XXII. MEZINÁRODNÍ KOLOKVIUM O REGIONÁLNÍCH
VĚDÁCH. SBORNÍK PŘÍSPĚVKŮ
22nd
INTERNATIONAL COLLOQUIUM ON REGIONAL
SCIENCES.CONFERENCE PROCEEDINGS
Place: Velké Bílovice (Czech Republic)
June 12-16, 2019
Publisher: Masarykova univerzita (Masaryk University Press), Brno
Edited by:
Viktorie KLÍMOVÁ
Vladimír ŽÍTEK
(Masarykova univerzita / Masaryk University, Czech Republic)
Vzor citace / Citation example:
AUTOR, A. Název článku. In Klímová, V., Žítek, V. (eds.) XXII. mezinárodní kolokvium o regionálních
vědách. Sborník příspěvků. Brno: Masarykova univerzita, 2019. s. 1–5. ISBN 978-80-210-9268-6.
DOI.
AUTHOR, A. Title of paper. In Klímová, V., Žítek, V. (eds.) 22nd
International Colloquium on Regional
Sciences. Conference Proceedings. Brno: Masaryk University Press, 2019. pp. 1–5. ISBN 978-80-
210-9268-6. DOI.
Publikace neprošla jazykovou úpravou. / Publication is not a subject of language check.
Za správnost obsahu a originalitu výzkumu zodpovídají autoři. / Authors are fully responsible for the content and
originality of the articles.
© 2019 Masarykova univerzita
ISBN 978-80-210-9268-6 (online : pdf)
 
 
 
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DOI: 10.5817/CZ.MUNI.P210-9268-2019-7
ECONOMIC PERFORMANCE OF MANUFACTURING
INDUSTRY OF PILSEN AGGLOMERATION
Ekonomická výkonnost zpracovatelského
průmyslu v Plzeňské aglomeraci
PAVEL KRAJÍČEK
VÁCLAV NOVÁK
ŠÁRKA PALCROVÁ
Katedra regionálního rozvoje a veřejné správy
Fakulta sociálně ekonomická
Univerzita J. E. Purkyně v Ústí nad Labem
Depart. of Reg. Develop. and Public Administration
Faculty of Social and Economic Studies
J. E. Purkyně University in Ústí nad Labem
 Pasteurova 1,400 01 Ústí nad Labem, Czech Republic
E-mail: st69168@students.ujep.cz, vaclav.novak@ ujep.cz, palcrovas@seznam.cz
Annotation
The aim of the article is to evaluate the economic performance of manufacturing industry in the agglomeration,
which is presented by a strong industrial tradition. The Pilsen agglomeration is a relatively significant territorial
unit for the population of the Czech Republic. The question is whether the importance of the Pilsen agglomeration
is also expressed by its economic performance. Method of delimitation of agglomeration has been based on using
of commuting to work data. Through a data base on reciprocal commuting flows, the correlation of the core of the
agglomeration will be determined, ie. Pilsen, with surrounding municipalities. Kovanda has already tried to define
the Pilsen agglomeration. The thesis will, therefore, offer a comparison of the delimitation of agglomerations
through two different methods. The performance of the manufacturing industry will be based on the aggregation
of business accounting, especially the indicator of labor productivity, i.e the ratio between value added and number
of employees. The main findings include the fact that the Pilsen agglomeration showed very good results in the
sector, which are most represented in the employment of manufacturing. The main drivers of the economy in the
Pilsen agglomeration are beverage industry, transport, and general engineering.
Key words
manufacturing industry, Pilsen agglomeration, economic performance
Anotace
Cílem článku je zhodnocení ekonomické výkonnosti zpracovatelského průmyslu v aglomeraci, která se prezentuje
výraznou průmyslovou tradicí. Plzeňská aglomerace je v měřítku České republiky populačně poměrně významnou
územní jednotkou. Otázka zní, zda je význam Plzeňské aglomerace vyjádřen i její ekonomickou výkonností. K
vymezení aglomerací byla užita data o dojížďce do zaměstnání. Prostřednictvím datové základny o recipročních
dojížďkových proudech bude zjištěna vzájemná provázanost jádra aglomerace, tzn. Plzně, s okolními obcemi.
Plzeňskou aglomeraci se již pokusil vymezit Kovanda. Práce tedy nabídne porovnání vymezení aglomerací
prostřednictvím dvou různých metod. Výkonnost zpracovatelského průmyslu bude založena na agregaci dat
podnikového účetnictví, především pak indikátorem týkajícím se produktivity práce, tzn. poměrovým indikátorem
přidaná hodnota na zaměstnance. K hlavním zjištěním patří skutečnost, že Plzeňská aglomerace vykázala velmi
dobré výsledky u odvětví, která jsou zde zastoupena na zaměstnanosti ve zpracovatelském průmyslu nejvýrazněji.
Hlavními tahouny ekonomiky jsou v Plzeňské aglomeraci odvětví výroby nápojů, dopravního i všeobecného
strojírenství.
Klíčová slova
zpracovatelský průmysl, Plzeňská aglomerace, ekonomická výkonnost
JEL classification: R12
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1. Introduction
Geographical thesis frequently tent to be extensive and multidisciplinary. However, purely geographical research
activities include the identification and delimitation of different types of territory. The most important areas of
settlement systems are agglomerations (Hampl, 2005). The agglomeration includes mainly the core of the city,
where most services are directed. The non-core zone of the agglomerations is formed by municipalities with a
narrower core background, where there is not only a very strong link to the core city, but there are also opposite
trends. This means that core residents have a reason to travel to agglomerated municipalities in great intensity.
Commuting both for work and for services. High proportion of interconnection of each of the spatial units in
agglomeration is also given by high intensity of mutual commuting structures. (Halás et al., 2012).
Agglomerations arise due to the spatial growth of the most important centers (Hampl, 2005) and also because the
municipalities neighboring to the important center make a profit, which means a population supply. In both cases,
the suburbanisation processes associated with the residential and occupational function of agglomerated
communities play an irreplaceable role (Novák, 2017). Since the 90s, and also in other post-communist countries,
agglomerated areas experience dynamic economic changes, Krzysztofik (2016) for example, dedicated himself to
the processes of reindustralization and deindustralization in Upper-Silesian Conurbation. The authors of this
article are also devoted to the area with strong industrial tradition.
The economic performace of regions is observed worldwide. Porter (2003) observed regional economics in the
USA, whereas registered that industrial sectors are reporting higher average wages and higher rate of innovations
than other sectors of national economy. In the Czech Republic, the economic performance of small city-regions
(Ženka et al., 2013) was examined, using the financial indicators. Financial indicators involved in the final
accounts of companies were used by th authors of this article as well.
2. Delimitation of Pilsen agglomeration
Kraft with Marada and Popiakova (2014) are pointing out the non-existence of standard methods for delimination
of city agglomerations. The delimination of agglomeration can be performed through more complicated
quantitative methods and with the use of geographic information systems (Liu, Dong, Chi, 2010). In the
environment of south-eastern Asia, where by population and area a large scale metropolitain areas are situated, are
these methods very suitable. The delimitation of the Pilsen agglomeration, will be carried out using a method based
on data on commuting and commuting to work, previously defined by Novák (2017). The reason for choosing this
method is the ever-increasing role of suburbanization - especially residential suburbanization - this includes the
construction of new housing in the city's background and the gradual outflow of people from the core city to new
family houses (Ouředníček, 2002). No less commercial suburbanization affects the growth of agglomerations.
Population and jobs are also being moved beyond city borders (eg. the construction of new businesses). The result
is higher commuting to work in the agglomerated communities from the core.
Novák (2017) followed the mutual interaction between the agglomeration center and its background by means of
daily commute data to which a so-called merge parameter was built. “The combining parametr has, in light of
commuting to work, bi-directional character and forms a sum of two shared values:
 share of commuting out to work from the municipality daily to agglomeration, on total number of daily
commuting out to work from the municipality (%);
 share of commuters to work to the municipality from the agglomeration on total number of commuters to
work to municipality daily (%).„(Novák, 2017).
The result of using the Novak method was a delimitation an agglomerated area of 42 municipalities including the
core. It is one of the largest agglomerations in the Czech Republic. January 1, 2018, the population of the
agglomeration was almost 250 thousand residents when approximately 2/3 of the total population (170 thousand)
lived in Pilsen.
Kovanda (2006) has already tried to define the Pilsen agglomeration. Kovanda's method included six basic criteria,
including commuting to work. Among other parameters were, for example, bus availability. Kovanda issued an
opinion that at least 33% of employees had to go to the core of the agglomeration to be considered as agglomerated.
To the delimitation did not include reciprocal commuting flows from the core. The agglomeration defined by
Kovanda includes 89 municipalities and more than 270 thousand residents.
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Fig. 1: Delimitation of the Pilsen agglomeration from March 26, 2011
Source: Czech Statistical Office (2011), author's elaboration
3. Economic performance
The importance of monitoring the economic performance of the industry is also confirmed by the authors Schwab
and Hulten (1984), who in their work analyzed the economic performance of two distinct areas of departures dating
back to the mid-20th century. Their analysis consisted of regional disparities at different levels of aggregation with
access to the production sector. The performance of the manufacturing industry has also been explored since 1971
by Hussain and Bernard (2017). They have examined the two most primary industries in their country. The
comparison took place in 4 of the world's “players” in the paper and pulp industry in countries with the best
conditions for this type of industry: Canada, USA, Sweden, and Finland.
It is not possible to evaluate economic performance at a lower territorial level than the state level in the Czech
Republic, that is mentioned by Novák and Drdová (2013). Data on the economic performance of industries are not
available either for the regions of the Czech Republic or for smaller administrative units. Therefore, the author of
the article has set up a database based on financial statements, where the companies of the processing industry
were divided according to the CZ-NACE classification into sub-sectors:
 Manufacture of food products
 Manufacture of beverages
 Manufacture of wood and of products of wood and cork except furniture; manufacture of articles of straw
and plaiting materials
 Manufacture of paper and paper products
 Printing and reproduction of recorded media
 Chemical industry - Manufacture of chemicals, chemical products + Manufacture of basic pharmaceutical
products and pharmaceutical preparations
 Manufacture of other non- metallic mineral products
 Manufacture of fabricated metal products, except machinery and equipment
 Electrotechnical industry - Manufacture of computer, electronic and optical products + Manufacture of
electrical equipment
 Manufacture of machinery and equipment n.e.c.
 Manufacture of motor vehicles, trailers, and semi-trailers
 Manufacture of other transport equipment
 Manufacture of furniture
 Other manufacturing (including Manufacture of textiles)
 Repair and installation of machinery and equipment
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The 194 largest companies have been compared. There were companies operating in these branches of the
manufacturing industry in the Pilsen agglomeration, who published their financial statements.
Some sectors of manufacturing were not included in the analysis, because of the low or no representation in the
Pilsen agglomeration.
The comparison is based on several basic indicators of economic performance from companies. Labor productivity
from added value will be evaluated primary. It is calculated as the ratio between added value and human capital
(Truneček, 2004). The added value is per employee. To the other indicators that have been worked out are the
average monthly wage, the number of employees and the economic result.
Tab. 1: Number of subjects in the core, non-core zone and in the Pilsen agglomeration according to the
manufacturing industry in 2016
Manufacture of Core Non-core zone Total
Food products 1 4 5
Beverages 2 1 3
Wood and products of wood 7 3 10
Paper and paper products 2 1 3
Printing and reproduction 5 0 5
Chemical industry 10 10 20
Other non – metallic mineral products 3 5 8
Fabricated metal products 34 7 41
Electrotechnical industry 16 10 26
Machinery and equipment n. e. c. 18 11 29
Motor vehicles, trailers 10 2 12
Other transport equipment 4 1 5
Furniture 4 4 8
Other manufacturing 6 2 8
Repair and installation 11 0 11
Total 133 61 194
Data source: Author's elaboration
There are less than 200 manufacturing companies in the Pilsen agglomeration. These are spread out identically to
the population, thus 2/3 of the agglomeration core and the remaining third of the core. Most of the agglomeration
has the largest enterprises in the metalworking industry (roughly 1/5), the vast majority are in the core. More than
twenty enterprises are in chemical, electrical and engineering industries. The lowest number (3) is represented by
businesses in the beverage and paper industries. The most significant difference in the number of enterprises (when
the core prevails over the hinterland) is observed in the automotive industry and Repair and installation. The
opposite situation is recorded by the food industry. The same number of enterprises have chemical, glass and
furniture industries.
It is noteworthy that the total chemical industry operates in a total of 20 companies, including 19 companies which
producing rubber and plastic products.
Compared to the number of companies in the Czech Republic, we can classify the Pilsen agglomeration as below
average in the sector: Manufacture of wood and products of wood (roughly 10 percentage points), Printing and
reproduction of recorded media (twice as low) and Electrotechnical industry (almost 12 percentage points). On the
other hand, to the above-average sectors in the Pilsen agglomeration: Manufacture of machinery and equipment
n.e.c. (by 12 percentage points higher), Manufacture of motor vehicles, trailers, and semi-trailers, which is
represent more than 10 times higher than the Czech Republic. Other industries are represented in the Pilsen
agglomeration by the same amount as in the Czech Republic on average.
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Tab. 3: Number of employees in the core, non-core zone and in the Pilsen agglomeration by the
manufacturing industry in 2016
Manufacture of Core Non-core zone Total
Food products 25 209 234
Beverages 2 141 279 2 420
Wood and products of wood 119 74 193
Paper and paper products 456 145 601
Printing and reproduction 528 0 528
Chemical industry 1 093 832 1 925
Other non – metallic mineral products 280 2 027 2 307
Fabricated metal products 3 031 440 3 471
Electrotechnical industry 3 480 4 076 7 556
Machinery and equipment n. e. c. 4 069 1 326 5 395
Motor vehicles, trailers 6 227 1 227 7 454
Other transport equipment 3 309 15 3 324
Furniture 114 232 346
Other manufacturing 443 62 505
Repair and installation 507 0 507
Total 25 822 10 944 36 766
Data source: Author's elaboration
The number of employees in the Pilsen agglomeration is roughly the same compared to the number of companies.
In the entire Pilsen agglomeration, almost 37 thousand people work in the manufacturing sector, which is roughly
40% of the total number of persons working in the manufacturing industry in the entire Pilsen Region. The average
size of the company is approximately 190 employees.
“Two of the greatest giants of Czech engineering are the cities of Brno and Pilsen, where the engineering industry
had not only a high number of workers but also a high share in total employment”(Baštová, Toušek, 2005, p. 15).
The table confirms the words of Baštová and Toušek. The core of the Pilsen agglomeration continues to be the
giant of Czech engineering.
Most employees are working in the electrotechnical and automotive industries. This phenomenon corresponds to
the fact that in these sectors of the Pilsen agglomeration are large companies. However, for example, there are
about 15 more companies within the Manufacture of fabricated metal products in the Pilsen agglomeration, but
the number of employees in this sector is twice as high as in the Electrotechnical industry and Manufacture of
motor vehicles, trailers. The Manufacture of motor vehicles, trailers has the largest number of employees in the
core of the Pilsen agglomeration. In this sector is employed about a quarter of all employees from manufacturing
industry in Pilsen. A significant proportion of people are also employed by the Manufacture of machinery and
equipment n.e.c., Manufacture of fabricated metal products, except machinery and equipment and Manufacture of
other transport equipment. The same number of employees in the core and in the hinterland is registered in the
Electrotechnical industry. There is also a high number of employees in the Beverage industry, even in spite of the
low number of companies. Especially important is the company Pilsner Urquell, which employs almost 2 thousand
people. Compared to the Czech Republic, the proportion of people who are employed in transport engineering in
the Pilsen agglomeration is almost 9 times a higher and the production of Beverage industry is a 6 times higher.
Electrotechnical industry (10 percentage points) and Manufacture of motor vehicles, trailers, and semi-trailers (10
percentage points) have a higher representation in the Pilsen agglomeration than the whole Czech Republic.
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Tab. 4: Value added per employee (in CZK thousands) in the core, non-core zone and in the Pilsen
agglomeration according to the manufacturing industry in 2016
Manufacture of Core Non-core zone Total ČR
Food products 195 607 563 541
Beverages 3 786 2 440 3 630 1 321
Wood and products of wood 382 363 375 458
Paper and paper products 687 2 101 1 028 889
Printing and reproduction 564 0 564 544
Chemical industry 574 683 621 1 003
Other non – metallic mineral products 903 853 859 813
Fabricated metal products 918 946 921 662
Electrotechnical industry 989 566 761 753
Machinery and equipment n. e. c. 1 138 639 1 016 714
Motor vehicles, trailers 892 802 877 1 270
Other transport equipment 1 419 403 1 415 858
Furniture 570 511 530 472
Other manufacturing 253 398 271 457
Repair and installation 670 0 670 681
Total 1 162 943 1 175 953
Data source: Author's elaboration
“Basically, the value added per employee indicates how much money one worker can make for his employer. This
does not include the cost of his wages and other income and expenses, which are not directly attributable to the
manufacturing activity of the industrial enterprise“ (Novák, et al; 2012, p. 19).
Pilsen agglomeration shows a very above-average performance of employees. The employees of the Pilsen
agglomeration will earn about 200 thousand CZK more than an average employee in the Czech Republic. We can
see the difference when we compare added value inside the agglomeration. The difference between the core and
the non-core zone is the same as the difference between the whole agglomeration and the average of the Czech
Republic. The high performance is mainly due to the core city of Pilsen. Almost two-thirds of industrial sectors in
the Pilsen agglomeration are above the Czech average. The beverage industry (mainly brewing) shows the highest
performance, up to almost three times. Manufacture of other transport equipment also showed high values above
the national average, when one employee in the Pilsen agglomeration earned his company about half a million
CZK per year more than in the average of Czech repuplic.
Especially Škoda Transportation shows extremely above-average values, when one employee earns about CZK
1.5 million his company. Škoda Transportation has a long tradition in the Pilsen Region. Most of the production
is focused on trams, suburban electric trains, locomotives, metro trains, trolleybuses or electric buses. It is the
largest company in Central Europe (more than 5,000 employees) engaged in transport engineering (Aktuálně.cz,
ČTK, 2018). The company has several subsidiaries and supplies vehicles worldwide. In 2018, PPF bought shares
of the entire company (CZK 8.3 billion), the company is owned by the richest Czech, Petr Kelnner. Škoda
Transportation is still accompanied by financial scandals. The most important are eg. overpriced contract of the
modern depot used to repair buses, when it was supposed to “drain” up to 160 million CZK (Karel Hrubeš, idnes.cz,
2018). Another example is the payment of dividends from previous shareholders for suspected tax fraud (Karel
Hrubeš; Petr Kolář, MF DNES, 2018). Despite all the discrepancies, Škoda Transportation has a significant impact
on the economy of the Pilsen agglomeration.
The performance of the Manufacture of machinery and equipment n.e.c. is set by Daikin (air conditioning) and
Doosan Škoda Power is not lagging behind either. The traditional production of turbines in the Pilsen region dates
back to 1904. Nowadays Pilsen turbines are delivered to very remote destinations (South America, Asia, Africa).
Values for these industries exceeded the national average by about 300 thousand CZK per year.
Among the below-average performance sectors in the Pilsen agglomeration are the chemical and automotive
industries (about CZK 400,000 per year less). The reason behind the below-average performance of the chemical
industry is representation only from the plastics and rubber industries, which are not as powerful as chemical plants
and factories. Such gigantic enterprises do not exist in the Pilsen agglomeration, so the performance is considerably
below average.
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The reason behind the under-performance of the automotive industry is the overwhelming specialization in interior
components, which are not so highly valued as, for example, engines.
There is an above-average performance of the Manufacture of paper and paper products in the non-core zone,
within individual sectors of agglomeration. This exceeds the performance of this branch more than twice in the
core of the agglomeration. The hinterland also shows higher performance in the Manufacture of food products.
Among the above-average manufacturing industries in the core are traditionally Beverage industry, Manufacture
of other transport equipment, and Manufacture of machinery and equipment n.e.c.
4. Conclusion
The Pilsen agglomeration is the dominant economically strong settlement forming one of the largest Czech
economic regional centers. Agglomeration has traditionally been strongly focused on the manufacturing industry.
Its performance is crucial for the Pilsen agglomeration. The economic drivers include the local traditional sector.
It concerns the production of beverages, general mechanical engineering, and transport engineering. The largest
and most powerful enterprises are Pilsner Urquell and Škoda Transportation, which together employ more than 8
thousand persons and whose profit in 2016 amounted to more than CZK 6 billion. A surprising finding is also the
fact that the agglomeration background also showed better results for the vast majority of the industry compared
to the data for the whole Czech Republic.
There are more sectors behind the high economic performance. This fact can be perceived very positively, as
several above-average performing industries give a stable and crises-resistant regional economy, where the effects
of dependence on one dominant sector were significant (Blažek, 2010). It is certainly not possible to assume the
current decline in demand for both beverages, especially beer, as well as for transport machinery (eg trams). The
decrease in demand is certainly not expected in general engineering. The demand for turbines is primarily
important. The turbines are also shipped around the world. The surprising conclusion is the uneven performance
compared to the average wage of transport in Manufacture of other transport equipment. The difference of almost
600 thousand earned by one employee per year is not reflected in the average wage. By contrast, wages in general
the manufacture of machinery and equipment n.e.c. (higher by CZK 9 thousand than in the Czech Republic) and
the Beverage industry (higher by CZK 18 thousand than in the Czech Republic) correspond to the performance of
these industries.
The Pilsen agglomeration shows highly above-average values in terms of economic performance and also low
unemployment. It is independent on the Manufacture of motor vehicles, trailers, and semi-trailers. In conclusion,
it is one of the most resistant Czech agglomerations in the Czech Republic.
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This article was elaborated based on support of a student grant project in terms of a special university research
at the University of Jan Evangelista Purkyně in Ústí nad Labem and with the support of the Grant Agency of
the Czech Republic as part of the grant project ‘Development of trajectories of traditional industrial branches
in old industrial regions: governance, participants, institutions and leadership’.