Does geographical clustering pay? Analysis of the Norwegian salted and dried cod industry

Abstract

The structure of the Norwegian salted and dried cod industry is manifold, with differences both regarding plant size and type of organisation. The cluster of manufacturers and exporters of this industry in the North-Western region of Norway contributes considerably to total exports, and the main location for these firms is the Ålesund region. Ålesund is also the most important Norwegian town for exports of fish and fish products in general. It is well known from literature that geographical clustering of firms may induce self-reinforced growth effects. In an increasingly more competitive global environment, with stronger competition from producers and exporters in countries like e.g. Iceland, Canada, Russia, Portugal and China, it will be important to preserve and even strengthen such a cluster. In order to recommend adequate policy to support the development of this cluster one must recognize the mechanisms that create innovation and value added. To reveal possible localized external returns to scale in the regional salted and dried cod industry, a panel of firms is analysed by estimating a production function including both internal production factors and external economy variables. One important source of positive cluster-effects can be associated with immaterial capital related to connections between different actors within the industry. Preliminary results show that there is a significant localized external effect in this cluster, implying that geographical clustering in the central Ålesund region will induce more value added than otherwise.