colleges were established, and student exchange programmes supported knowledgetransfer from beyond Württemberg’s borders.A major breakthrough came with the development of electricity – in Stuttgartrepresented by the firm of Robert Bosch – and the early days of car construction.Gottlieb Daimler founded the Daimler-Motoren-Gesellschaft in Canstatt in 1890. Itproduced motors for coaches and ships. Magnetic ignition, an invention of Bosch,was introduced for the production of Daimler’s motors, Daimler himself abandoninghis own ignition system (Daimler-Benz 1998). Around the turn of the century Boschand Daimler became the first Stuttgart firms to employ more than 1,000 workers. In1926 Daimler merged with Benz & Cie.
and was transformed into the Daimler-BenzAG with its home base and central administration in Stuttgart.Many inventions in car construction and other sectors came from the machinetool industry, which changed the inner structure of firms as new machinesstimulated rationalizations. (This mutual penetration of sectors even todayconstitutes a comparative advantage of the area’s machine tool firms and is the mainreason for clustering.) Locally sourced machine tools introduced new productionmethods at Daimler, for example the presses manufactured at Weingarten, whichenabled production of large parts of the car body with a single machine (ibid).Daimler’s efforts at vertical integration, and thus the establishment of hierarchicalgovernance, would have been more difficult to manage without the quality andcustomer orientation of local machine tool firms. This was probably less a consciousdecision by individual firms than the most viable road to success given initialbackwardness.
And the quality of Stuttgart’s machine tools met the standards of thelocal motor industry.While big firms created a certain demand structure, machine tool firms did notcompletely rely on these new industries, but had been watching out for otheropportunities in the textile, paper and printing industries – but within a process of’coordinated specialization’ as Herrigel (1987) argues. Specialization in general wasnecessary to fulfil customer requirements for specific machine tool functions in highquality market niches. A coordination of this process was necessary to avoidcompetition between the sectorally specialized firms and to secure cooperation.
Herrigel shows how this rested on associations like the industry association of themachinery industry, the Verein Deutscher Maschinen- und Anlagenbauer (VDMA)or the Union of German Engineers (Verein Deutscher Ingenieure – VDI). Both aretypical examples of German organizations concerned with the production of LCCGs,