Metallurgical Industry In Donbass Region. Clustering Concept

Metallurgical industry in Donbass region Clustering concept This article will focus on the case for examining the reasons behind the establishment of the metallurgical industry in the Donbass region of Ukraine, these steams from conducting a similar exhaustive study of the National Innovation Systems concept in Finland (e.g. Nokia) as well as the Cluster system in Basque region of Spain. The two systems mentioned above complement each other. NIS is the frame and institutional set-up for business operations, while a cluster is one of the results of the implementation of the NIS framework. The diagram below illustrates the concept: Diagram 1. National Innovation System structure1 Parliament

Government Science and technology Policy Council

Ministry of Education

Academy of Finland

Ministry of Trade and Industry

Other Ministries

Tekes National Technology Agency

Sitra

Universities and Government Research Institutes

Enterprises, Private research Institutes, Funds and Foundations

* Tekes funds innovative research and development projects in companies, universities and research institutes. Tekes is a gateway to the best technology partners in Finland. The main financing organization for applied and industrial research and development, offering channels for cooperation with local companies. 1

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Source: ERRIN: European regions research and innovation network Metallurgical industry in Donbass region. Clustering concept | Olena Achkasova Hult International Business school

** Sitra, the Finnish Innovation Fund is an independent public fund which under the supervision of the Finnish Parliament promotes the welfare of Finnish society. Sitra’s responsibilities have been stipulated in law. Since its establishment, Sitra’s duty has been to promote stable and balanced development in Finland, the qualitative and quantitative growth of its economy and its international competitiveness and co-operation. Its operations are governed by a vision of a successful and skilled Finland. SITRA has always approached its operations with strong belief in the future and in the ability of the latest technology to generate well-being. While implementing the above described concept of NIS we can talk about appearance of the formations – clusters – where the value chain of the industry is completed by additional links: Diagram 2. Combination of National Innovation System structure and cluster concept

R&D institutions

Procurement

Inbound logistics

Development Infrastructure

Ministries

Operation s Marketing and sales

Outbound logistics

HR

Services

Financial Funds and Foundations

Technology development

Educational institutes

An examination of the Donbass region from the year of its origin till now shows that the government at that time had particular plan for this region.

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Donetsk was established as a labor city for the metallurgical industry. Later it became a coal mining hub providing supportive raw material supplier’s base for the metallurgical industry, which by fact, has existed much earlier than the main industry.

Metallurgical industry in Donbass region. Clustering concept | Olena Achkasova Hult International Business school

The inner cluster of the heavy industry include: Inbound logistics, Operations, Marketing and Sales, Services for industries and Outbound logistics (Donetsk enlarged its factories and mining to the nearest areas, such as Shaktersk, Makeevka and etc.) had been formed by 1897. The secondary activities were mainly developed by the main owner of the first metallurgical plant. One interesting fact is that the HR unit at that time was focused on getting skilled manpower from neighboring countries in order to serve the new-growing industry. Later, Infrastructure, Procurement and Technological development took place, but in a slow pace. After WWII, the region turned into student city with a large number of institutions, which had the primary responsibility of developing young specialists for these two industries: from blue collar to the workers on the factory or mines floor. More attention was given to the R&D areas of the region. A large number of government R&D institutions were working on heavy industry development. By 1950 with new investments from central government, Donetsk had become an important industrial center of Ukraine and the whole USSR. Moreover, looking at the government structure of Soviet Union, I can track a similar pattern, described in the Diagram #1. It shows cooperation of social system of parties and educational, research and development institutions, which followed particular plan (so called ‘government strategic plan’ at that time) that could ensure the region development towards heavy industry, including additional, but not less important structures, as specialized Universities and Schools. In a nutshell, there is a some benefits to be gained by conducting a detailed research on the development of the metallurgical industry within Donbass region, with the help of such methodologies as country/region analysis, value chain analysis of the industry and cluster analysis, in order to understand how to use the lessons from other NIS and cluster systems to revive the metallurgical industry in the Ukraine. The objective is to study the current situation of the industry, learn about the gaps, and come up with the solutions in order to: -

Analyze and revitalize the heavy industry cluster in the Donbass region Support its continues development Come up with new solutions – as replenishment to current industries - that would influence the region growth, due to exhaustion of natural resources, i.e. coal, iron and etc.

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Metallurgical industry in Donbass region. Clustering concept | Olena Achkasova Hult International Business school