The ‘Second Industrial Divide’? The Role of the Large Firm in the Baden-Württemberg Model

Abstract

By criticizing the prevailing network models in the policy science literature, we hypothesize that regional networks are not helpful for a company per se; network membership may be used for purposes unique to the dominating firm. Thus, institutional linkages can most fruitfully be analysed by looking at the level of the firm, and the role played by a firm's interpretation and shaping of its environment. For this purpose we look at the historical gestation of the corporate capabilities of Bosch, a large automotive component firm in the German state of Baden-Wurttemberg. Our research suggests that we discard the hypothesis that Bosch's position is heavily reliant upon a cooperative network with SMEs; instead we suggest an analysis along Chandlerian lines. The present changes in component sourcing policies of large car manufacturers will decrease the Multinational Corporations' dependency upon any particular regional network. The manufacturers' strategic decisions about sourcing policy, research linkages and location of manufacturing facilities reflect management's evaluation of the benefit of network membership. More specifically, for firms engaged in global competition, even if they have been largely nationally based in the past, global linkages have become overwhelmingly important.