Evolutionary Insights to Strategic Coupling: Windows of Locational Opportunity in the Emerging Supply Chain of Wood Pellets

Evolutionary Insights to Strategic Coupling:

Windows of Locational Opportunity in the

Emerging Supply Chain of Wood pellets

1. Introduction                                                          

A recent debate in economic geography gravitates around the synergetic potential of two influential strands of literature: Global Production Networks and the Evolutionary Economic Geography (cf. MacKinnon, 2012; Oro and Pritchard, 2011; Coe, 2011; 2012; Jacobs and Notteboom, 2011; Boschma and Martin, 2007). The Global Production Networks-approach (GPN) focuses on the economic geography of production, distribution and consumption and its implications for regional development. Initially designed as a heuristic device and based upon the seminal works of Dicken et al (2001), Henderson et al (2002) and Coe et al (2004), the GPN is in essence a relational perspective on the ‘firm-region nexus’ in the contemporary capitalist world economy (cf. Dicken, 2011). On the one hand, GPN is a departure from the introvert ‘localist view’ on regional development, so prominent in the ‘new regionalism’-debates of the 1990s, by emphasizing the influential role of extra-regional networks mediated by Trans-National Corporations (TNC's). On the other hand, GPN avoids the linear conception of production systems that tends to limit the Global Value Chain/ Global Commodity Chain-approach as put forward by development economists (cf. Gereffi, 1994; Kaplinsky, 2000). Instead, the GPN views value creation and capture, power and embeddedness as a relational process among actors, across scales and within networks, which shape and is shaped by uneven regional development paths.  

        The evolutionary approach to economic geography (EEG) slightly but surely moved towards the forefront of academic debate the last decade. Based upon the seminal works of Rigby and Essletzbichler (1997), Boschma and Lambooy (1999), Boschma (2004) and in particular the works of the ‘Ron Boschma- Koen Frenken- tandem’ (2003; 2006; 2007; 2009), the EEG is focused on an evolutionary understanding of the economic landscape through the lens of the geographical diffusion of organizational routines, innovation, knowledge and the mechanisms of selection and adaptation that go with it. In essence, the EEG takes a micro-perspective on the rise and fall of regions, explained by the bounded rationality of individual actors and in which, in many cases, territorially-based institutions constrain rather than enable regional progress. It builds upon the Schumpeterian-perspective of economic systems and draws henceforth heavily on the evolutionary economic theory of the firm (Nelson and Winter, 1982; David, 1985 Arthur, 1988, Dosi, 1991). Despite its academic success, the EEG is still claimed to be an un-unified paradigm (Coe, 2011), or perhaps just ‘another turn’ in the heterodoxy that is economic geography (Grabher, 2009; Sunley, 2008; Lagendijk, 2006).

        This paper is not the place to repeat all that has been written, conceptually, empirically and critically, on both the GPN and EEG approaches. Rather, this paper’s aim is to contribute, both conceptually and empirically, to the current debate about finding common ground between both approaches, as most eloquently articulated by MacKinnon (2012)^[1]. MacKinnon (2012) aims to extend the GPN-concept of strategic coupling in a temporal sense by incorporating a concept central to EEG: path dependence. In this paper we argue that focusing on the spatial proliferation of emerging global value chains can extend the concept of strategic coupling further. Evolutionary economic geographers have interpreted the spatial proliferation in the economic landscape based either on 'chance' or Windows of Locational Opportunity (WLO) (Martin, 2010). This paper focuses on the bridging potential of WLO, claimed as such by Boschma and Frenken (2009). The WLO (Storper and Walker, 1989; Boschma, 1997) conceptualizes the locational dynamics of firms in new and emerging industries. Typical of these industries is that corresponding institutional arrangements have not yet been well articulated, nor have interests become firmly territorially embedded. Therewith, spatial proliferation of these industries' global value chain is flexible in the starting phase, coined an ‘open’ window that ‘closes’ over time. We argue that regional actors can capture or seize an 'open' WLO by means of strategic coupling, therewith also overcoming criticism on WLO that centers on the exclusion of power relationships and strategic agency (cf. Jacobs and Notteboom, 2011). Our conceptual arguments are underpinned empirically by focusing on an emerging global value chain: wood pellets.

        Still in a ‘primitive’ development stage, the wood pellet industry is experiencing rapid growth and is first in the bio-energy spectrum to turn into a global commodity market. European demand especially, due to policy incentives and regulations, is on the rise (Schonewille, 2008; Sanders et al., 2009; IEA Task 40, 2011).  Selected regions in North America and Russia are becoming main exporters of wood pellets given their large feedstock availability (i.e. fiber waste from sawmills) and small domestic market. We argue that there are ‘open’ WLO for the region of Eastern Canada with regards to the wood pellet industry. In defining what the ‘open’ WLO constitute for Eastern Canada, the supply chain or infrastructural and logistics developments are emphasized given the 'landed' nature - materiality and fixed territoriality - of the wood pellet industry, in line with Bridge (2008; 2009) and Prudham (2005). Especially in emerging global chains, ports are described a key role in developing an efficient supply chain (Sanders et al., 2009, Robinson, 2002). Although not our main focus, us perceiving infrastructural and logistics development to be integral to strategic coupling responds to Coe et al. (2008a)’s call for more recognition of logistics in the management of global flows.

        The central theoretical question of our research is: how do the concepts of WLO and strategic coupling correspond with each other? The central empirical question is: how can we understand the processes of WLO and strategic coupling by means of the case study on wood pellet exports from Eastern Canada?  

This paper proceeds along the following lines. In the next section we review the understanding of regional economic outcomes in GPN and EEG-tradition; connecting to the recent debate on their synergetic potential. In the third section, we elaborate on the concept of WLO and the synthesis with strategic coupling. In the fourth section, we introduce the case study of the wood pellet industry. We analyze what ‘open’ WLO in the wood pellet industry constitute for Eastern Canada and elaborate on which actors are involved. In the fifth section, we analyze the ‘game’ of strategic coupling 'played' by the involved actors in Eastern Canada. A conclusion summarizes our arguments and considers their implications for the on-going debate among economic geographers.