Regional clusters and agglomeration advantages: manufacturing in Hungarian urban areas

Abstract

Specialisation of regions and urban areas is one of the main sources of economic growth and development. The region which is able to strengthen its key traded sectors can gain significant advantages in regional competition. An efficient approach to identify a region’s key sectors is cluster mapping which is designed to reveal geographical concentration of growing, dominant and innovative economic activities.

For the years between 2014 and 2020, it has been declared a high priority of EU regional policy making to promote smart specialisation and re-industrialisation – in which regional clusters play an important role. The changes in the global economy as well as economic shocks have made it crucial to identify all potential economic activities in regions that reach a critical mass, have higher innovation capabilities and contribute to the development of regional competitive advantages. Among all traded economic activities, manufacturing has become vital in Hungary. It promotes technological innovation, productivity and trade, produces for export, generates economic growth and employment, and has an increasing demand for services.

Given that place-based policies put a particular emphasis on the spatiality of economic activities, it is important to determine what characterises the spatial distribution of manufacturing in the urban areas of Hungary, and which sectors have reached a critical mass for clustering.

Therefore the present study analyses the spatial distribution and the critical mass of manufacturing subsections in Hungarian urban areas. It shows which manufacturing subsections in Hungary could reach and maintain its critical mass between the time of Hungary’s accession to the EU in 2004 and the time of the global economic crisis. We examine the spatial distribution on the level of urban areas because they reflect residential, business and labour relations. The study follows the slightly modified methodology of cluster mapping developed by the European Cluster Observatory, which identifies potential clusters based on three criteria: size, specialisation and focus. We use data on employees, and we compare the results of two years, 2005 and 2010. As we expected, we can demonstrate which sectors in manufacturing are worth specialising in by urban areas and whose support contributes to the further development of regions. The main conclusion is that Hungarian urban areas have different developmental trajectories, and we might witness re-industrialisation processes only in a few, less developed regions in Hungary.