Patterns of Industrial Growth: The textile industry in Antioquia, Colombia
Industrial growth and technical change are widely recognised as essential for socio-economic development. Their causes, consequences, and characteristics have been greatly studied within the innovation literature from different perspectives. Specific capabilities and assets appear to determine a firm’s ability to capture the value of innovation and achieve economies of scale (Teece, 1993a, 1986). From the industry perspective, the patterns and factors that drive innovation tend to vary significantly between economic sectors (Pavitt, 1984). At a regional level, the interactions between firms, suppliers, consumers, and other actors within specific geographical boundaries may impact a region’s capability to face market opportunities (von Tunzelmann, 2009) and absorb technological learning (Viotti, 2002).
Innovation and growth have been traditionally explained from two contrasting and complementary approaches. From a traditional economic perspective, growth is conceived as a cumulative process in which innovation is an external rational investment introduced as an input to the function of production. The systems approach, in contrast, indicates that technical change involves complex coordination and interaction between different actors and that innovation is essentially endogenous and uncertain (Nightingale, 2021).
Understanding growth and the factors that enable technical change is crucial for firms to determine the best strategies to capture the value of innovation. Additionally, it is crucial for regional and national governments to create appropriate policies to drive growth within its geographical boundaries. To exemplify the determinants of innovation and growth in a specific industry, this paper will examine the textile industry in Antioquia, Colombia. By revisiting previous literature about technological innovation, firm and regional capabilities, industrial dynamics, and the sectoral patterns of innovation, the essay aims to illustrate what are the characteristics that guide growth and innovation in an industry considered “low-tech” in a developing country.
Antioquia and its textile industry constitute an attractive case study, as it combines many interesting characteristics from an industrial innovation viewpoint. Often categorised as the “industrial region” of Colombia, Antioquia has been the birthplace of some of the largest and most successful companies in the country in sectors including textiles, food processing, and construction.
Nowadays, Antioquia’s industries represent 20% of Colombia’s manufacturing firms (CCMA, 2018). In addition, many of the best-ranked companies in the National Business Innovation Ranking (ANDI, 2021) are from this region, and the region’s capital city, Medellín, has been recognised as the world’s most innovative city (BBC, 2013) and a worldwide innovation hub (ACI, 2017).
FIRMS AND INDUSTRY
In Colombia, Antioquia has been catalogued as the country’s greatest centre of production. Its textile industry was traditionally the sector that generated the most employment and development within the region. Different factors have contributed to this growth.
According to some historians, among the factors that developed Antioquia’s textile industry were the decline of the mining industry in the twentieth century, the leadership of some key industrial entrepreneurs of the time, and the organisation structure on which the industry was founded (Valle Flórez, 2008). The falling-off of the mining industry in the region pushed workers to migrate to urban areas. Important businessmen of the time founded what would become the three most important companies in the sector – Coltejer, Fabricato, and Tejicondor. These firms marked the economic growth of the industry and the region at that time. The organisational structure of the factories, based on the classic and scientific administration styles of Taylor and Fayol (Valle Flórez, 2008) also enabled the industry’s growth.
These factors resemble characteristics of both the “entrepreneur” of Schumpeter (Fagerberg, 2004) and the type of organisation of Chandler (Teece, 1993b). On the one hand, the development of this industry was greatly determined by the leadership and vision of the first industrial entrepreneurs who were able to combine knowledge, skills, and resources, and fight what the “Schumpeter Mark I” work call “resistance to new ways” or social inertia (Fagerberg, 2004). On the other hand, the ability of the firms to plan and coordinate functions through organisational structures designed by the management, and the investments made in key complementary assets (namely factories, workforce, and distribution channels) seem to have enabled them to exploit economies of scale and achieve competitive advantage (Teece, 1993b, 1986).
Regarding the specific characteristics of the industry, Pavitt (1984) argues that a traditional manufacturing sector like textiles is a supplier-dominated industry. This type of sector is characterised by having small firms, weak R&D and engineering capabilities, and a cost-cutting orientation. Consequently, these firms only make minor contributions to product innovation and focus their efforts to process innovations (Pavitt, 1984). In Antioquia’s textile factories, this type of innovation was mainly concentrated on the production methods and administration model. Factories adopted registration processes of daily and monthly average production, machine efficiency rates, and cost systems, that allowed them to implement, for example, the first mass production of dresses in the country (Valle Flórez, 2008) and to benefit from dynamic economies of scale (Teece, 1993b). Nonetheless, in contrast with Pavitt’s proposition, the industry was dominated by three large firms during the early years of industry expansion (Carbonó López, 2021). Additionally, engineers played an important role in textile factories, as they were responsible for installing the first hydraulic plants, designing, and building the factories, and implementing new organisational structures (Valle Flórez, 2008). This difference in the characteristics of Pavitt’s taxonomy follows the argument of von Tunzelmann and Acha (2006) that low-tech industries (such as textiles) are not easy to classify in a specific “taxonomy” as they are not “very distinctive or singular in technological terms”.
In fact, textiles are often classified as a low-tech industry. It is an industry that depends greatly on machinery and chemical innovations developed elsewhere (Pavitt, 1984), and its technological diversification is more focused on production than on technology (von Tunzelmann and Acha, 2006). However, these industries do develop absorptive capacities that allow them to generate a broad base of innovative activities, especially in engineering, continuous improvement processes, and organisational innovations (von Tunzelmann and Acha, 2006). In contrast with high-tech industries, these sectors do not tend to generate absorptive capacities from formal R&D but from the replication of the innovative activities generated elsewhere (von Tunzelmann, 2009). In Antioquia’s textile industry, firms had previously sent employees to factories overseas to learn the methods of production and then train workers upon their return (Valle Flórez, 2008). According to von Tunzelmann (2009), this type of personnel mobility allows firms to learn “the more tacit or uncodified aspects of new products and processes”.
In summary, from the firm and industry perspective, what defined the success of Antioquia’s textile sector, to some extent, was a combination of audacious industrial Schumpeterian “entrepreneurs”, firms with the necessary structure and complementary assets to achieve economies of scale, and an industry’s absorptive capacity able to learn and develop processes and organisational innovations.
THE REGION
The geographical scope in which industry is born and develops is also considered to play an important role in the industry’s industrial evolution path. Within the innovation literature, a region is described as a particular congregation of suppliers, producers, consumers, and other actors, each with its own capabilities (von Tunzelmann, 2009). The correct alignment of the multiple capabilities and interactions of these actors may determine a region’s potential for innovation and growth.
The work of von Tunzelmann (2009) reunites the ideas of Sen (1985) and Penrose (2003) to distinguish between consumers, firms, and technological capabilities. The first type is related to the consumers’ ability to classify product characteristics. The second type addresses the capabilities to transform resources and technologies into products. And the third category is related to the different sources of technologies or value networks – laboratories, universities, supply chains, banks, and governments. In the case of the textile industry, two of these value networks were relatively important for its development and growth. There was an emerging engineering-specialised human capital coming from the nascent School of Mines, as well as a financial boom in Antioquia’s banking system, resulting from the commercialisation of the local coffee crop (Valle Flórez, 2008).
From the national learning systems perspective (Viotti, 2002), a country like Colombia is considered a late industrialising economy, whose main economic engine is technological learning, rather than innovation. We understand learning as “the absorption of innovations developed elsewhere, and the generation of improvements in the vicinity of acquired techniques” (Viotti, 2002), and can relate this to Antioquia’s industrial characteristics. Its technological learning was mainly based on technology and equipment imported from advanced countries, copying, and reverse engineering – characteristics of the active absorption of Viotti (2002).
Clearly, the specific geographical characteristics of the region contributed greatly to the industry’s development. Specifically, the region’s dynamic capability to align external value networks (human capital and sources of financing) with firm-specific capabilities, as well as its active absorption capability to appropriate new technology from abroad, helped to set the region up for success.
INDUSTRY CHALLENGES
Despite the success of Antioquia’s textile sector, many challenges have pushed this industry to decline. These challenges include globalisation, technological adaptation, demands for cooperation and competitiveness, and the need for new interactions at a local and global level, and all of these have threatened the stability and sustainability of this industry in Colombia.
Firstly, the excessive degree of specialisation in textile production during the first half of the twentieth century impeded the development of new industrial sectors. In the 1950s, the textile sector employed nearly 50% of the population, and factories were concentrated in the capital city (Sánchez Jabba, 2013). Returning to Pavitt (1984), this market concentration is characteristic of supplier-dominated industries, which tend to have a vertical diversification into production technology and “very little movement into other product markets”.
Secondly, with the entrance of low-cost textile imports to the country, as a result of the liberalisation strategy of Colombia (Sánchez Jabba, 2013), the regional textile industry faced extreme price-based competition. At first, firms tried to copy Asian production models, but this did not result as expected. This is explained by the high dependence on “context-specific characteristics and tacit knowledge” (von Tunzelmann, 2009), which makes forms of production difficult to imitate.
Therefore, one of the main current tasks of this industry is to identify new markets that generate alternative options and broaden its commercial options. A common approach used by governments worldwide to address this task is to develop “cluster” strategies. This is a perspective not recommended by von Tunzelmann (2009) since it doesn’t ensure that the interactions between the actors are compatible. Instead, he argues that the factors that best enable absorption within an industry and a region are greater mobility of personnel, competition and collaboration, specialist institutions, and institutional change.
The cluster strategy was precisely the approach adopted by Antioquia’s textile industry in the early 2000s (Sánchez Jabba, 2013). Even though the objectives include obtaining more specialised forms of production, promoting cooperation between firms, and facilitating access to new technologies (CCMA, n.d.), this is an approach does not help to determine which capabilities are dynamic and embedded in the region that will produce economies of scale and can help to face the demands of global markets (von Tunzelmann, 2009). In general, governments in Latin America have taken measures to protect their infant industries from the competition of established producers in more industrialised countries, which confine the region to low-tech activities. Instead, LATAM governments may need to turn their attention to the activities which generate most of the output and employment and the best bases to achieve dynamic comparative advantage (von Tunzelmann, 2009).
Despite these threats, during the last decade, Antioquia has prevailed as the most important industrial region of the country, representing the 20% of the national industrial output. Today, the textile industry is the region’s biggest employer (CCMA, 2018). Nevertheless, the region and industry should adopt a different strategy that brings on the existing sources of comparative advantage and considers emerging technological and market opportunities.
CONCLUSIONS
Some of the causes that explain the emergence, development, and growth of Antioquia’s textile industry were exposed in this paper. The decrease in the region’s mining activity, the emergence of new engineering-skilled human capital, the support from a nascent banking system, the organisational structure, and the leadership of the first audacious industrial entrepreneurs, led this industry to be one of Colombia’s main economic engines during the 20th century. These factors have been analysed from the concepts and frameworks developed by some of the most important exponents within the innovation and technical change literature. The complementary assets and the Chandlerian organisation proposed by Teece (1993b, 1986), the taxonomy of sectoral patterns of innovation by Pavitt (1984), and the regional capabilities and learning systems established by von Tunzelmann (2009) and Viotti (2002).
These theories largely explain the evolution and dynamics of this industry. Nevertheless, some contradictions were found. First, despite being a supplier-dominated industry (Pavitt, 1984), Antioquia’s textile industry was greatly dominated by large firms and engineering capacities played an important role. But as previously exposed, these engineering capacities were focused on production processes and organisational innovations, a clear characteristic of a low-tech industry (von Tunzelmann and Acha, 2006).
Finally, these frameworks have also provided some answers and approximations to the challenges that this industry has faced in the context of globalisation and technological competition. Analyses were exposed about the excessive market concentration of this industry (Pavitt, 1984), the difficulty to imitate new forms of production, and the relatively inadequate policy approaches governments have used to face market and technological challenges (von Tunzelmann, 2009).
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