GOVERNANCE OF INDUSTRIAL CLUSTERS:
NATURAL RESOURCE BASED CLUSTERS IN AUSTRALIA, FINLAND, AND THE NETHERLANDS

Pertti Ahonen 

This is a study of governance, which is here understood as particular ways how relationships between actors become shaped to the effect that policy outcomes of a definite type will continue to emanate. The focus is on the governance of industrial clusters of industries that are interlinked by input-output relationships. The study aims at an improved understanding of both governance and industrial clusters. The empirical support comes from case studies of the governance of renewable natural resource based industrial clusters in Australia, Finland and the Netherlands, and a comparison between the cases.

The word ‘governance’ is unequivocal only within particular vocabularies. It can be used as a direct English equivalent of the word Herrschaft in Max Weber’s (1985) work. It can be used in the specific meaning of Oliver Williamson (1985; Wible; 1995) to refer to markets, hierarchies, and networks. It can be used in the specific meanings ascribed by international organizations such as the World Bank (1992) or the OECD (1995). 
In a meaning arisen in contemporary research (Miller and Rose 1990; cf. Kooiman 1993), in this article governance is seen to involve ways how relationships between actors become shaped to the effect that policy outcomes of a definite type will continue to emanate. Where this is not so, we have cases of policy failure, which, in turn, predicts policy reform or policy termination. ‘Governance’ is freer from connotations than ‘politics’, ‘policy’, ‘government’, ‘administration’, or ‘control’. It covers government policies and public policies pursued by self-governing private interests alike (Streek and Schmitter 1985). It is not seen narrowly to stem from intentions of master policy-makers only, but it also covers policies evolving as a result of the concertation of actions by a multitude of actors, as rapid responses of actors that have to react to challenges posed by change, and as unintended consequences of the relevant actors’ intentional actions. 
	Although more than one operationalisation exists, in Porter’s (1990) industrial economics ‘industrial clusters’ are ensembles of industries interlinked by input-output relationships intensified by geographic proximity. Frequently mentioned efficiency benefits of industrial clusters include economies of scale of volume production (Porter 1990; Krugman and Obstfeld 1994) and economies of scope of multiple use of core resources within firms and other organisations, regions, and small national economies (Baumol et al. 1982).
	If governance is present in the Porterian perspective at all, it is part of spontaneous coordination between firms mediated by markets. In Porter (1990: 71-73), government is not present as much more than an external influence upon firm behaviour. 
There are other related words and word unions where governance and government receive more attention than in Porter. There are ‘national systems of innovation’ (Lundvall 1992; Nelson 1993; Kuusi 1996), ‘regional systems of innovation’ (Saxenian 1994), ‘industrial complexes’ (Ruigrok and van Tulder 1995), ‘regimes’ regulating industrial sectors (Nayar 1995), and others (Jessop 1995). 
	
A PERSPECTIVE TO THE GOVERNANCE OF INDUSTRIAL CLUSTERS
One way to approach the governance of a policy field including one delineated by the concept of an ‘industrial cluster’, is to articulate a perspective and vocabulary by adjusting available general approaches or approaches previously applied in some other policy field. To analyse policy fields which loaded with a techno-economic perspective and vocabularies requires adjustments to any perspective and vocabulary first applied, say, to the analysis of foreign policy-making or social welfare policies. 
	Perspectives abound in research on governance of techno-economic policy fields. In most contemporary institutional analyses of techno-economic development the strong tradition of political institutional analysis has been ignored, intuitively re-invented, or only slowly re-appropriated (Sclove 1995). An important dimension in analyses of techno-economic development is present in empirical political theory (Schmidt 1995). This is the dimension of the number, type and nature of actors and arenas of policy-making. 
In one extreme, 5-7 types of actors or arenas have been postulated in institutional analyses of techno-economic development (Hamlett 1992; Ruigrok and van Tulder 1995: 63-90). This is analogous to the pluralist orientation in empirical political theory. In the other extreme, and resembling ‘democratic elitism’ in empirical political theory, the number of relevant political actors has been condensed down to the two basic actors and the catalytic additional actor of corporatism: the employers’ organisations, the unions, and the state mediating between the former actors (Katzenstein 1985).
	Between the extremes lie perspectives aiming at simultaneous analysis of different and differentially structured institutional domains and the various and varying actor constellations in such domains (Marin and Mayntz 1991; Lo 1995; Jessop 1995). In this type of research, statistical generalisability is typically not feasible, but relevance is sought from the ‘analytical generalizability’ of the conceptual framework and the research design to later analyses (Yin 1989: 38-40).
	The variant of the third perspective applied in this study emanates from joint research efforts in a network of scholars from small industrial countries since 1990 (Marceau 1994; Ahonen 1995a, b; Marceau et al. 1996). Five distinct domains are put into the focus (Figure 1). 

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	First, a domain of supply in a techno-economic policy field is discerned. A sub-domain of primary production and a sub-domain of industrial production and services are discerned. Domestic relations of ownership are also distinguished, as is control of production by such actors as financial institutions, producer’s organizations and unions, and co-operatives. 
	Second, a governmental domain is distinguished. Beside national governments, this domain covers the European Union as an inter-governmental and confederal actor sui generis as far as EU member states are analysed. 
	Third, R&D is included as a domain of its own. Public research institutions, including public universities, are distinguished from R&D institutions of private business. The rationale for separating the third domain is that application-orientation without independence of R&D jeopardises innovation in firms and government alike (Wible 1995). 
	Fourth, the perspective involves separation of a domain of the international economy from the national economy. International demand is of a higher importance in small, open economies (Penttinen 1994) than in large, self-sufficient economies (cf. Porter 1990: 143-144). 
	Fifth, the natural environment is also included as a domain. This is to facilitate the application of the perspective in the empirical part of the article. 
	The perspective is illustrated, tried and enriched in three case studies regarding governance of renewable resource based industrial clusters in three countries, and in a comparison of the cases. The analysis regards an Australian wool-industrial cluster, a Finnish forest-industrial cluster, and a Dutch agro-industrial cluster.
Porter (1990: 685) sees natural resource based industrial clusters as being transcended by investment-, wealth- and knowledge-based clusters. Here the purpose is not to try to contradict Porter, but to shed light upon particular circumstances that condition of the validity of his conclusions.

AUSTRALIA’S WOOL-INDUSTRIAL CLUSTER
Supply 
The GDP and employment shares of Australia’s extensive agriculture have fallen down to modern low figures (Table 1; Table 2). Australia’s share is one third of world wool production and three fourths of world greasy wool exports. 

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Australia’s company structures of wool ESP (early stage processing) are concentrated. The industries have suffered from high material costs and problems of viability. Then the production chain is almost cut: the wool LSP (last stage processing) is underdeveloped. In the early 1990s, Australia transformed only five per cent of her wool into textiles and held a one per cent share of world production of pure and mixed wool yarn and one third of a per cent of world production of woollen woven fabrics. (UN 1994; Table 3; general sources, Marceau and Sulaiman 1992; IWTO 1994.)

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Organised graziers bargained the Australian national government to a wool floor price in the mid-1970s. The graziers had the price raised until they priced themselves out of the world market. This left the QUANGO Australian Wool Council the principal buyer in wool auctions, and a heavy AWC debt and a massive wool stockpile accumulated. In 1991, the government abolished the floor prices, the selling price dropped by one half, and international buyers returned. The price drop led to adjustment problems for graziers and reductions in their numbers.
	In their organising function in the economy, the Australian banks have been slow to move from matters of land and agriculture to LSP development. In the 1990s the government joined the domestic retailers to improve forward linkages from wool production to wool LSP and LSP technological restructuring.

Government
In a ‘boundary maintenance funcion’, the Australian national government protected long since World War II the wool growing with tariff and quota barriers. In the mid-1980s it started phasing out the quotas and reducing the tariffs, which rationalised the cluster but accelerated its contraction.
	The rate of direct agricultural subsidisation is low in Australia (OECD, 1994). However, the national and state governments’ contribution towards the wool-industrial cluster is not negligible. 

R&D
In the late 1980s, Australian agriculture received one fourth of the national and three fourths of the state R&D expenditures (Gregory, 1993). The bulk of world’s research on wool production and processing is carried at the CSIRO (Commonwealth Scientific and Industrial Research Organisation), which is a statutory authority removed from direct government control.
	The weakness of Australia’s wool industries are aggravated by the ongoing worldwide restructuring of textile production chains and the dominance of countries well established in LSP. However, new opportunities continue to arise for Australia out of the thermal, fire-retarding and environmental qualities of wool, its flexibility of use, and the emerging markets in the Asian NICs. 

International aspects
Ownership of Australian wool growing remains in domestic hands, but foreign ownership in wool processing is significant. The wool exports are heavily dependent on international buyers in the regular wool auctions. The international cooperative body of the wool industries, the International Wool Secretariat, is situated in Britain and renders benefits for many other actors than Australian ones, but it mostly Australian-financed. 
Australian wool is one of the raw materials traded in the world markets with high susceptibility to price fluctuations. There is also a global long-term trend of decreasing real wool prices. However, the reputation of Australian merino wool among the global wool LSP industries is strong.
Australia’s dependence on her raw wool exports is reflected in the figure that in the late 1980s, wool brought in 14 per cent of the Australian gross currency earnings. Australia’s exports of raw wool feed to the further surplus value extraction in the wool production chain in such principal wool LSP countries as Germany, Italy, and France. (Table 3; Table 4; Appendix). 

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Environment
Australian sheep grazing mostly uses areas of scant vegetation and little alternate human utilisation. The grazing mostly causes only local environmental stress. 
	Wool is environmentally superior to most of its substitutes. It is biodegradable and recyclable within broad limits. 

FINLAND’S FOREST-INDUSTRIAL CLUSTER
Supply 
In 1993, forestry employed 1,5 per cent of occupationally active Finns, the forest industries, 3,7 per cent, and related occupations, 7 per cent. Forests of best growth belong to private owners and companies. The former’s share is two thirds of the forest area and three fourths of the annual increment. Non-farmers nowadays own the numerical majority of the holdings, most of which will by the year 2000 belong to city-dwellers. Privatisation of the national government forests is an issue. (FFIF, 1994a, Table 5, Malmberg, 1994.)

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Finland has 50 large (capacity > 50,000 sq.m. p.a.), 180 smaller and 4,000 minuscule sawmills. Pulp and paper company size and the production capacity are large. (Table 6.) In terms of turnover, in 1993 the fifteen largest industrial groups in Finland's forest-industrial cluster included one group with equal strengths in forest and metal industries and six forest industry groups. There were three metal industry groups concentrating on products for forest industries, including world’s number three paper machine manufacturer Valmet. There were two chemical industry groups with an analogous concentration, a large forest engineering consulting group, and the two largest newspaper publishers. After mergers and new joint ventures, the number of forest industry groups had fallen to four by 1996. (Hernesniemi et al., 1995: 111.)

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Finland’s assets in forestry include ubiquitous forests (Table 1), good growth and growth surplus (Table 7), deconcentrated ownership (Table 5), and supportable logistics due to the Baltic Sea and developed road networks. She is the world’s largest producer and exporter of wood-containing printing and writing papers. Product diversification is high. Forward linkages include production and exports of paper and pulp machines and backward linkages, production and exports of forest tractors and harvesters. A newer linkage involves biochemical high technology products. (Hernesniemi et al., 1995, Martin-Löf, 1995, v. Ungern-Sternberg, 1994, UN, 1994.)
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The stumpage prices of timber are the target of a nationwide bargaining system between the forest industries' central organisation and the forest owners. The latter are represented by the Organisation of Agricultural Producers MTK despite the changing forest ownership structure. In the recent years comprehensive agreements on the stumpage prices have rarely been concluded and the bargaining has been regionally decentralised. In 1996, the European Commission allowed the continuation of the bargaining system with some decentralising adjustments.
	Local, regional and national statutory forestry quangos distribute or use government subsidies, allocate the statutory forestry fees carried by the local quangos from the private forest owners, and provide improvement and extension services tothe owners. Representation of the local quangos in the MTK’s forestry branch ensures control of private forestry by organised agriculture. At the turn of the 1980s and the 1990s the national governance of private forestry was transferred to the national forestry quangos from the government Forest Board, but later government expressed willingness to cancel part of this privatisation. 
	The cooperative Metsäliitto has 200,000 owners, which includes most of the farmer forest owners. Since a merger and a cross-ownership arrangement of 1995 it is the core of a forest industry ownership concentration, which parallels in size the government-owned Enso group, which has also recently grown in mergers. Both groups are second to Europe’s largest forest industry group Kymmene-UPM, which was also formed in 1995 in the same as the two financing commercial banks merged. In the early 1990s the central organisation of the forest industries and the forest industry employers’ association merged to form the federation Finnish Forest Industries. Adjustment to the European competitive regime has decreased the numbers, membership and personnel of the industries’ timber buying associations and sales associations for forest industry products. 

Government
Icentive creation and quango self-regulation have been the dominant strategies of government policy-making, although the government has also provided substantial subsidies to private forestry. Since the Forest Act in 1886, law has forbidden the wasting of forest. 
The government launched forest research and university education in forestry in the early 20th century. It set up the first national inventories of forest resources in the 1920s. With land reform and settlement policies it boosted private forest ownership since the 1920s. After World War II, it launched nationwide incentive programmes in forestry and subsidies to quango-provided extension services, drainage, cultivation and the building of forestry roads. Government continues to contribute to the international representation of forestry and forest industries and does so also as the European Union elaborates its first forest policies in the late 1990s. (Ollonqvist 1996.)

R&D
In Finland government technology transfer and R&D for the benefit of the country’s forest-industrial cluster started in 1908, when the faculty of agriculture and forestry was established at the University of Helsinki. The government Forest Research Institute was founded in 1917. Paper engineering is an established field of technological university education and research and at the country’s leading technology transfer organisation, the government’s Technical Research Centre VTT, established in 1942. Modern Finnish technology policies took shape in 1983 with the establishment of the government's subsidising agency Technology Development Centre, Tekes. Only at first was forest-industrial R&D de-emphasised in the national technology policy programming. Government R&D organisations possess no leadership in technological forest industry innovation, but the industries are large and well organised for R&D leadership.
	Diseconomies of the small average size of Finland’s private forest holdings are offset by the statutory forestry quangos and the services they provide and the elaborate production chains from forest to mill to exports. The forest industries founded their joint R&D company the Finnish Pulp and Paper Institute, Ltd. (KCL Oy) in 1916. They also developed independent R&D capability early. After World War II Finland had to expand her production of pulp and paper machines to pay part of her war indemnities to the Soviet Union in 1944-1952, after which commercial exports ensued. R&D economies exist between the pulp and paper machine industries and industries producing pump, valve, boiler, elevator, conveyor and process control technologies. Economies also exist between the forest industries and the chemical and the environmental technology industries.
	In Finland’s forest-industrial cluster there are spillovers of know-how from the companies of the forest and the related industries to the domestic competitors through joint ventures, joint business and R&D projects, transfers of personnel, trade journals and exhibitions, and patent information. The generic R&D intensity of any forest industries is low, but in Finland the forest-industrial cluster is still quite innovation intensive. Recent innovations include new paper grades and coating solutions; the world’s fastest and largest paper machines; ever wider and smoother paper track; ever smoother paper; technologies of chlorine-free bleaching; increasingly closed circuits of water and process chemicals; and progressing elimination of emissions and effluents. There is also transfer of biomedical technology for paper content and texture control; imaging and microwave technologies for pulp and paper process control; and robotics for forest machinery to minimise damage to vegetation. (FAT, 1995, Tissari, 1995.)

International aspects
Finland’s forests are steadily in Finnish hands. The same holds true in the forest industries, although foreign minority ownership in publicly traded companies is on the increase. The Finnish companies have a wide ownership of forest industries in Germany, Great Britain and France. The industries’ expectation in the 1970s that Finland could never join the EEC first contributed towards these takeovers. (Hernesniemi et al. 1995, Ahonen 1995a.) 
	The Finnish forest industries use most of the domestic pulp, but most paper and board is exported (Table 8) chiefly to European markets, where German and French firms are the keenest competitors to the Finnish firms (Table 9). Germany and the United Kingdom are here Finland’s key export markets, followed in varying orders by France, the Netherlands and the USA (Table 9). Finnish-made paper machines make 17 per cent of the world stock of 7,000 machines (Talouselämä, 14/1995, Paper European, 1993). 

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The diversification of the Finnish forest-industrial cluster (Appendix) provides the country some buffer against price and volume fluctuations in the world markets (Martin-Löf, 1995). Finland is a large producer of pulp but neither a large international buyer nor a large exporter of the cycle-prone market pulp (Table 8). However, the diversification was not sufficient, as government devaluations of the Finnmark to ‘bail out’ the forest industries suffering from high costs during economic downturns were the rule until the 1990s. (Hernesniemi et al., 1995.) Finland’s dependence upon the exports of her forest industries remains high. In the early 1990s, the Finnish forest industries earned one third of the gross currency earnings, but the predominance of domestic inputs rise the net earnings share to 50 per cent.
	The products of the Finnish forest-industrial cluster are almost entirely producer goods. The technical quality reputation of the Finnish products is good in the world markets. The industrial consumers’ needs are nowadays also met with individual tailoring of Finnish value added forest industry products such as certain fine papers (Hernesniemi et al., 1995, 120-123, Martin-Löf, 1995).

Environment
Environmental accounting on Finland’s forests gives wood production a share of 57 per cent of the benefits, and prevention of the greenhouse effect by the forest biomass, natural protection and climate sheltering, 26 per cent. Tourism and the traditional Scandinavian ‘every person’s rights’ carry 6 per cent each. Berry and mushroom picking, hunting, and reindeer herding make together 5 per cent. Landscape values have not been systematically accounted for. (Saastamoinen, 1994.) 
	Each year 1,8 per cent of Finland’s forests are felled. The share of clear felling is one third (FFIF, 1994a). The annual increment is three and half times above that in the 1860s (FFIF, 1994b). Species endangered by forestry exist, but their number is low in comparison to Central Europe (Aarne and Sevola, 1994: 29).
	Even with multiplied production volumes, the Finnish forest industries have eliminated most of their prior environmental pollution. In 1993, biological oxygen demand BOD7, SOx emissions, and organic chlorine emissions were down to 10 per cent of the amounts in 1970, 1980 and 1986, respectively. Mill by mill accounting of emissions and effluents is published. (Laine, 1995, Ebeling, 1995, FFIF, 1994a.) 
Despite the progress, Finland’s forest industries face risks of end user boycott against paper made of timber from allegedly primeval, clear felled or any virgin forests. Quotas for a minimum content of recycled material in paper and board products are also being introduced by Finland’s export countries and by the European Union.

THE DUTCH AGRO-INDUSTRIAL CLUSTER
Supply
In the Dutch agro-industrial cluster three subclusters can be discerned: dairy farming-dairy processing; compound feed manufacturing-livestock farming-meat processing; and horticulture (vegetables; and flowers, plants, bulbs and tubers). Statistics give the Netherlands a relatively small average arable farm area (Table 1), but grassland used for silage production adds greatly to the capacity. (General sources in this chapter are Bijman, 1992, Strijker, 1993, and CBS, 1995.)
Other aspects of intensity include high use of fertilisers (Table 2), high amount of employed people per hectare of agricultural land (Cole and Cole, 1993) and high volume imports of cheap compound feed. The intensity of agriculture brings about a large average economic size of farm (Table 10), especially in horticulture. Family farming increased in predominance until the 1980s, but then the number of non-family farm workers turned to a rise, reflecting industrialisation in horticulture. (Table 11.) 

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In the Dutch agro-industries, the unit size in terms of volume, turnover and employment has been on the rise, and the numbers of units and companies have decreased. Scale economies have made large units profitable, and strive for scope economies have pushed cooperatives into related food industries. Retailers have concentrated into chains and integrated production stages for improved satisfaction of demand. More commercial forms of organisation have come to supplement the cooperatives to enable better risk taking, capital accumulation, and development of new value added products and stronger brands.
	In the mid-1990s, the Dutch agricultural production consists of the volume leading animal production, the rapidly growing horticultural production, and shrinking arable crops cultivation (Table 11, CEC, 1995). The Netherlands are the world’s leading producer and exporter of cut flowers and bulbs. She is also a strong producer and exporter of vegetables, chicken and eggs. In the early 1990s, her largest agro-industries were dairy production, followed by meat and animal feed production. 

In the Netherlands, cooperatives, owned by large numbers of primary producers, control 80-100 per cent of the processing of starch potatoes, cut flowers, dairy products and vegetables, and 49-75 per cent of the processing of fruit, ornamental plants, sugar beet, seed potatoes, and flower bulbs. Cultivation contracts between the producers and the industries give further stability in the production chain. 
	The lobbying positions of Dutch agriculture and agro-industries are long-established vis-à-vis the European Union’s CAP. Sectorialisation according to separate production lines and consolidating control of production chains from farm to factory trade have gradually weakened the position of Landbouwschap, which is the statutory key arena of corporatist interest intermediation between the central associations of agricultural producers and the agricultural workers’ unions. (Meester and van der Zee, 1993, Frouws and Ettema, 1994.) 

Government 
In the member states of the European Union, the governance of the bulk of agricultural policies is alienated from national governance dominance. However, differences in production lines, the differential impact of the subsidy criteria and the differential position of the national agricultural lobbies in domestic and European policy-making contribute to different impacts of CAP in each member state.
The European Union’s Common Agricultural Policies, CAP, provides a framework also for Dutch agriculture and agro-industries (Treaty of Rome, Art. 38-47, for a general source in this section, EU, 1994 ). CAP involves common internal markets for agricultural products, preferential treatment for Union products, and financing of agricultural policy measures through the EU budget. CAP aims at increasing productivity, guaranteeing a fair standard of living in agriculture, stable food markets, and ensured food supply and reasonable food prices (Treaty of Rome, Art. 39.1). 
CAP guarantees a minimum price for the so-called heavy market regime products, such as cereals, milk, beef, and wine, and buys the surplus if the market prices are falling below a prescribed intervention price. Both for the heavy regime products and the so-called light regime products - e.g., pork, poultry, vegetables, and vegetable oils - farmers are protected from dumping by third countries. Here, subsidies are paid where the world market price falls below the European target price. 
The Union also protects most of its agricultural products with tariffs where import prices fall below a prescribed threshold price. Another part of CAP is an intricate and occasionally counterproductive agrimoney system to buffer producer prices against the impact of exchange fluctuations. 
	In the 1980s CAP was burdened by surpluses of agricultural products and high costs of storage and subsidised sales especially in the heavy regime. In 1984 largely successful countrywise quotas were implemented for dairy products, but the reduction of other surpluses has been slower. CAP has ensured minimum prices and incomes for the agricultural producers and boosted prosperity in agro-industries. 
CAP reforms started of the 1990s have aimed at decoupling support to farmers from support to production; price cuts and other measures to reduce production; restructuring in the agrimoney system; and better attention to environment. Redistribution from large to small farmers and actual production cuts have remained smaller than first planned after bargaining in the Union’s Council of Ministers. Direct support to farmers also continues to cushion farming from the market forces, although the fit is being improved with new GATT/WTO regulations requiring reduction of the EU agricultural supports.

R&D
Prestigious agricultural education, training, research and R&D abound in the Netherlands, such as the Agricultural University at Wageningen and the dairy research and the food research institutes. The economically suboptimal size of most farms for independent innovation was the main motivation for the creation of the prestigious ERE (Education, Research, Extension) network of agricultural innovation diffusion. 
The ERE contributes by educating farmers, promoting research and its applicability, and promoting public and private extension services to diffuse innovations from research institutes and other sources of knowledge to farmers. Strategic decisions regarding the ERE are taken by the Ministry of Agriculture in consultation with farmer organizations and, albeit so far rather occasionally, the food industries. The ERE has been seen as no less than a main factor behind the economic success of Dutch agriculture.
The contributions of the ERE have been primarily focused upon primary agriculture. Food industry issues used not to be taken up strongly by the innovation system, and investment in R&D has been relatively low in the industries themselves. Parts of the ERE have been privatised lately, food industry companies have been allowed to exert more influence upon research and extension, and the companies are also becoming main coordinators of innovation.

International aspects
Dutch agricultural land and most food industries remain in domestic hands. In the early 1990s, the Netherlands was after the United States and France the world's third largest exporter of agricultural products. Forty per cent of the production of her food industries were exported, which gave these industries sixty per cent of their earnings. In 1990-1993 agricultural exports made up about one fourth of total Dutch exports. In the early 1990s, agricultural exports earned 20-25 per cent of the Dutch gross foreign currency earnings.
Dutch agricultural products are strong imports in many countries, although they rather supplement than dominate in their export markets (Table 12). The Dutch agro-industrial cluster has revealed comparative export advantage also in manufactured fertilisers and agricultural and food processing machinery (Appendix, UN 1991). 

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The Dutch agricultural exports are vulnerable to the global downward trend in real agricultural prices. A particular threat to the Netherlands is made up by the intensifying competition from Mediterranean countries in agricultural products including products of horticulture. 

Environment
A correlation exists between the use of fertilisers per hectare and the yield of such agricultural products as wheat. Here, the Netherlands is among the world leaders. (Cole and Cole, 1993, Table 1.) 
Residues of fertilisers and pesticides in Dutch soil, ground and water make up a serious environmental problem. Concentrations of minerals in manure spread out in fields in excess of needs of plant growth have brought about the worst environmental problem in Dutch agriculture. The residue problem has given rise to occasaional consumer boycotts against Dutch products in Germany, and the manure problem has tainted also the domestic image of Dutch agriculture.
	Non-polluting, animal-friendly production without chemicals and additives has become one criterion of consumer choice of food. Genetic manipulation and the use of growth hormones have given rise to consumer suspicion and demands for alternative production methods. Biodynamic and ecological food production belong to the responses. The declining demand for milk, beef, butter and eggs adds to the rationale for broadening the ecological production lines, which are already considerable in the Netherlands. (Landman, 1992, van der Ploeg, 1993, Nooij, 1993, Frouws and Ettema 1994.) 

SUMMARY AND CONCLUSIONS
Table 13. Summary of Comparisons of Natural Resource Based Industrial Clusters in Australia, Finland, and the Netherlands.

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Without their renewable resource based industrial complexes Australia, Finland, and the Netherlands would have only a fraction of their comparative export advantage, RCA (Appendix). RCA changes only slowly, Australia being the most stable countries of the four in this respect. (Appendix.)
	The value added generated in an economy adds up to its national income. Australia has the greatest need of the four countries to advance in this respect. The Finnish forest-industrial cluster has gradually moved towards products of ever higher value added. As there are limits to the value added embodied in paper, as indicated by the continuing low value of paper exports per weight unit (FAO, 1994) and the strong role of process as opposed to product innovation, the related industries have frequently a large role in extracting more value added. In the Dutch agro-industrial cluster, in turn, generation of new value added by means of brands dedicated to quality conscious, health conscious and ecologically conscious submarkets has been seen as desirable The Dutch metal industries related to the agro-industries also have a potentially important role.
	Automatic entitlement of primary producers and industries to government subsidies which isolate them from market trends and incentives has had adverse long-term effects upon renewable resource based industrial clusters. Stockpiles and costs have accumulated, and adjustments after policy turnarounds have been painful both in Australia and in CAP. Government nurturing of industrial clusters to help internalise positive economies that would otherwise not be dependably accomplished promises better results (Krugman and Obstfeld, 1994: 282-287). The moderate Finnish subsidisation over the years to boost productivity in private owners’ forests is a representative of the latter strategy.
	Diversification of products and exports in renewable resource based industrial clusters provides buffer against international fluctuations in prices and demand. The Australian wool production and exports are vulnerable in this respect. In Finland, diversification provides buffer despite susceptibility to fluctuations of prices o f the basic forest industry products. The diversified Dutch agro-industrial cluster appear as fairly well buffered, although this arises in part from their seclusion from the world markets for agricultural products due to CAP. 
	Sustainability of industrial clusters presupposes their adaptability to long-time trends in demand and prices. A downward trend in world market prices of primary products challenges the Australian and the Dutch clusters to diversify further and to develop new exportable products with more value added. No systematic downward trend has been predicted for the key products of the Finnish cluster. However, together with the Dutch cluster, the Finnish cluster faces the gravest environmental imperatives. These frequently occur in the large German markets, which are highly politicised in matters of the environment.
	Natural resource based industrial clusters are common ‘cash cows'The approaching European Monetary Union will require Finland, in particular, seek other flexibility parameters than those of her previous currency policies.
	Must say: what does the analysis give, as analytical generalizability, to study of governance, and study of industrial clusters, etc.

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Table 1.	Agriculture in the economy, selected countries, 1978 and 1990
	Agriculture, % of GDPa	Agriculture, % of employmentb	
	1978	1990	1978	1990	
Australia	5,7	2,9	6,4	5,6	
Belgium/Luxembourg	2,4	1,7	3,4	2,7	
Finland	4,3	2,8	14,4	8,4	
Netherlands	3,8	4,1	5,4	4,6	
Sweden	1,7	0,9	6,1	3,3	
Source: OECD, 1992.
aGross value added in agriculture as a percentage of Gross Domestic Product in market prices.
bAgriculture as percentage of total civilian employment.

Table 2.	Volume figures in agriculture, 1990
	Arable land, % of areaa	Forest, % of area	Average farm, 1985/6, ha	Fertiliser useb	Agriculture, % of total exports	
Australia	6	14	285	28	31	
Belgium/Luxembourg	25	21	17	496	10	
Canada	5	39	229	47	7	
Finland	8	76	13	210	3	
Netherlands	28	9	17	628	23	
Sweden	10	68	27	127	2	
Source: FAO, 1992, OECD, 1994, 22.
aArable land does not include grassland, which gives a somewhat skewed picture especially of the situation in the Netherlands.
bKg/ha of arable land.

Table 3.	Markets of selected agricultural products, 1992a
	Pork	Dried or salted meatb	Greasy wool	Dairy productsc	
	Imports	Exports	Imports	Exports	Imports	Exports	Imports	Exports	
Australia	0	2	0	0	0	78	0	3	
France	9	7	12	4	11	1	7	16	
Germany	24	3	12	4	15	2	13	19	
Netherlands	0	22	2	25	0	0	2	18	
United Kingdom	3	0	56	1	5	1	7	4	
Europe, % of world totald	65	77	88	91	53	6	66	87	
Source: FAO, 1993.
aFigures in the table are percentages of world totals.
bIncl. ham and bacon.
cConditioned, dry and fresh milk, butter, cheese, curd.
dTotal world imports, 9,485 bn USD; total world imports, 9,154 bn USD.

Table 4.	Shares of world exports in selected countries, 1992
Country, %a	Total merchandise exports	Agriculture, fishing and forestry	Agriculture without fishing	Forestry and forest industriesb	
Australia	1,1	2,5	2,8	0,4	
Canada	3,5	6,1	3,7	15,7	
Finland	0,7	1,8	0,2	8,4	
Germany	11,1	6,4	7,1	6,3	
Netherlands	3,7	7,7	9,5	2,5	
Sweden	1,5	2,3	0,6	9,2	
USA	11,7	13,2	13,5	11,6	
Category, % of total world tradec	100	12,7	6,1	2,8	
Source: FAO, 1992, Aarne and Sevola, 1994. Perhaps not coincidentally, statistics and studies compiled in different countries give different figures for the shares of each country. For instance, Swedish statistics give Sweden a larger share than Finnish studies or FAO statistics.
aPer cent of total in the category indicated by the column heading in question except last row. 
b1991.
cTotal world trade in 1992, 3,846 bn USD.

Table 5.	Forest ownership in Finland and Sweden
	Private holdingsa	Ownership shares of forest land, %	Private ownership categoriesd	
		Governmentsb	Companiesc	Private owners	-11 ha	11-100 ha	101- ha	
Finland	320,000	25	8	67	4	69	27	
Sweden	240,000	26	25	51	4	50	46	
Source: UN, 1985.  
aNumber of private owners’ holdings. Private owners include all non-government owners except companies.
bNational government, municipal governments, and church parishes.
cIncludes companies owned by non-government owners and by government owners.
dPer cent of forest land held by private owners in each size category of holdings.

Table 6.	Pulp and paper industries in selected countries, 1991

	Austria	Finland	France	Germany	Sweden	
Fellingsa	12,300	34,500	43,200	28,400	56,000	
Number of paper and board mills	31	46	150	241	53	
Paper and board production capacity b	3,504	10,115	8,060	13,619	9,193	
Employees in paper and board production	11,500	42,700	28,200	57,200	38,000	
Source: Paper European, 1993.
a1,000 sq.m. p.a.
b1,000 metric tons p.a.

Table 7.	Forests and forestry in selected countries
	N.A.I.a in e.f.b	Total fellings	
	Million sq.m., with bark	Per ha, 1,000 sq.m.	Million sq.m., with bark	As % of N.A.I. in e.f.b	
Former USSR	700	1,7	518	74	
Canada	208	1,9	152	73	
Finland	68	3,6	56	80	
France	66	5,3	48	73	
Germany	57	5,8	43	75	
Sweden	91	4,1	58	63	
Source: UN, 1995. Cf. UN, 1985.
aNet annual increment.
bExploitable forest.

Table 8.	Pulp production and paper and board production in selected countries, 1992a
	Pulp		Paper and board	
	Production	- Exports	+ Imports	= Consumption		Production	- Exports	+ Imports	= Consumption	
Austria	1,341	151	449	1,639		2,091	2,539	695	247	
Finland	8,525	179	160	8,506		9,147	5,432	139	3,854	
France	2,609	411	1,967	4,165		7,651	2,654	2,436	7,433	
Germany	2,033	190	3,838	5,681		9,763	3,118	6,299	12,944	
Sweden	9,590	2,792	198	6,996		8,377	5,531	295	3,141	
Source: Paper European, 1993.
aIn 1,000 metric tons.

Table 9.	Inputs and outputs of the largest exporters and importers of paper, board and newsprint, 1992a
Exporters
Importers	Finland	USA	Sweden	Germany	Canada	Netherlands	France	Austria	Total	
Germany	2,2	0,6	2,1	-	0,1	1,1	1,6	1,6	13,0	
UK	2,4	0,7	2,2	1,2	0,3	0,4	0,9	0,3	10,0	
USA	1,0	-	0,1	0,3	6,4	0,1	0,2	0,1	9,8	
France	1,4	0,2	0,9	1,4	0,1	0,6	-	0,4	8,2	
Italy	0,6	0,5	0,8	0,8	0,0	0,1	0,7	0,6	5,5	
China	0,2	0,9	0,1	0,3	0,0	0,0	0,0	0,1	5,3	
Netherlands	1,1	0,4	0,7	1,2	0,0	-	0,3	0,2	4,9	
Japan	0,3	0,9	0,0	0,1	0,1	0,0	0,0	0,0	1,7	
Total	14,6	12,8	10,7	10,2	8,0	4,3	5,2	4,9	-	
Source: FAO, 1994. See also explanation in Table 4.
aThe figures are percentages of total world trade volume in metric tons, 1992 was 40,9 bn t. 

Table 10.	Economic size of farms in certain countries, 1987a
	- 4,000 	4,000
- 16,000	16,000
- 40,000	40,000 -	Total	
			Per cent			
Belgium and Luxembourg	25	25	31	19	100	
France	25	31	30	14	100	
Germany	31	33	26	10	100	
Netherlands	4	24	27	44	100	
United Kingdom	31	21	20	28	100	
Source: Strijker, 1993.
aPer cent in terms of ECU (1,2 - 1,3 USD during the first half of the 1990s) of standard gross margin. Sum of per cents may differ from 100 due to roundings.

Table 11.	Developments in Dutch agriculture
	1950	1970	1990	
Total farm area, 1,000 ha	2,337	2,143	2,006	
Agriculture, % of populationa	13,5	6,2	4,7	
Family employmentb	480	303	238	
Non-family employmentc	101	37	52	
Total agricultured	100	197	349	
Arable cropsd	100	123	164	
Livestockd	100	170	338	
Horticultured	100	245	640	
Source: Strijker, 1993.
aEmployment in agriculture in per cent of occupationally active population.
bEmployment in agriculture, heads and members of owning families, 1,000.
cOthers than heads and members of owning families employed in agriculture, 1,000.
dVolume of production index.

Table 12.	Dutch shares of imports and consumption of agricultural products in certain countries, 1990a
	Germany	France	U.K.	Italy	
	Imports	Consumption	Imports	Consumption	Imports	Consumption	Imports	Consumption	
Pigmeat	61	9	37	8	25	8	49	14	
Chicken	62	26	31	1	37	3	0	0	
Eggs	89	31	40	3	77	4	40	5	
Cheese	53	17	55	4	13	5	9	3	
Potatoes	61	10	25	2	33	4	37	7	
Vegetables	36	27	20	5	26	12	0	0	
Flowers	79	38	73	20	68	29	68	7	
Source: Strijker, 1993.
aIn per cent.

Table 14. Comparison of Natural Resource Based Industrial Clusters in Australia, Finland, and the Netherlands.
Dimension	Australia	Finland	Netherlands	
0.1 Content of cluster	Wool-industrial	Forest-industrial	Agro-industrial	
0.2 Role of cluster in the economy	Very important	Crucial	Extremely important	
0.3 Number of product groups in the cluster with constant comparative export advantage	7-8	3	7-8	
0.4 Leading products in cluster	Raw wool	Printing and writing papers	Cut flowers and other plantsdairy products	
Ownership and production: primary production end	Domestic, dispersed, growing unit size	Domestic, dispersed, growing unit size	Domestic, dispersed, growing unit size	
Ownership and production: manufacturing and export end	Mostly domestic, concentrated	Mostly domestic, concentrated	Mostly domestic, concentrated	
Control of manufacturing and services parts towards primary production part	Mostly through wholesale trade	Corporatist or inverse (cooperative control)	Developing from inverse (cooperative) towards control	
Unification of production chain from R&D to primary production to manufacturing to wholesale and retail trade	Lacking; most of advanced manufacturing occurs abroad	High	Quite high, increasingly unified	
Diversification of products	Low, increases only slowly	Quite high, increasing	Moderate to rather high, increasing	
Control of production	Mixed (owners, industries, foreign interests)	Financial groups, one cooperative, organised forest owners 	Co-operatives important, company form becoming more important	
European Union policy role	None directly, only import quotas etc.	Gradually increasing	Key role	
National government policy role	Important	Considerable, decreasing	Important	
Government R&D	Very important	Important, stable	Very important	
Industrial R&D 	Weak	Very important	Increasingly important	
Utilisation of domestic R&D	To a large extent by foreign actors	Domestic	Domestic	
Foreign ownership by domestic actors	(Finances much of International Wool Secretariat)	Important in other European countries in forest industries 	Increasing	
Internationalisation of markets and products	Almost complete	Very advanced	Advanced (esp. in EU)	
Environmental imperatives	Relatively well under control so far	Considerable, increasingly important, may become grave	Severe, a constant and serious challenge	
				
General characterization of cluster and its governance	Corporatist-governmental	Industrial-corporatist		

Figure 1. A framework of comparison of industrial clusters.

Appendix.	Export specialisationa in renewable resource based products, 1992
Categoryb	Product category title and suggested cluster	Australia	Finland	Netherlands	
	Agro-industrial cluster				
1	Meat and meat preparations	6,6	0,2	3,5	
2	Dairy products	2,7	0,7	4,1	
3	Fish and fish preparations	3,1	0,1	1,4	
4	Cereals and cereal preparations	1,1	0,4	0,7	
5	Feeding-stuff for animals	2,2	0,1	2,9	
6	Other food products	1,2	0,3	2,9	
7	Beverages and tobacco	0,5	0,2	1,9	
8	Animal and vegetable oil and fats	0,3	0,2	1,5	
9	Cut flowers and other plants	0,4	0,0	10,6	
11	Skins and leather manufactures	3,2	1,4	1,1	
	In part agro-industrial clusterc				
14	Textile fibres	27,0	1,1	0,4	
15	Textile yarn, fabrics, etc.	0,2	0,4	1,0	
58	Clothing	0,1	0,5	0,9	
	Agro- or forest-industrial cluster				
10	Seeds and spores for planting	1,7	0,0	4,4	
20	Crude fertilisers, mineral and coal	29,9	0,6	0,9	
28	Fertilisers, manufactured	0,1	1,1	2,1	
31	Agricultural and food processing machineryd	0,4	0,9	1,2	
	Forest-industrial cluster				
12 	Wood and wood manufactures	0,1	5,9	0,5	
13	Pulp and paper	0,2	10,3	0,8	
33	Paper and pulp machinery	0,1	7,3	0,3	
57	Furnituree	0,1	0,7	0,8	
	Selected other categoriesf				
17	Iron, steel and ferro-alloys	0,9	2,1	0,8	
18	Aluminium	5,8	0,4	1,2	
16	Iron ore	113,9	0,0	0,0	
19	Non-ferrous ores and metals	5,5	2,3	0,8	
27	Pharmaceuticals	0,5	0,4	0,8	
23	Oil and gas	2,4	1,0	2,7	
53	Ships and boats (incl. oil rigs)	0,9	2,7	0,6	
59	Orthopaedic equipment and hearings aids	0,5	0,1	1,8	
Source: Dalum, 1995. Data stem from the IKE database, Aalborg University, Denmark. 
aRevealed comparative advantage RCA. For RCA = 1, a product’s share in a country’s exports equals the average over all OECD countries. For RCA > 1, the country is export specialised in the product. For RCA > 1 in all of the years 1973, 1979, 1984, 1988 and 1992, the figure is in boldface. For RCA > 1 in at least one but not all of those years, the figure is italicised. 
bIn the IKE database, all later data are converted to fit into SITC, the Standard of International Trade Classification, Revision 1 level, applied in 1961-1977. Here, two-digit Revision 1 categories are used.
cNatural and synthetic materials, machines for their processing, and clothing irrespective of material. Importantly, regarding Australia, includes raw wool.
dAlso includes forest tractors.
eWooden, plastic and metal furniture.
fAll other categories with RCA > 2 at least in one of the four countries in 1992.

Pertti Ahonen is since 1989 Professor of Public and Financial Management at the  University of Tampere, Finland, and since 1995 Head of the Finnish National Doctoral School Consortium in the Administrative Sciences. 

Address: Department of Administrative Science, P.O. Box 607, FIN-33101 TAMPERE, Finland. Tel. +358-400-735 760, +358-3-266 1374, +358-3-2156 356, fax +358-3-2156 020, Internet hlpeah@uta.fi