beginning, and the West Pannonian Regional Development
Agency provide some financial contribution to the cluster’s budget. Despite clus-
ter development issues enjoy priority in local, regional and the central govern-
ment’s development policies in the past few years the financing problems of clus-
ter initiatives still have not been tackled. No appropriate instruments have been
assigned to objectives. As it is seen from foreign examples, these types of organi-
sations need financial subsidisation during the first years of their operation and
they may become self-sustainable only at the medium stage of their evolution
process.
14 55% of producer enterprises has ISO 9001, 40% has ISO9002 and 40% has QS9000 quality
assurance certificate. Several members have ISO 14001, TS19469 and VDA 6.1 certificates.
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Figure 10
PANAC and its network of associated organisations and institutions
Service Providers,
Traders
service supply
Cluster Partners
Project Partners
service demands, project
co-operation purpose
proposals
Cluster Founders
Central & Regional
PANAC
requirements, demands,
Economic Development
Management
expectations
development strategies
Professional Organis.
Business Development
expertise, connecting
Organis.
programmes
connecting programmes
Universities & Reserch
Institutions
applied researches
Source: The author’s own edition on the basis of PANAC.
6.2 The services of PANAC
PANAC – as it has been described in the foundation document – has a mission of
integrating foreign big multinational car manufacturers and small car component
businesses into the economy of the region and of East Central-Europe with the
establishment of a dynamic and innovative cooperation network of automotive
industry on the territory of Transdanubia. The initiative’s missions have been set
up as follows:
− Supporting the localisation of production and development of modules and
systems,
− Improving Hungarian-owned suppliers’ ability to produce and develop high
complexity systems and parts,
− Improving the ability of Hungarian research communities to be involved in
automotive (international) projects.
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PANAC’s primary objective is developing the professional skills of suppliers
to be ready for integration into the global network of suppliers. PANAC’s another
priority is providing professional assistance for partners so as to enable them for
manufacturing more complex and knowledge intensive products, hereby improve
their positions in the supplier chain. The fostering of a nation-wide automotive
strategy and developing the initiative into a reference-provider organisation on the
partner companies (both to the government and domestic or international buyers)
is an additional objective of theirs.
In year 2000 before the foundation of PANAC a detailed service had been pre-
pared for the commission of West Pannon Regional Development Agency on the
basis of an assessment of the automotive enterprises’ demands. The service plan
was targeted at identifying the major categories where potential cluster members
would need help and assistance from PANAC. The replies of the interviewed en-
terprises covered the following categories (A nyugat-dunántúli jármőipari vál-
lalkozások… 2000):
− Organisation and collection of tendered subsidies and low-interest rate
circulating capital credits;
− Dissemination of information on a periodical basis (business, market, capi-
tal investments, partnership, tendering, legal etc.);
− Partnership organisation, partner finding services;
− Technology centre facilities for production support and quality develop-
ment and documentation (calibration of measurement and analytical de-
vices, special laboratory analyses etc.);
− Assistance to partnership projects for increasing the efficiency of produc-
tion (designing common manufacturing projects, shortening the duration of
delivery).
On the basis of demand survey and the long-term experiences of similar
cluster initiatives in other countries PANAC has plans for introducing the
following services for its members (some services are already in operation now
while others are scheduled for a later time).
6.2.1 Providing training and specialist training projects
The preparation and organisation of training programmes for the management of
enterprises having joined the cluster for teaching everyday management (con-
trolling, benchmarking, TQM, KVP etc.) and human resource management skills.
Several workshops have been organised with the assistance of multinational com-
panies and available free of charge for cluster members in various fields as quality
assurance, logistics and corporate management. The cluster also runs a special
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customs administration training course at a flat charging rate. A special training
course is available for the graduate students (mechanical engineers, transport en-
gineers and tehnical managers) of Széchenyi University at the cluster’s partner
organisations. Audi has built and opened its own training centre in year 2001 pro-
viding valuable training services. Of them perhaps the events of the supplier de-
velopment programme of the past few were the most important but the supplier
chain management and project management training programmes held by foreign
lecturers with customs specialist trainings are also worth of a note.
6.2.2 Providing specialist events
PANAC sets providing specialist programmes and their availability for enter-
prises a priority as they may contribute to the establishment of new partnerships
or to the penetration of new pieces of specialist information. To achieve these tar-
gets PANAC has an important role in the organisation of professional displays,
fairs and in encouraging enterprises to participate on them. PANTECH automo-
tive exhibition and conference organised by PANAC was held in 2004 in Gyır for
the first time. Before PANTEC PANAC had already participated at a suppliers’
display and fair held in Budapest in year 2003 and also had some role in the or-
ganisation of International Automotive Forum, a professional conference held in
Gyır twice. PANAC was involved in further programmes under various topics as
well, such as the impact of the European Union’s environmental standards on
automotive industry or in special events having held under the general theme of
green technologies. Additional successful programmes have been organised and
completed with the involvement of international partners in such issues as the lo-
gistic demands of global sourcing, the practical application of CATIA –
CAD/CAM design programmes and the managerial issues of supplier chain op-
eration. Along with professional training programmes several international study
trips to cluster initiatives or multinational companies of similar profile have been
organised into various countries as for example Germany, Austria and Japan.
6.2.3 Providing information and communication services
Compilation of databases and the dissemination of their data (PANAC members,
the most important automotive R&D service providers, institutions for training
and education and other servicing firms). These databases are facilitating inter-
company communication and easing cooperation partner finding for projects. For
fostering cooperation a common database is under preparation. Now a website
(www.autocluster.hu) is available as a primary means of communication where
along with the current news of the automotive sector various pieces of informa-
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tion are provided on the cluster’s services. Professional forums, program offers
and several other useful links are helping the orientation of partners. Later on
further databases will be built. Onsite factory visits are fostering the establishment
of direct contacts.
6.2.4 Providing diagnostic and consulting services
Technological, organisational and financial assessment of cluster members for
identifying their potentials and the necessary interventions for becoming a sup-
plier. Providing continuous consulting and expert services for members. The cor-
porate diagnostics based on the members’ requirements and current international
standards is compulsory for all members and this procedure is automatically com-
pleted on the entrance of a new member. Diagnostic processes are serving as a
basis for the determination of the members’ supplier profile. The further en-
hancement of diagnostic assessment and the members’ participation in interna-
tional projects demanded the introduction of a benchmarking programme. This
programme comprises the setting up of Benchmarking Club issuing semi-annual
reports on the benchmarking of 23 enterprises.
6.2.5 Providing technology transfer services
This comprises the provision of various Technology Centre services for members
on discounted prices. Services are based upon the region’s existing capacities. Of
them the testing centre of Széchenyi István University with TÜV Rheinland
accreditation providing mechanical and destructive-free materials testing and
three-dimensional measuring facilities has the greatest importance. The
University is also cooperating as a partner in CAD/CAM planning, in mechanical
system designing and testing, in factory and manufacturing system drafting and in
several other projects, while INNONET Innovation and Technology Centre’s
computer lab is open for members with error and impact analysis and
metering/device testing facilities.
6.2.6 Providing marketing and PR services, internationalisation
This comprises regular information disclosure in quarterly bulletins on the
members’ major investments, activities, successes, planned or ongoing common
projects, professional meetings, events and actualities. Reports on professional
meetings, seminars and workshops organised by the cluster management. Mainte-
nance of continuous contacts with press and advertising media both in Hungary
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and the neighbour countries. As a result of marketing and PR activities several
articles have been published about the initiative. The image and representation of
PANAC in international environment. Participation in international events. Sup-
port provision for members to participate in international fairs, displays. Net-
worked cooperation with similar foreign automotive initiatives. PANAC has out-
standing relations with Automotive Cluster Vienna Region (ACVR) participating
in joint project with Upper-Austrian AC, with ACstyria Autocluster GmbH in
Styria, with the Greman AKJ-Automotive, with the French ARIA Cluster for
Nord Pas de Calais and with several other German research institutes and univer-
sities. To maintain an efficient exchange of practices on international level
PANAC with German and Austrian automotive clusters is participating in the es-
tablishment of the Association of European Automotive Clusters.
6.2.7 Fostering cooperation and development capital
This comprises assistance provision to cooperation project preparation, devel-
opment and financing, especially in the areas of R&D, joint manufacturing proc-
esses, quality development, logistics and acquisition. Assistance to partner search
with the help of common database, system database and Internet. There is a plan
for the provision of financial assistance to the implementation of joint develop-
ment drafts and projects with the involvement of at least three partners targeted at
fostering cooperation. Today the cluster’s financial position is too weak for the
direct financial subsidization of concrete projects but may give support to partner
organisations with a continuous monitoring of tenders and tender consulting ser-
vices (e.g. the tenders of the Ministry of Economy, R&D funds of the Ministry of
Education, tenders of the Regional Development Council’s preliminary regional
development programme etc.).
7 Conclusion
After the presentation of the features of clusters having been emerged as products
of the growing territorial concentration and cooperation systems, our objective
was to investigate the practical utilisation and application potentials of the theo-
retical interpretations of clusters which requires a policy-oriented approach.
Namely, how is it possible to facilitate the establishment, the natural evolution
and development of clusters by political interventions? This question raises two
interrelated problems serving as a standpoint for the applicable methodology in
research, the research process itself and influencing its results at the same time.
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While the interpretation of regional cluster in literature is originating from the
conceptualisation of region as a node-like formation without definite borders and
institutions, functioning rather as a power centre whose existence is based upon
the intensity and geographical dimensions of economic relations and cooperation,
the application of cluster-oriented policy – due to the necessity of establishing and
operating a relevant system of instruments and institutions and to the essential
preconditions of measuring their performance – in the majority of cases cannot be
abstracted from a concrete political or at least a development or planning-statisti-
cal region marked out by definite borders.
At the same time cluster development – in contrast with theoretical approach
that is not associated with organisations – in several cases demands the establish-
ment of an organisational framework, the foundation of new institutions, organi-
sations bearing the name of cluster and also a substantial subsidisation of their
services, at least at the initial phase of their operation and the active collaboration
of policymakers.
Automotive industry with its automotive supplier sector is an explicitly and
highly concentrated formation in Hungary. This is all true for the number of en-
terprises (especially for the foreign investments within the automotive sector) but
analysing the volume of production with the specific index of manpower em-
ployed within this sector we can conclude that in Hungary the core area of auto-
motive sector is located in North-Transdanubia – namely in Gyır-Sopron, Vas,
Komárom-Esztergom and Fejér counties. This concentration level of automotive
industry as a critical mass may provide a perfect basis for the formation of the
domestic automotive cluster.
It should also be cleared that although clusterisation process has achieved the
greatest advance in the automotive sector in Hungary its development stage is still
far below the level of an advanced, well-functioning automotive cluster. It should
rather be considered as a potential cluster having the majority of elements needed
for successful clusters but these elements should be further consolidated and ex-
tended so that they could elicit significant positive agglomerative and synergic
effects.
This is explained by the low intensity of supplier and R&D collaboration and
common innovation projects between the newly established and operating busi-
nesses in the region, by the trifling scale and intensity of cooperation between
economic actors, scientific research institutes and universities and by the inade-
quate flow of information and knowledge resulting from the aforementioned defi-
ciencies of cooperation relations. The global sourcing of foreign companies
makes the job of Hungarian enterprises very difficult to get into the team of their
suppliers. The demand for domestic R&D results or activities is also moderate
only.
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Grosz, András : Clusterisation Processes in the Hungarian Automotive Industry.
Pécs : Centre for Regional Studies, 2006. 72. p.
Discussion Papers, No. 52.
It is a big problem that the regional basis and the strategic competences of the
sector’s most outstanding German, Japanese and American companies are located
outside the region. This is a partial explanation for the aforementioned problems
and deficiencies but also calls attention for the dangers these enterprises’ rela-
tively quick outmigration may bring about. For decreasing the degree of the re-
gion’s economic vulnerability strengthening the competences and generating a
critical mass of domestic automotive industry and enterprises that may serve as a
real basis for cluster-based development are issues of elementary importance.
Meanwhile several positive processes have started in several fields bearing the
marks of clusterisation. The cooperation between institutes of higher education
was continuously getting more and more intensive during the past few years. Szé-
chenyi István University joined Pannon Automotive Cluster as a founder and
continuously extended its economic relations and treats its relationship with Audi
as a matter of special importance. A Motor Vehicle Logistic Cooperation Centre
was opened under the university’s auspices after a survey on he sector’s demands
with a special target of intensifying the relationship between university researches
and the North-Transdanubian automotive industry. Along with Széchenyi István
University the Budapest University of Technology and Economy is bound to
automotive industry with strong economic ties and to some extent the University
of Veszprém as well.
Mechanical engineering, namely motor vehicle industry looks back to a long
history in the North-Transdanubian region. These old traditions and innovative
background predestine the region and its automotive industry to put the existing
and future networked partnerships into the centre of its development and com-
petitiveness increasing strategy. In this sense for the settlement of newcomer
automotive suppliers and for the improvement of input-output connections within
automotive industry an Automotive Supplier Park and a Mechatronic Competence
Centre will be established in Gyır. Along with these projects several other initia-
tives and services have been launched during the past years targeted at satisfying
the specific demands of this very formation in automotive industry.
Various trends may be observed in the economic activity of companies
showing towards clusterisation. With the changing regional economic environ-
ment the earlier site selection strategies based on the competitive advantages of
low manpower and plant establishment costs were replaced by new ones origi-
nating from the competitive advantages of logistics, cooperation relations and the
building of supplier networks. The progress having been made so far may be il-
lustrated by such examples as the emergence of development profiles (Knorr-
Bremse: product development centre, Audi: engine development plant, Luk-
Savaria: launch of development profile, Magna Steyr: development centre, WET
Automotive: RCD centre) or initiatives for assessing and supporting domestic
supplier firms (Suzuki, Audi, Opel).
67
Grosz, András : Clusterisation Processes in the Hungarian Automotive Industry.
Pécs : Centre for Regional Studies, 2006. 72. p.
Discussion Papers, No. 52.
And last but not least, clusterisation may significantly be promoted by the es-
tablishment of PANAC, a specific cluster development oriented cluster organisa-
tion founded by enterprises and by its consistent cluster building strategy. We are
aware that the intensity of PANAC’s activities compared with similar foreign or-
ganisations is too low for achieving significant results in clusterisation even in
medium-term perspective even if the shaping of its service profile derives from
the assessment of the demands of Hungarian enterprises and from the experiences
of PANAC’s Austrian and German partners.
Despite long-term involvement policy in automotive industry may bear some
risks in the region due to strong dependencies but the so far achieved results, the
future potentials of automotive industry and the ongoing processes of global
economy (big automotive investment projects within a radius of some hundred
kilometres) are justifying the necessity of further steps towards a modern auto-
motive and automotive component part cluster. For the minimisation of structural
threats and for strengthening economic diversification a similar cluster-based
technology should be introduced in other economic sectors as well as it has al-
ready started in timber, furniture and spa tourism.
68
Grosz, András : Clusterisation Processes in the Hungarian Automotive Industry.
Pécs : Centre for Regional Studies, 2006. 72. p.
Discussion Papers, No. 52.
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