Competitive Advantage in the Tile Industry

6.4Conclusions for value chain research

In the section on the conceptual framework, we pointed out that value chain research so far suffers from a number of deficits, in particular a too narrow focus, a bias for buyer-driven chains and a shallow theoretical foundation. In the research which led to this paper we have pursued a relatively broad focus, trying to map the various supporting industries and services connected to tile production. Some of them turned out not to be strategically important for the sector, such as mining of clay and independent design companies. Others are crucial for an understanding of the industry, namely manufacturing of capital goods and of glazing materials. This perspective went beyond the focus which was often applied in earlier value chain research, i.e. addressing the interaction between the producers of final products and buyers. Thus, our research underlines the importance of applying the value chain concept in the way suggested by Kaplinsky and Morris (undated, 4): “The value chain describes the full range of activities which are required to bring a product or service from conception, through the different phases of production (involving a combination of physical transformation and the input of various producer services), delivery to final consumers, and final disposal after use.”

The bias for buyer-driven chains in earlier research was related to Gereffi’s distinction between buyer- and supplier-driven chains, which again was related to the extensive research he and other U.S. researchers had done on the apparel trade between East Asia and the U.S. Our research indicates that this simple distinction does not give justice to a complex reality. Buyer-driven chains are those which feed into highly concentrated segments of the retail trade, in particular food & drink, garments & footwear and furniture, where barriers to entry to production are low. Supplier-driven chains involve industries such as cars and computers, where barriers to entry further up the chain are high (even though concentration of retail trade may be high as well, such as in the case of computers). But what about cases such as tiles? Is it too early to say whether it is a buyer- or a supplier-driven chain, or do chains such as this one establish a type of its own? We want to argue that neither is the case, and that we should refrain from such attempts of constructing overly simple typologies. Value chain research so far has only to a small extent been connected to cluster research, and it has been unconnected to industrial economics. This is even more surprising as issues such as concentration and barriers to entry play a key role in value chain research, since they are usually referred to when it comes to locate power in value chains.

Our suggestion for value chain research is to do two things. First, go for more deduction and less induction, in particular by looking at what is happening in neighbouring disciplines, for instance industrial economics and management science. It is likely that we will come across concepts and theories there which will permit us to reassess the empirical findings which are already available. Second, continue and deepen value chain research by using network governance concepts. In our case study, we tried to do this but only succeeded to a limited extent, in particular in the cases of Sassuolo and Castellón, where we were newcomers and local actors were hesitant to share the kind of information we would have needed to profoundly understand the power games involved in the clusters and in the value chain. How can we deal with this kind of problem? One option is to become an industry specialist, conducting repeated research projects on the industry and in this course creating trust among industry actors and establishing contacts which render true inside information. But this option has shortcomings, in particular as it tends to limit the cognitive capacity of the researcher. Another option is to turn cluster and value chain research more practical. We find it probable that the number of researchers in the field of industry-related research is increasing, so that the competition among researchers for the scarce time of industry insiders is increasing, and is getting even more intensive as firms and industries are consolidating and the number of relevant sources in the industry may decrease. How then does the researcher establish a competitive advantage, something that persuades industry insiders to share time with him or her? Our suggestion would be that the most convincing argument is that not only the researcher but also the industry source gets something out of the interview. In other words, the researcher needs to be prepared not just to listen to the industry source but to get involved in a topical discussion which is useful for the “interviewee”. This, in turn, means that industry research, and in particular value chain research, needs to become more practical and action-oriented so that researchers really have something to offer to industry insiders. So this would be our suggestion for a next step in the evolution of value chain research: not only to use it in university courses, so that students get a better understanding of what is going on in the real world, but to turn it practical so that it is useful to industry insiders.

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1 The research presented in this paper is based on three fieldwork exercises which involved three clusters – Sassuolo in Italy, Castellón in Spain, and Santa Catarina in Brazil. We conducted interviews with tile firms and other actors in the Santa Catarina cluster in April 2000; this included a visit to the Construction Materials Fair in São Paulo (Feicon). All three authors conducted interviews with tile firms and other actors in Sassuolo and Castellón in October 2000; this included a visit to the Tile Fair in Bologna (Cersaie). We conducted a benchmarking exercise with six medium-sized tile firms in the Santa Catarina cluster in November/December 2000. We discussed the findings of the research with the firms in Santa Catarina in August 2001, thus gaining further insights. Apart from this, we exploited the information provided in trade journals and by internal papers and workshop documentations from sector associations. We are grateful for the time company representatives, association officials, and other source persons spent with us. We are also grateful for the feedback we received on the first draft from Hubert Schmitz and ASCER, the feedback on the second draft we received during the workshop at IDS in February 2001, in particular the comments by Raphie Kaplinsky, and the subsequent detailed comments from Hubert Schmitz and John Humphrey. The usual disclaimers apply.

1 See, for instance, Killick (1994) and the April 1994 special issue of World Development.

2 This, in turn, leads to a terminological inconsistency with the earlier work by Michael Porter, who refers to intra-firm interaction as “value chain”, whereas he addresses inter-firm transactions as “value system”.

1 The common statistic measure in the tile industry is the square meter (except for the U.S., where it is the square foot). For participants in the industry this has the advantage that they do not have to talk about sales, let alone profit. However, the analytical use of this measure for our purposes is low, except in terms of changes in the relationship between sales value and square meters sold. We will come back to this point later. – The source of square meter data, if not otherwise mentioned, is the trade journal Ceramic World Review, usually based on data from ACIMAC, the association of Italian tile equipment manufacturers.

2 Data from Ceramics World Review, various issues. It must be noted that some industry sources have serious doubts regarding the accurateness of these data.

3 Firms are unwilling to unveil any data in this respect.

4 Other suppliers, such as producers of clay, are not discussed here because they neither shape the technological evolution of the tile industry nor are particularly powerful.

5 In August 2001, Degussa sold its glaze-related business unit to Ferro.

1 This relates to the concept of reflexivity as formulated by Giddens (1984, 3): “... it is useful to speak of reflexivity as grounded in the continuous monitoring of action which human beings display and expect others to display”.