Cluster Dynamics and Industrial Policy in Peripheral Regions : a study of cluster formation as a local development process

Abstract: The rapid growth of the global economy in the last two decades has created a new economic reality in many municipalities in peripheral regions of Sweden. Having earlier relied on traditional industry as the source of employment, today municipalities in peripheral regions are struggling to survive in a completely changed economic landscape, with new conditions for development. The dismantling of trade barriers, accessibility of new markets for production, and faster and cheaper modes of communication and transportation have combined in changing the conditions for development. While historically peripheral regions have depended on manufacturing firms as a source of employment, indications today show that local and regional development is enhanced through the development of locally acquired relationships that promote knowledge creation and transmission. In the past, the Swedish government had put in place measures to promote a degree of regional parities. These included enticement schemes to industry and the relocation of public bodies. Faced with the global winds of change that have arisen in the last few decades, this approach is becoming unsustainable. The overall aim of this dissertation is to contribute to the research aimed at enhancing regional economic development and to increase the understanding of as well as give insights into local economic development processes aimed at meeting global challenges in a peripheral region. In it I explore the two interrelated questions of 1) what are the mechanisms influencing location of economic activities and industrial policy in peripheral regions? 2) How do these mechanisms manifest themselves in a peripheral region? In this study, three case studies of local development processes in the two municipalities of Ljusdal and Söderhamn, in the geographical region of Hälsingland are presented. The case studies are named the business case, the policy case and the hybrid case to reflect the mechanisms that induced them.