phase of hard learning and thus with a time gap which may often cause furtherdownturns. What we have to explain is the specific solution Stuttgart chose in orderto remain in the league of successful economies.The cluster we examine is confined by the boarders of the Stuttgart region,which contains six Landkreise: Stuttgart, Böblingen, Esslingen, Göppingen,Ludwigsburg and the Rems-Murr-Kreis. In 1982 there were 444 machinery firms inthis area; 480 in 1992; 441 in 1994). Esslingen, which was among the areas where theindustry emerged in the 19th century, still has the highest percentage of machineryfirms in the region, more than 120 having been identified there. Unfortunately we donot know at this aggregate level how many of them are machine tool firms. Manyhave diversified their production. For instance, we found a firm which producedlathes as well as packaging machines. Smaller suppliers may not specialize in toolsystems but only on less complicated parts, and thus supply machinery firms with avaried product range. Especially because of transportation costs, such smallersuppliers often limit their activities to the region; even integrated machinery partswere sourced with ‘95% from firms operating in a distance not greater than 100 km'(Interview BW-F-01). However, such approaches varied and seemed to depend onthe size of firms and their market strategies. Bigger firms had sometimes alreadychanged from regional to global sourcing in the 1980s (Interview BW-F-18).Quantitative data analysis shows that in 1990 machinery firms sourced 12.3%of machinery parts from within the Land, while about 30% of the generally suppliedcomponents and services for machinery firms in Baden-Württemberg weremachinery parts (including steel and ADP in both cases) (Heidenreich and Krauss1998: 226) (see Figure 3.1). This might not seem much for an Italian industrialdistrict, but it is evidence of close local buyer-supplier relations in Germany, wherefirms still rely heavily on in-house production (Knodt 1998; Hirsch-Kreinsen 1993).While trade with firms in foreign markets should have alarmed observers ofthe branch in 1991, the reunification boom compensated for this in 1991 and 1992.Then, in 1993 turnover of machinery firms in the Stuttgart region shrank from DM 19bn. in 1990 to DM 16 bn. (see Figure 3.2). Changes in statistical classification make itimpossible to compare data before and after 1994; a much higher level of turnoverand employment in 1995 may be partly a statistical artifact. However, we cananalyse developments from 1995 onwards. With the exception of 1999 turnover ofmachinery firms in the region has continuously increased. In fact, the relative

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