To Compete Globally, Collaborate Locally

July 25, 1994|By NEAL R. PEIRCE

COPENHAGEN — Put the words ''global'' and ''economy'' together and images of potent multinational corporations, gobbling up markets and competing across continents, spring to mind.

But across the North Atlantic, a group of economic-development specialists have been marching to a very different drummer -- the idea of developing networks of small manufacturers that can learn to compete globally by collaborating locally.

These strategists for small manufacturing networks are to be found in Denmark, Germany, Italy and across the United States from North Carolina to Washington state. Their ranks are still so thin that most of them know each other personally.

But they are onto a fascinating idea. Instead of seeking big public subsidies to recruit multinational firms to their areas, they are after modest government grants to promote the smaller and medium-sized local manufacturing firms that typically bolster local economies rather than enrich distant stockholders.

It is not always an easy sell to convince entrepreneurs and small-firm executives -- among the world's most prickly independent people -- that they'll be better off sharing and cooperating than trying to excel alone.

But if a machine-parts company hopes for much of a future, it must be able to meet the European Community's stringent new quality standards. A small furniture manufacturer will never outcompete Third World competitors on price; its survival depends on access to top designer talent to fill specialized niche markets. Going it alone, a small, specialized electronics firm may have no chance to break into export markets; in a collaboration, it may.

Firms have always formed loose networks to exchange some information, perhaps to lobby governments, says Niels Christian Nielsen of the Danish Technology Institute. But the scale, speed and scope of development is so rapid in today's intensely competitive global economic setting, he argues, that small firms can falter, losing market share and profitability, unless they join together for technology advice, market information and export expertise.

That's the rut thousands of smaller Danish firms faced in the late '80s, with slipping exports and fear of being overwhelmed with in the European Common Market.

Then, in 1989, a study tour of U.S. economic development specialists, financed by the German Marshall Fund of the United States, showed up in Copenhagen enthused about the historically successful network of small manufacturers it had just seen in operation in the Emilia-Romagna region of northern Italy.

Mr. Nielsen and his Danish Technology Institute colleagues became excited about the potential of networks for their own country's 7,000 small manufacturing firms. But how, they asked, could they convince those strongly individual, fiercely competitive small company owners to cooperate? The only way, they decided, would be in groups -- and that would take government assistance to organize.

With rare speed for a government, the Danish authorities not only agreed but produced $25 million for a high-intensity campaign to introduce the networking idea. With that serious capital, brochures on the network potential were distributed across the country, from airplane seat pockets to bank counters. On grounds they'd been losing money on their small-business clients, the nation's banks were enlisted to encourage firms to sign onto networks.

The Danes trained some 40 ''brokers'' to help form networks and provide the contact ''glue'' among their busy members. They also decided that any group of three or more companies that came up with an idea for a network could apply for a $10,000 study grant to see if it would work. The process was anti-bureaucratic -- a two-page application, response time in less than a month, the answer almost always ''yes.'' Lots of crazy ideas emerged. But as feedback and debate grew among the firms, better and better ideas emerged.

Successful Danish networks, ranging from furniture to textiles to electronics, emerged. Some 2,500 of Denmark's 7,000 firms have now entered networks. The country is rated high in Europe in international competitiveness and has replaced decades of negative trade flows with the highest per-capita trade balance in the European Community.

Is there a secret here for American states and communities too? Copying consciously from Europe, Oregon in 1992 adopted a statewide manufacturing network model with many elements (but not the scope or budget) of the Danish plan. Several other states -- including Arkansas, while Bill Clinton was still governor -- launched smaller efforts.

Stuart Rosenfeld's new firm -- Regional Technology Strategies, headquartered in Chapel Hill, North Carolina -- has received a federal grant to create ''USNet,'' a small manufacturing network with 15 partner-states. (The money comes under the $500 million Technology Reinvestment Project for defense conversion.)

American efforts seem tokenish, small-scale, in comparison to what Denmark undertook. But as disillusion grows about the effectiveness of the multimillions of dollars states fork out each year to attract branch plants of the multinationals, the alternative of nurturing small manufacturing networks may start to appeal.

Neal R. Peirce writes a column on state and urban affairs.

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