1. Double or Nothing Metals: Status and future development Associate Professor Amir Sasson Norwegian Business School, BI PROSIN Kristiansand, 25.05.2011

2. Cluster Attractiveness EducationalAttractiveness Talent Attractiveness R&D & Innovation Attractiveness EnvironmentalAttractiveness Ownership Attractiveness The Emerald Model

3. Cluster Attractiveness EducationalAttractiveness Talent Attractiveness R&D and innovation Attractiveness EnvironmentalAttractiveness Ownership Attractiveness Knowledge dynamics The Emerald Model

4. REPORT NO 6. May 2011 KNOWLEDGE-BASED METALS & MATERIALS By Amir Sasson

5. Consistent portion of GDP  While GDP is increasing, the portion of oil is exploding, basic and fabricated metals maintain their national respective market shares.  This cannot be said about many other industries.

6. Value creation and locomotives  Expected returns in secondary and tertiary production.  Above average returns in primary production, but for 2009…  Not doing worse than many “central” industries e.g. health, tourism, or construction.

7. Industrial agglomeration  Not really…  Broadly distributed.  Under a few roofs only.

8. Educational Attractiveness  The pool of graduates with relevant advanced knowledge of metal and materials is increasing in absolute and relative terms.  Availability  Attraction

9. Talent Attractiveness  Industry composition is in line with the industry’s focus on manufacturing as evident from the composition in other manufacturing industries (e.g., food, textiles, wood, pulp and paper, and chemicals) and labor intensive industries (e.g., fishery).  But:  It is attractive to the “wrong” type of foreign workers…  And engineers are existing!

10. R&D and Innovation Attractiveness I  Metal: Relevant academic contributions are up to three times the national average  But a marginal role in the global picture of metals and materials.

11. R&D and Innovation Attractiveness II  Oil: Both product and service innovations are significantly above national averages  Metal: Decreasing innovation activity over time. 0 % 5 % 10 % 15 % 20 % 25 % 30 % 35 % 200420062008 Other industries: Product innovationMetal industry: Product innovation Other industries: Service innovationMetal industry: Service innovation

12. Ownership Attractiveness  Oil: Serial owners are technology developers  Metal: A serial owner. Attractive for foreign portfolio builders.

13. Knowledge Dynamics  Local competition: Local competitors are of comparatively little significance, with only 17% of firms meeting intense competition locally. Secondary production and tertiary production firms experience high levels of local competition but this is not the source of the toughest competition that they experience.  Suppliers: Metal firms in all sectors perceive their international suppliers as more technologically leading than their national suppliers. This clearly indicates a lack of competitiveness among local and national suppliers to all sectors.  Local customers: They are not the most demanding.  Collaborative linkages: 55% state that R&D institutions are irrelevant in their innovative product developments. This percentage is much higher than in the oil industry (38%) or the health industry (32%).  Intra-industry labor spillovers: Non-existent

14. Parts of the metal industry are not isolated within the Norwegian economy.

15. Competence development  The metal industry as a whole does not distinguish itself in terms of high investments in intra-firm competence development relative to other industries. Its distribution is similar to that seen in other labor-intensive industries. It differs from investments made in more “knowledge- intensive” industries.

16. Some implications  The Norwegian metal industry is at a crossroads.  We argue for a “double or nothing” strategy. Norway can either become a significant player in the metal industry or become an insignificant player that will eventually be squeezed out of the markets by giants.  We refer to this process as “the giant competition hypothesis”: when national barriers to competition, establishment and trade are gradually reduced, and output is standardized, scale considerations will motivate actors to increase their respective sizes through horizontal mergers and acquisitions, and/or through the development of superior technologies.  Questions:  Is Norway to become a giant in the silicon business (or play a decreasing role as a part of the portfolio of foreign giants)?  Is Norway to become a giant in the aluminium business (different parts of the value chain or will it sell its remaining assets to foreign giants)*  Create a synchronized strategic direction that encourages investment in knowledge that allow industrial development.  Knowledge-based owner, electricity and expansion, transforming the knowledge base and increase the knowledge infrastructure.