Regional Deindustrialization and Re-bundling: Evidence from the Merger of the Former German Hoechst and French Rhône-Poulenc Groups

Abstract

large part of the work in economic geography and other social sciences has focused on new growth prospects due to the establishment of global production chains and the rise of new clusters of industrial activity. Much less attention has been paid to former growth industries and regions that have recently experienced shrinking processes due to internationalization. This paper will explore the cases of two chemical regions, i.e. southern Hessen, Germany and Rhône-Alpes, France. These two areas have both undergone drastic restructuring since the mid-1990s, due to the merger of the prominent chemical groups Hoechst and Rhône-Poulenc into Aventis. Instead of investigating the development of the core activities at Aventis, we will focus on the operations that were considered less important and consequently split off. In addition to the negative consequences produced by these activities, in our analysis we also emphasize regional opportunities which arise from competence building, reorientation and new firm formation. These processes can be viewed as re-bundling existing and new knowledge bases with other resources to help overcome economic crises and develop a new competitive edge. As such, the paper aims to contribute to a relational understanding of economic globalization and regional restructuring.

Acknowledgements

Earlier versions of this paper were presented in 2006 at the Fifth Proximity Congress on “La proximité, entre interaction et institution” in Bordeaux and the RGS-IBG Annual International Conference in London. The authors would like to thank the participants of these congresses, particularly Stephen Appold, and the two reviewers of European Planning Studies for their valuable suggestions. They are also indebted to Nicole Kogler and Clare Wiseman for providing critical comments on earlier drafts of this paper.

Notes

Although many chemical firms are aiming to shift their focus from mass products toward specialty chemicals, a relocation of standardized mass production of basic chemicals is only partially feasible and cost-efficient.

After initial successes, recent developments have indicated that another major restructuring could take place involving Sanofi-Aventis and Bristol-Myers Squibb, the effects of which could again be quite drastic for some of the existing operations and production networks. On the one hand, important patents will run out in the upcoming years. On the other hand, new health policies in developed economies which aim to reduce costs are a burden for further growth. As a consequence, the firm has put investment projects in the Frankfurt/Main region on hold and seemingly started discussions with Bristol-Myers Squibb to initiate another mega-merger. Through this merger, Sanofi-Aventis would be able to strengthen its research base and pipeline for new drugs (Toronto Star, 2007; Frankfurter Rundschau, 2007a, 2007b).

It has to be pointed out that the tenants of the industrial parks in southern Hessen (Figure 2) were not primarily suppliers of the original chemical operations of Hoechst. They were new firms which resulted from the disintegration and restructuring processes. Many of these firms were potential customers for the established regional suppliers and service firms. In addition, new firms moved to the IPH in recent years which were unrelated to the former production branches at this site. Similar processes also apply to the industrial parks in Rhône-Alpes although these locations primarily host firms which directly resulted from the disintegration of Rhône-Poulenc.

It has to be emphasized that the effects of the restructuring processes would be more drastic if those firms and operations were included which declared bankruptcy and went out of business. We were not able to include these processes and their consequences for re-bundling because systematic information about the extent of such processes and the respective agents involved was not available.

Since restructuring processes in Rhône-Alpes were in an early stage at the time of our study, we did not systematically investigate firm formation processes in this region.

Regional policy-makers were seemingly also involved in keeping the main location of the chemical producer Ticona, a former Hoechst branch, within the region after it became clear that the firm had to give up its original production site in Kelsterbach, which was too close to the new Frankfurt/Main international airport (Ochs & Schubert, 2006; Schubert, 2007).