Clusters, Supply Chains and Local Embeddedness in Fyrstad

Abstract

In recent years, there has been a proliferation of regional development policies designed to promote and develop regional clusters. Regional policymakers in Europe strive to develop local clusters to promote regional economic growth mainly through supply chain development initiatives, particularly in regions dominated by branch plants of large multinational enterprises. This article explores the role played by two large firms in developing linkages with local suppliers in the small regional economy of Fyrstad, west Sweden. Using a case-study approach, the investigation examines the main methods through which Saab Automobile and Volvo Aero Corporation develop suppliers within the local automotive and aerospace clusters. Overall, the research discovers that local sourcing is low and local supply chains are dominated by small, low value-added suppliers providing basic parts and repair services. The region lacks high-technology, fast-growing first and second-tier suppliers. The research also shows that the problems facing the supply chain in the automotive cluster are different from the aerospace cluster and that supplier linkages within the aerospace cluster appear to be more beneficial for long-term regional development. Finally, policy recommendations to aid each cluster are highlighted.