Low-Tech Competitive Advantages and the Role Of Proximity

Abstract

The prevailing ethos of high-tech production makes it easy to forget that low-tech industries are not synonymous with low growth or low profitability. Even countries with some of the world's highest labour costs have based their economies on an ability to be competitive in labour-intensive, low-tech production. Furniture production is an excellent example of a huge and successful export-oriented European low-tech industry, which is mainly located where labour costs are highest. This article examines the peculiarities of the industry and highlights development within a single country, Denmark. It is argued that intensified exposure to international competition has led to a trend towards spatial agglomeration within the industry. It is further suggested that the enhanced demand for proximity between furniture producers is not based on utilizing the advantages of a geographical concentration of suppliers or customers, but rather on the ease of communication and exchange of knowledge when co-location gives rise to shared trust. Without the access to such intangible, localized capabilities it appears to be difficult for firms in this low-tech industry to survive. Sustained competitiveness and spatial proximity are thus closely interrelated.