Wind Power Cluster in Denmark

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Microeconomics of Competitiveness
Final Report

The Danish Wind Energy Cluster

Warsaw School of Economics – 13th January 2010

1. IntroductionPage 2

2. Country BackgroundPage 2

3. Performance of the Danish EconomyPage 3
2.1 Trade
2.2 Budget and Fiscal Policy
2.3 Gross Domestic Product and Productivity Growth

4. Cluster composition in DenmarkPage 5
3.1 History of Cluster Policy in Denmark
3.2 Today’s Context

5. The Business Environment in Denmark – National DiamondPage 8 5.1 Factor Conditions
5.2 Demand Conditions
5.3 Related and Supporting Industries
5.4 Context for Firm Strategy, Structure and Rivalry
5.5 Government – the Influence of Macroeconomic Policies
5.6 Institutions for Collaboration

6. Historical Development of the ClusterPage 13
6.1 Wind Energy in Denmark before the 1970s
6.2 The Danish Wind Energy Cluster in the 1970s – The First Hesitant Beginnings 6.3 The Danish Wind Energy Cluster in the 1980s
6.4 The Energy Policy of the Danish Government since the 1980s/1990s 6.5 The Cluster of Modern Wind Turbines since 1990

7. Description of the Wind Energy ClusterPage 20
7.1 Vestas: World’s no. 1 Turbine Manufacturer

8. Wind Energy Cluster – Cluster DiamondPage 22
8.1 Factor Conditions
8.2 Demand Conditions
8.3 Context for Firm Strategy, Structure and Rivalry
8.4 Related and Supporting Industries

9. Strategic Issues Facing Denmark and the Wind Energy ClusterPage 28 10. Policy recommendations for the appropriate constituenciesPage 30 11. ConclusionPage 31

Required Disclosures
1. Introduction
This paper gives an insight into the Danish economy and business environment. Furthermore, it describes the cluster composition in Denmark and how the policies towards clusters have changed in recent years. The core of the paper is the comprehensive analysis of the wind energy cluster in Denmark where the cluster is analysed with the use of Porter’s diamond model. Lastly, identification of strategic issues facing Denmark and the wind energy cluster will be presented and policy recommendations given.

2. Country Background
Denmark is located in Northern Europe between the Baltic Sea and the North Sea and has Copenhagen as its capital. Its population consists of approx. 5.5 million inhabitants whereof 9.1% is immigrants and their descendants. The official language is Danish, but the level of English proficiency is very high. The Danish constitution was codified in 1848 and today the country is governed by a parliament consisting of 179 members. The election period is four years but the prime minister can call an election at any time. Furthermore, Denmark has a constitutional monarchy with Queen Margrethe II as the head. The Queen is apolitical and only functions a representative for Denmark. Denmark joined the EU in 1973 and has always seen it as a good place for economic cooperation, but Danes have been more reluctant towards the political integration resulting in Denmark staying out of the Euro. Denmark is known for its Scandinavian welfare model, which ensures a high level of re-distribution through taxes. The model includes among other things the “flexicurity” system, which will be elaborated later (Ministry of Foreign Affairs of Denmark).

3. Performance of the Danish Economy
Danish economy can surely be described as a modern one, oriented primarily at services. In terms of its resources, the economy depends to the greatest extent on human capital, which translates into a more labor-related approach towards business. With over 5.5 million citizens, Denmark maintains a record low level of unemployment, roughly 2.1%. All those indicators contribute to a pretty high standard of living. For this reason Denmark was ranked 16th globally in the Human Development Index, which reflects several aspects, such as live expectancy, knowledge and education standards...
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