Regional effects of the automotive crisis in German engine building industries

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‘Flexible specialization’ has long been considered a competitive advantage for the German mechanical engineering industry. As early as 1984, Piore/Sabel stressed that flexible specialization was important to companies in terms of the production process and also their client base. We will demonstrate that this perspective is insufficient today. Specialization can lead to disadvantages, leading to ‘lock-in’ if a company is too dependent on its specific market niche. The ability of a company to attain a competitive advantage depends on its capability to bring product modifications to the market, in particular innovations relating to their core competencies. In the economic recession, which first struck the German mechanical engineering industry in 2008, flexible specialization and product modifications in the core competencies played a strong role in company survival. Labour flexibility and equity capitalisation also helped companies to cope with the crisis, although the former did have consequences for the local labour markets. The investigation is based on 20 in-depth interviews in mechanical engineering companies in regions dominated by this manufacturing sector. Interviews took place in summer 2009.