Competitive Advantage in the Tile Industry

4.3Comparing governance patterns in Sassuolo and Castellón

There are numerous issues which we might raise in terms of comparing the two clusters. One option is to come back to the issue of competitive advantage and upgrading. We have started with the proposition that understanding upgrading in the tile industry requires an analysis of the localised factors, i.e. cluster issues, and an analysis of global factors, i.e. the structure of the global value chain. We will look at the latter issue in the final section of this report, since the look at the case of Santa Catarina adds important insights. At this point, we will have a look at localised factors, and specifically at the governance patterns.

We summarise our findings in Table 9. There are a few notable differences between the clusters, and the main observation is that governance patterns are stronger in Castellón. It does not suffer from the kind of rivalry we observed in Sassuolo between capital goods and tile producers. Moreover, the cohesion among tile producers is stronger in Castellón.

What is behind these differences? We cannot offer a simple, straightforward answer. In our view, three factors are likely explanations. First, there is the issue of restructuring of value chains, especially the downstream part. We have argued that this may create a situation where firms find the idea of working jointly implausible, and not just at the commercialisation stage but also at other stages. The observation that Assopiastrelle in terms of new activities is not even addressing all the very pressing issues (it addresses environmental and transport problems, but is not effective in achieving a renovation of the infrastructure) is compatible with this explanation. It is not by chance that collective action in Castellón is strong, and that firms there are so far not going for forward integration.

Second, there is the consolidation process which is occurring in Sassuolo but not in Castellón. There is some indication that firms in Sassuolo think that they are now big enough to sort out problems by themselves, rather than relying on collective action, whereas among firms in Castellón there seems to be a clear notion that they are still quite small and need collective action.

Table 9: Governance patterns

Factor	Sassuolo	Castellón
Organization of value chain	local machine producers mostly Spanish colorifici local tile producers sales reps	Italian machine producers mostly local colorifici local tile producers
Power structure in the cluster	So far strong position of tile manufacturers Power struggle between machine and tile manufacturers	Strong but not dominant position of glazing producers Partnership between glaze and tile producers
Role of government	Very limited	Supportive role of national, regional and local government
Evolution of institutional fabric	Relatively strong business associations, some degree of internal fragmentation Limitations in terms of other supporting institutions	Very strong and united business associations Very strong environment of supporting institutions

Third, one might speculate that collective action has to do with the degree of professionalisation. The argument would be that the decision in favour of or against collective action involves a mixture of objective and subjective considerations, such as a rational calculation of costs and benefits (objective) and the relationship with a neighbour who has been a nuisance all the time (subjective), and that objective considerations become more relevant with a rising level of professionalisation. It appears that in Sassuolo the degree of professionalisation in the capital goods sector is higher than in the tile sector, with the former having a strong engineering base and the latter relying more on tacit knowledge than on a scientific approach. The observation that ACIMAC presents a much stronger analytical competence than Assopiastrelle would be in line with this argument. Regarding the case of Castellón, local actors emphasise the process of professionalisation which has occurred not only in terms of production management but also regarding other management functions. Firms may still be family-run, but the family members in decision-making position have gone through extensive formal education plus on-the-job training in firms outside the tile business.

5Latecomer industrialisation and value chains in the tile industry: The case of Santa Catarina, Brazil

In this section we will look at the evolution of competitive advantage in the tile cluster in Santa Catarina, Brazil. We will pursue two questions:

1. 
   What does this case tell us about the relative importance of localised factors and value chains? We have seen that in the case of Sassuolo the increasing importance of downstream issues in the value chain militates against effective collective action at the local level. We will show that a similar process can be observed in Santa Catarina.
   
2. 
   What does the evolution of the Santa Catarina cluster tell us about the functioning of the global value chain in the tile business, in particular the interaction between the elements which are further upstream? We have mentioned that there is an internal tension in the clusters in Sassuolo and Castellón. The producers of capital goods and glazes appreciate the existence of customers in emerging countries, whereas the tile producers are not so happy about the emergence of new competitors. We will show that the fierce rivalry among and between capital goods and glaze producers creates a constellation which benefits the emergence of a competitive tile industry in a place like Brazil.