Gruvöns Bruk/ Billerud in Grums, Värmland. Photo: Odd Iglebaek
In our Interreg III financed project on Inner Scandinavia we found arguments favouring a theory focusing on the importance of local and regional resources (Berger, Forsberg and Ørbeck, 2004 and Forsberg et al., 2006) though perhaps not in the way Porter (1990) and Krugman (1998) necessarily understand it. The evidence for this is of another kind, namely, it is best understood within a path-dependence perspective with physical connotations. This means that there are arguments for a more physical resource-oriented approach than was observable within the "new economic geography" models based on a number of simplifying assumptions.
A concentration of ownership
We will illustrate this further by looking more specifically at the province of Värmland in the Swedish part of the broader Inner Scandinavia region. The notion that company and industry-specific knowledge and skills should be utilised in regional growth programmes is a central idea in the discussions of regional innovation systems. This is also a central idea in the Regional Development Programme of Värmland.
The industrial background of the region is of importance here in order to better understand the strategy of the programme. During the high point of the paper and pulp industry in the 1950s and early 1960s, large parts of Värmland were divided in terms of ownership between two large forest fiefdoms, namely, Uddeholm and Billerud. Apart from a few large paper and pulp industries (primarily Skoghall), Uddeholm's base was the iron and steel industry. Billerud was first and foremost orientated towards the paper and pulp industry (primarily the Gruvöns Bruk mill), but it also owned a number of large sawmills. A significant difference also existed in ownership terms between western and eastern Värmland. A relatively high percentage of private forest owners in the west combined agriculture and forestry, whereas eastern Värmland was dominated by company-owned forests.
In skills terms, industrial development based on forest-based resources has given rise to an extensive store of knowledge on processes and products. The growth of this expertise was nourished by the close relationships between firms and industries in the region. The exchange of personnel between companies in close proximity to one another additionally facilitated learning processes and skills, creating a fertile environment for innovation. Company research and development departments have also gradually undergone a process of concentration.
In some cases, changing ownership structures hastened concentration tendencies and valuable expertise was sometimes lost. In other cases, skills and expertise were enhanced and a higher degree of specialisation was enabled within the region. The increasingly clear trend of recent decades in which products have gained an ever greater knowledge component has made research and development resources, relatively speaking, an increasingly important factor in improving products and processes. This stands in contrast to the prevailing situation fifty years ago, when relatively unprocessed products could still be sold for a tidy profit.
The emergence of a knowledge-based economy and regional innovation systems
The interaction between company research resources and university research has taken on greater importance in development work. Research and development at Karlstad University in particular has proved vital for the forest industry of the region. The advent of a civil engineering programme orientated towards chemical technology and research on paper coating are examples of the key role played by the university. There are several research directions within the "Forest, Environment and Materials" knowledge profile at Karlstad University that are relevant to the investigation of innovation systems. A strategic research field entitled: "The Properties and Function of Packaging" was also recently established at the university. In addition, regional companies often also possess significant in-house research resources.
Värmland's clusters, the Paper Province, the Packaging Arena, Steel and Manufacturing, have without doubt been highly successful (Sölvell, 2009). They have each emerged from the traditional regional industries and today consist of companies in the paper and pulp and steel industries respectively. The purpose of these clusters is to promote skills development, marketing, project development and regional growth processes.
One such example is that of the Paper Province (TPP) which was born of a 1998 initiative by an enterprise promotion organisation. Discussions among the group members led to a study being initiated of the paper and pulp industry. Funded by the County Council, County Labour Board, a number of municipalities and private enterprise, TPP was launched in spring 2000, primarily for the purpose of working with labour recruiting issues (Forslund and Johnstad, 2004, Berger and Johnstad, 2008). As a result of a joint initiative, a highly diversified packaging sector was established within the framework of The Packaging Arena (TPA).
Innovative arenas
The fact that Värmland is home to a unique expertise endowment in the forest industry sector is obvious. The problem is that today's fiercely competitive situation in the global arena requires a higher level of specialisation and product processing. Business relationships have been developed between companies in many industrial markets, rather than between companies and consumers. It is increasingly apparent, however, that consumer goods markets have become more important, due in the main to improvements in social welfare and purchasing power in many countries.
The most significant impact here can however be observed in the computer and telecoms sector, where new products and models targeted at an affluent group of consumers are launched one after the other. The paper and pulp industry in Värmland has also tried to find ways to develop the value chain from forest and paper to various types of special products. As a result the whole region is now being promoted as "The Packaging Arena".
A similar process took placed in the Norwegian part of Inner Scandinavia with innovation systems such as "Treklynga", Bluelight and Light Metal. One of our studies has initiated a benchmarking process of the innovation systems in the region (Berger & Johnstad, 2008).
These are only some of examples discovered of how forest assets in Värmland initiated various technical innovations. Research and design play a greater role not only in technical innovations, but also in the efforts made to identify the best possible system solutions, which integrate product and packaging solutions. The greater service content in the consumer products market leads companies to more fully connect and cooperate with the regional university in Karlstad.
Conclusions
Our main observation in relation to the globalised economy is that the economy may be globally integrated, but the strategies of the municipalities in the region are strikingly local and path-dependent. Without questioning the importance of social networks and the social integration of knowledge and local collaboration, we found that the strategies are heavily based on the natural resources of the region.
Moreover, new local projects also aim to sell the exclusive resources of the municipality, and these are physical: the border, the forest, the hilly topography, the water system etc., are all suitable for housing and tourism. This demonstrates that no one single economic narrative exists. Across Inner Scandinavia then, as in other regions, it is clear that a multitude of economies and development strategies based on local physical and human resources exist.
By Professor Sune Berger, Department of Human Geography, Karlstad University, Sweden and Professor Gunnel Forsberg, Department of Human Geography, Stockholm University, Sweden
References
Berger, S. & Johnstad, T. (2008) A Community of Practice between Six Clusters. Paper presented at the conference on Regional Development and Innovation Processes. Porvo, Finland 5th -7th March 2008.
Berger, S., Forsberg, G., & Ørbeck, M., (2004) (red.) Atlas över Inre Skandinavien. Befolkningsutveckling, näringsliv och livsmiljö. Karlstad University Studies 2004:66.
Forsberg, G, Grimsrud, G.; Jakobsen, L.; Jansdotter, M. & Vangsgraven Stubberud, K. (2006) Gränsfall. Platsens betydelse för omställning och utveckling i en gränsregion. Nordregio,
Forslund, P. & Johnstad, T. (2004) Innovasjon og verdiskaping. Utvikling innen fem innovasjonssystem i Värmland og Innlandet. Working paper.
Krugman, P. (1998) What's new about the new economic geography? Oxford Review of Economic Policy, 14:7-17.
Porter, M. (1990) The Competitive Advantage of nations. New York: Free Press.
Sölvell, Ö. (2009) Clusters: Balancing Evolutionary and Constructive Forces. Stockholm: Ivory Tower Publishers.