WISERD Working Paper Series, WISERD/WPS/003

This paper seeks to understand the status of and changes in the Welsh automotive industry in the wake of globalization and the consequent structural challenges. Hailed as a budding leader in Europe in terms of auto-component production (where Wales purportedly boasts of supportive institutions, high quality infrastructure and flexible labour conditions), its ambition to maintain or improve innovation and competitive edge in this sector appears to have been seriously thwarted in recent years by developments in the world economy. To date, few studies have attempted to model the automotive sector using a defined regional dynamics. An eclectic framework is warranted and needs to be discussed in detail by integrating aspects of systems of innovation in the light of changes in the world automotive industry and economic conditions which, by and large, permeate to regional dynamics. This paper takes
stock of the ongoing structural and organisational ‘revolution’ in the value-added chain in the automotive industry in Wales and discusses the strengths and weaknesses of the industry from a systemic innovation point of view. Taking a systems of innovation approach which draws on basic concepts of evolutionary theory and innovation systems, we provide a descriptive analysis of the structure and boundaries of sectors for the identification of the factors affecting innovation and competitiveness of the firms, and also for the development of new public policy indications. The building blocks of the analysis consist of the following elements: the influence of regional (national) innovation system elements; technological specificities in the sector and their evolution; and market demand/ competitive conditions.