suppliers, and electrotechnical firms. But still local firms ask the VDI whether itcould offer these seminars in-house. For legal reasons it cannot do this. Localentrepreneurs are forced to make use of the general programme the organizationoffers. We see how legal and formal aspects enforce collective action whereassociational support would otherwise just be used for a single firm’s benefit. Thiscreates the positive by-product, that entrepreneurs talk to each other and discovercommon concerns. The VDI in Stuttgart is linked to the Fraunhofer-Institut (IPA).Lecturers are invited from the university, and staff members of the VDI alsoparticipate in subcommittees of the Landesgewerbeamt, which discusses issues ofvocational training for the engineering sector. Thus the VDI illustrates how publicorganizations and associations (excluding the unions) are networked locally andsupport the cluster with collective goods. However, in the 1990s the market situationchanged and this regional support infrastructure had to be adjusted to newchallenges.Strength and weaknesses of the networked firm modelThe crisis of the 1990s in Baden-Württemberg has been much debated (Cooke andMorgan 1998; Braczyk, Schienstock and Steffensen 1996; Herrigel 1996b). Eventuallyhowever firms recovered. How did they and public actors achieve this?Challenges for firms – transformation of the local machine tool clusterSome firms reported that 1993 was the worst year in their entire history ofentrepreneurship (Interview BW-F-08). The comparative advantage of high qualityproducts turned into a disadvantage. This was largely the result of a downturn intraditional mass markets. Almost every interviewed firm produced components ormachines for the motor industry, either by supplying directly to firms likeDaimlerChrysler or to suppliers, or to other machine tool firms which depended onthe motor industry.While in times of growth the networked firm model meant that smaller firmscould be supplied with LCCGs by larger ones, in times of crisis this dependencecreated three negative effects. First, the absolute number of orders for new machinetools decreased enormously. Second, the restructuring of the large firms introducednew systems of control, which meant that price margin now became the mainrelevant measure by which supplier relationships were kept or cancelled. Third,while in times of growth a customer firm would make its small suppliers think

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