The Division of competencies in corporate networks of the automobile industry: Are there development prospects for location and region?

Abstract

The aim of this paper is to develop a conceptual framework explaining the different options of corporate competency division and their regional effects in terms of peripheral acquisition of competencies. The framework is empirically based on an analysis of the Volkswagen Commercial Vehicles group which is the market leader in Western Europe within the segment of light commercial and leisure time vehicles. About 22,000 employees work at three production sites. The headquarters of the commercial vehicle group is located in Hanover, Germany, where 15,000 people are employed in administration and vehicle production. The three manufacturing plants in Germany, Poland (Poznan) and Brazil (Resende) produce more than 300,000 vehicles per year. Volkswagen Poznan was initially one of many extended work benches in transition countries. Meanwhile, the Volkswagen plant in Poland has been transformed to a competitive firm with more organizational responsibility and a higher degree of vertical integration. This paper argues that the traditional division of competencies in the automotive industry, with the localization of knowledge-intensive modules of the value chain in core regions and labour-intensive activities in semi-peripheral regions, has lost its universal validity. Instead, a new scope of variation becomes evident in the international allocation of corporate competencies. By means of FDI and local efforts, selected locations in Central Eastern Europe – among them Poland – have developed from extended work benches to matured and fully-integrated manufacturing plants and engineering centres. Due to the transmission and self-acquisition of corporate competencies, semi-peripheral locations can pass through different types of upgrading. Process, product and functional upgrading extend their room of manoeuvre, allowing them to map out more independently their local strategies for business development and plant organization. In addition, upgrading provides impulses for regional development through effects on employment, income as well as professional skills due to the increased demand of well-educated and trained people. In order to reduce product and logistical costs as well as external influences on the value chain, OEMs and tier-one-suppliers endeavour to build up local suppliers and service providers.Automobile Industry; Automotive Industry; networks; competences; upgrading; global value chains; international division of labour; multinational corporations; Volkswagen; commercial vehicles; regional development; economic geography; Poland; Germany; Central Eastern Europe;