CLUSTERS GROWTH AND ENERGY DEMAND                         A REFLECTION ON SUSTAINABLE CLUSTER                             ...
By examining Porter’s diamond model, there are              Objectivesome concerning linkages of factor conditions which  ...
METHODOLOGYThis paper takes based empirical evidences on therelationship between economic growth and energyconsumption (Ho...
CONCEPTUAL FRAMEWORK:CAUSAL LOOP DIAGRAM                                                         Figure 5 Reinforcing loop...
Figure 8 shows important balancing loop between         efficiency; it would escalate economy transition toeconomic factor...
Porter, M. E. (1998). "Clusters and the new         economics of competition - M.Porter."         Harvard Business Review ...
Upcoming SlideShare
Loading in...5

Surapong soponkij cluster growth and energy demand cld ai summit


Published on

cluster growth and energy demand cld presentation

Published in: Technology, Economy & Finance
  • Be the first to comment

  • Be the first to like this

No Downloads
Total Views
On Slideshare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Surapong soponkij cluster growth and energy demand cld ai summit

  1. 1. CLUSTERS GROWTH AND ENERGY DEMAND A REFLECTION ON SUSTAINABLE CLUSTER Surapong Soponkij Rattanakosin College for Sustainable Energy Environment, Rajamangala University of Technology Rattanakosin, Salaya, Phuttamonthon, Nakorn Pathom 73170, Thailand Corresponding author: 2009), clustering is a function of the number andABSTRACT quality of linkages among firms and with other elements of the economy. It is the linkages thatThis paper studies the dynamic correlations between enable a vigorous level of innovation and othercluster growth and energy factors by using a system technologically related activities through production-dynamic modeling approach. Though energy is change benefits. From significant finding (Cornillieinevitable as the matter that reflects the growth of and Fankhauser 2004) of declining energy intensity iseconomic activity, its transaction cost and the one of the major improvements of transitionsecurity issues for developed and emerging economy in production changes. The decompositioneconomies, there is no empirical finding between model distinguished 4 factors as relative importancecluster growth and energy demand. It is significant of energy-intensive economy as follows; energyfinding that innovative clusters leverage their intensities of industry, transport and economytechnological development in cost-benefit energyintensity which requires long-term projection of transitions (agriculture, services, and residential), andenergy security to sustain its cluster growth. In this the effect of structural change in which significantlypaper, it simulates how clusters have reflected the contributed to reflect the declining and improvementfeedback effects on economic growth and energy of energy intensity.consumption along cluster dynamic which correlatesthe condition scenarios of energy demand indicated Finally from results, energy intensity defined asby technological, economical, and sociological energy use per GDP that depends on socio-economicfactor. and environmental benefits as the matter of the fact that declining in energy intensity could be thereforeINTRODUCTION considerable to market-based reform in economy-Cluster becomes a key mode of economic efficient improvement (Bhattacharyya andconcentration and focus of government policies Ussanarassamee 2005). From such finding, energyacross the world and for a wide variety of industries. demand in transition country tends to be highlyThere have been government enthusiasms for intensive consumed by transport sector whereasencouraging industrial cluster development aimedparticularly in innovative transaction, technology Background of literatures and analysis modelregimes and knowledge spillovers, though not This paper attempts to conceptualize clusters on theexclusively, to evolve economic efficiency basis of existing literature in cluster dynamics that(Iammarino and McCann 2006). Whereas the key reflecting cluster growth in transition economic. It’sfeature of clusters policy are dynamic correlations clear that most influential work of Michael Porterbetween productivity changes, innovation, and new (1990) is starting point for clusters analysis. Alsolinkages of economic transition (Tim Padmore 1997). Porter’s diamond model provides cluster initiative approach when policy maker decides to focus onTransition economies often focus on a mix industry cluster examining process (Porter 1998).types in developing countries. Transition economyoften means a changing planned economy to a Cluster Growth and Full Diamondmarket economy. However, the development of For cluster often involves networking and emergingmarket economies in developed countries, there is social capital. The more social capital within aadvanced economy to focus high-tech industries region would expand sophisticated-cluster network to(Mans, Alkemade et al. 2008) that are considered as develop more rapidly. The diamond (Porter 1998)attractive cluster policy to gain government’s works as an engine to drive an upgrading cluster toattention to promote funding to creates incentives for emerge upstream and downstream linkage for rivalry,cluster partners to actually collaborate on high- cooperation, openness to international markets, andtechnology sectors. According to cluster (Solvell finally lead customer demand.
  2. 2. By examining Porter’s diamond model, there are Objectivesome concerning linkages of factor conditions which To simulate break-through scenarios among energylocal firm in particular cluster needs to overcome factors in technological, economical, and sociologicalsuch as supply of natural resources, in this studyexplicitly referred to energy resource in transition To probe whether energy intensity make difference ineconomy, per development of technology-related in cluster dynamic in term of attracting social capitaladvanced factors. In addition to this model, it derivesdemand conditions for local demand or existence of Scope of studylocal resources that cluster will interact with regional The purpose of this paper is to introduce a simulationor local labor market and Research University to modeling of system dynamic with selected scopes ofadvance innovative upgrading for related process-based transitions in cluster dynamic whichintermediate production. This is how cluster reinforces economic transition and drives the demandinitiatives involve in economic development to of energy efficiency thoroughly. Although muchmaximize the benefits of local presence. They must comparative work between economic growth andfoster substantial local investment and bound energy consumption on the impact of industrial at theongoing relationships with government bodies and national level has been conducted, our challenge topolicies and local institutional such as utilities, regional activities aggregated or defined as regionalschools, financial services, media, and research cluster are far forwarding discussion and analysis togroups. For a cluster to continue to mature and grow, reinforce the interaction of cluster dynamic betweenfactor markets of both firms and people are the main R&D institution and private innovative SME throughcirculation in social capital including formal and establishment of collaborative policy.informal network of personal and corporate network,organization for collaboration, brainstorming, idea, To advocate government’s enthusiastic public policyskill and resource on which must be attracting to the maker from transition countries, our scenarios will beinflow of international market with different inward based upon a couple decades’ time series from yearinvestment (FDI – foreign direct investment and VC 1985 – 2005 of empirical case studies from diverse– venture capital), import of materials, components groups of industrial countries, government agencies,and products, and new technologies (Yehoue 2009). and cluster management in Europe, and transition countries such as China, India, and Thailand. SinceBesides clusters dynamic, it is crucial for small scale this study has been narrowed through technological,industry (SSI) to account for energy efficiency as the economical, and sociological involvement in clustermain improving factor of cluster’s barriers (Nagesha dynamic regardless of location, it is our courage toand Balachandra 2006). They referred six important leverage global-market economy with indigenous-factors for effectively handling with barriers to transition economy. To drastically simulate suchenergy conservation; (1) technical – lack of feedback effect on energy consumption or demandavailability, reliability and knowledge of efficient forecasting, some economical endogenous such astechnology, (2) institutional – lack of right income, energy price must be balancing with energytechnology input, financial support and proper requirement in causal loop as given governmentprogram, (3) financial – lack of explicit financial policy (Asafu-Adjaye 2000).mechanisms, (4) managerial – lack of training,improper managing, (5) pricing – lack of rational Expected outputpricing of electricity and other fuels and (6) This model conceptually shows result factors byinformation – lack of appropriate information, reducing in energy intensity from small-scaleinformation diffusion problems. They revealed that industries that is normally correlated with the effectsfinancial initiatives and behavior of managerial of innovative technology and knowledge spilloversentrepreneur are the barriers to improvement of initiated by government policy’s introduction ofenergy efficiency. Though these barriers’ priority are necessary energy requirement into cluster dynamicirrespective to others dissimilarities between which are not fully as endogenous. This indicatesindustrial clusters, financial inflow is the most some relationships between rising social capital inimportant to be addressed for energy-efficiency new SSI and reducing environmental impact withimprovement in cluster development. Moreover, lower energy intensity. Higher social capital is likelyrelated study of SSI’s barrier in transition countries to demand more energy efficiency and somehow(Thiruchelvam, Kumar et al. 2003) found many derives energy requirement. We show conceptualpolicy options but all interventions require diagram that reveals the impact of government policycoordination among government bodies and incentive in correlated scenarios with dynamic factors ofpolicy of energy conservation program. energy requirement in causal loop explicitly.
  3. 3. METHODOLOGYThis paper takes based empirical evidences on therelationship between economic growth and energyconsumption (Hondroyiannis, Lolos et al. 2002),however, with the absence between cluster growthand energy demand. For this simulation, non-linearsystem dynamic modeling, particular set of energyfactors have been used; energy consumption, energydemand, energy supply, energy intensity, energyefficiency, energy conservation, energy requirement,energy price, and energy import to leverage cluster Figure 1: Linkage tree from government policy throughgrowth as balancing feedback and modeling the cluster growtheffect of particular government policies on the clusterdynamic. Hypothesis 2For comparison, most studies are found on static and Is higher energy requirement really effective to theopen-looped effect of causality of corresponding inflow of social capital or foreign investment?policies to the cluster formation without including thefeedback effect from the cluster to those economic This is to analyze that our government policy tofactors in simulation (Teekasap 2009). To assess business attraction from hypothesis 1 has explicitlysuch cluster dynamic and its theoretical policy promoted the energy factors such as energy(Brown 2000), cluster-based economic evolution are efficiency in new industrial SME as small-scaleinvolving the parameters of capital resources - FDI, cluster. Since government policy is one endogenous,employment ratio, income, market demand – private of the main factors in cluster dynamic,consumption, and production – export, GDP, (Thiruchelvam, Kumar et al. 2003) supporting causaleconomic efficiency benefit are presented to model loop of energy requirement illustrated in Figure 3.various scenarios for different policies applied todevelop cluster growth. Explicitly, our mostinfluential empirical study on causality betweencluster dynamic and FDI to drive economic growth(Yehoue 2009), finding such government policy inbalancing domestic capital has been leveraged withan initial delay of foreign investment as a startingbusiness attraction in cluster dynamic.Hypothesis concerning in causal loop Figure 2: Linkage tree from the set of energyIt is necessary to understand all supporting factors in requirements to economic growthour main causal loop and their linkages ofrelationship among the main key factors as suchcluster growth, economic growth, and energydemand. We will examine each of these loops insystem dynamic modeling based on 2 correlatedhypotheses.Hypothesis 1The supporting government policy in businessattraction to cluster dynamic is essentially drivingenergy efficiencyThis hypothesis derived from observation in clusterdynamic linkages in Figure 2. In order to begin oursimulation, previous clusters’ empirical literatureshave shown causality between cluster growth andgovernment policy (Teekasap 2009), so we observeessential analysis on this hypothesis 1.
  4. 4. CONCEPTUAL FRAMEWORK:CAUSAL LOOP DIAGRAM Figure 5 Reinforcing loop between R&D institution, technology spillovers, new industrial SME and cluster dynamic Next correlated loop of reinforcement in Figure 6 isFigure 3: Casual loop diagram showing relationship derived from factor of endogenous cluster dynamic inbetween cluster growth, economic growth and each first R-loop of cluster growth. As cluster becomesenergy factors more successful, it promotes collaboration in associate with R&D institution for particularApparently, In Figure 4 causal loop diagram shows 2 innovation. This also initiates benefit back to clustermain cause-effect loops as follows; reinforcing loop dynamic in term of technology spillovers to newcomprised of all plus signs (+) in supporting linkage comer as innovative SME.stated by R-loop, balancing loop comprised of 1-2minus signs (-) in opposite feedback stated by B-loop.Figure 4: Reinforcing loop between clusterdynamic, employment, and government policyThis Figure 5 initiated from rectangular box of Figure 6: Causal loop of energy factors effectingcluster growth stock as the main loop in which governement policyprovides 2 substantial reinforcing loops of R-loop.We interpret that positive cluster dynamic isreinforcing as the main input for cluster growth bywhich attracts output as employment as in Figure 5. The next major causality of balancing loops shown inThe higher employment ratio, the more cluster Figure 7 will be nested loop among energy factors;incentives gained by government policy. the change in energy requirement will cause bidirectional effects to other energy conservation, energy consumption, energy price, energy import, energy demand, energy supply, energy intensity, and energy efficiency. We believe that this latter causal loop effect will drive government policy to stimulate a delay loop of one another energy requirement.
  5. 5. Figure 8 shows important balancing loop between efficiency; it would escalate economy transition toeconomic factors based on economic growth and achieve higher productivity and therefore greaterenergy consumption as crucial feedback effects to economic cost-efficiency.government policy. If we add a scenario in whichgovernment policy focuses directly in energy CONCLUSIONrequirement, it show that energy conservation will be There is positive relationship reinforcing clusteraffecting energy consumption directly through dynamic with higher energy consumption before aenergy conservation and indirectly effected through delay of monitoring by government policy in energyenergy import that will deduct GDP to impede requirement. This signals a positive role that energyeconomic growth. efficiency could enhance the balancing feedback to the economic efficiency. Higher positively the energy efficiency in form of lower energy intensity, lower negatively energy conservation in form of strict energy requirement, this calls for more attention from cluster policy makers to improve the energy efficiency of energy-intensity in small-scale industrial SME as a means of inducing more collaborations from R&D institution and government policy. BIBLIOGRAPHY Asafu-Adjaye, J. (2000). "The relationship between energy consumption, energy prices and economic growth- time series evidence from asian developing countries." EnergyFigure 7: Balancing loop between energy requirement Economics 22(2000): 615-625.and energy consumption and feedback effects in Bhattacharyya, S. C. and A. Ussanarassamee (2005).economic growth "Changes in energy intensities of Thai industry between 1981 and 2000: a decomposition analysis." Energy Policy 33(8): 995-1002.DISSCUSSION OF RESULT Brown, R. (2000). "Cluster dynamics in theory andIn this model, causal loop diagram shows energy practice with application to Scotland."consumption pattern based on energy requirement Regional and Industrial Policy Researchthat has been stimulated by government policy Paper March(38).through the development of cluster dynamic in which Cornillie, J. and S. Fankhauser (2004). "The energyleveraging the innovation of energy intensity and intensity of transition countries." Energyenergy efficiency. Besides, the bigger energy Economics 26(3): 283-295.efficiency, the smaller energy conservation has been Hondroyiannis, G., S. Lolos, et al. (2002). "Energyaccounted based on higher energy requirement. consumption and economic growth- assessing the evidence from greece." EnergyIt’s important that government policy has been Economics 24(2002): 319-336.manipulated to drive cluster dynamic with merging Iammarino, S. and P. McCann (2006). "The structureinfrastructure. By this reinforcing loop, significant and evolution of industrial clusters:bridging of regional location has emerged new Transactions, technology and knowledgeindustrial SME associated with R&D institution. spillovers." Research Policy 35(7): 1018-Hence, cluster growth directly promotes considerable 1036.employment, technology spillovers, higher GDP and Mans, P., F. Alkemade, et al. (2008). "Is clusterfinally boosts economic growth. policy useful for the energy sector? Assessing self-declared hydrogen clusters inIndustrial SME shares major accounts for innovative the Netherlands." Energy Policy 36(4):development of energy intensity. This would have 1375-1385.macro benefits as well in the form of reduced energy Nagesha, N. and P. Balachandra (2006). "Barriers todemand or reduced demand growth for energy energy efficiency in small industry clusters:conservation or energy demand from industry. This Multi-criteria-based prioritization using theanalysis lends credence to argument that energy analytic hierarchy process." Energy 31(12):intensity makes a difference to their energy 1969-1983.performance in term of returns on economic
  6. 6. Porter, M. E. (1998). "Clusters and the new economics of competition - M.Porter." Harvard Business Review November - December(1998).Solvell, O. (2009). "Clusters, Balancing Evolutionary and Constructive Forces - Red Book Jan 09 Second Edition." Ivory Tower January(2009 SE).Teekasap, P. (2009). "Cluster Formation and Government Policy: System Dynamics Approach." International System Dynamics Conference 27(2009).Thiruchelvam, M., S. Kumar, et al. (2003). "Policy options to promote energy efficient and environmentally sound technologies in small- and medium-scale industries." Energy Policy 31(10): 977-987.Tim Padmore, H. G. (1997). "Modelling systems of innovation-- II. A framework for industrial cluster analysis in regions." Research Policy 26(1998): 625-641.Yehoue, E. B. (2009). "Clusters as a driving engine for FDI." Economic Modelling 26(5): 934- 945.