This document discusses industrial clusters in China, specifically: - It defines industrial clusters and traces their history back to Alfred Marshall. - It explores the implications of clustering for Chinese firms, particularly SMEs, including overcoming financial constraints and improving productivity. - It notes that thousands of industrial clusters in China mainly comprise SMEs, and the number of SMEs is growing faster in clustered areas.

2. (草稿)
 Clustering (as defined by business literatures)
 History of cluster
 Implications of clustering in China
 SMEs Definition in China
 Relationship between clustering and SMEs
 Advantages of clustering for SMEs
 Problems and difficulties
 Zhejiang-model
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3. A variety of different definitions of industrial clusters
are depicted in the literature of business economics
and innovation studies. The literature broadly
explains cluster in a geographical sense
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6. The history of industrial cluster dates back to the classical economic
analysis of Alfred Marshall in “Principles of Economics”. Marshall
(1920) points out that localization economies creates due to
presence of pooling of labor, availability of industry specific goods at
lower cost and technological spillover.
However it was popularized by Michael Porter in ’The
Competitive Advantage of Nations (1990)’; thus industry
cluster is sometimes referred to as Porterian Cluster.
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8.  The cluster-based business model makes use of more
entrepreneurs and labor and less capital. This may explain
why clusters have emerged as the organizational choice of
Chinese firms over time (Long and Zhang, 2011) .
 Furthermore, Long and Zhang (2011) has provided
empirical evidence that clustering has indeed helped
Chinese firms overcome financial constraints and further
improve their productivity and export performance; thus
providing regional competitive advantage.
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9. China's rapid industrialization is characterized by the following
patterns:
a) industries have become more spatially concentrated;
b) regions have become increasingly specialized; and
c) firms have become more interconnected
In addition, the number of firms is growing faster in clustered
areas than non-clustered ones. Together these patterns
suggest that China's industrialization process is largely cluster-
based
(Long & Zhang,
2011)
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11.  Today, there are thousands of industrial clusters, mainly comprising
SMEs. Statistical data from the Ministry of Information Industry
reveal that only some 160 cities out of about 280 produce industrial
clusters, of which the major constituents are SMEs [今天，有成千
上万的产业集群，主要包括中小企业。从工业和信息化部的统计数
据显示，只有约160个城市出约280产生的产业集群，其中的主要成
分是中小型企业。]
 The number of SME firms is growing faster in clustered areas than
in non-clustered regions; this pattern resembles the East Asian
cluster-based industrialization led by SMEs but differs from the
U.S. experience, where industrial districts were dominated by large
firms [企业数量的增长速度和企业规模都不显著更大的集群地区比非
聚集区;这种模式类似于东亚基于集群的产业为首的中小企业，但不
同于美国的经验，在工业区是由占主导地位大型企业] (Long &
Zhang, 2011).
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12.  Large-firms generally exhibit less inter-firm connections as they are
more concerned with beating the competition; conversely SMEs
relies on “if you can’t beat the competition, then join them” [大公司
通常表现出较少的企业间的连接，因为他们更关心的是打败竞争对
手，相反中小企业依靠“如果你不能打败竞争对手，就加入他
们”](Long & Zhang, 2011).
 SMEs suffer from a lack of resources. One way to overcome these
problems is to develop “clusters”, which provide a platform for
SMEs in a region to share innovation facilities and new ideas
and production resources through closer business networks [中小
企业苦于缺乏创新设施和资源。克服这些问题的方法之一是制定“集
群”，这对中小型企业提供一个平台，在一个区域，通过更紧密的业
务网络，以交流创新设施和新的思路和生产资源](Chen & Cao,
2006)
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13. Clustering plays a critical role in accelerating innovation and
competitive advantage in SMEs:
a) The inflow and outflow of technical personnel lead to
rapid technical diffusion. When people change from one
enterprise to another, this leads first to imitation and thence
to innovation.
b) SME clusters also lead to economies of scale, so
necessary for innovation.
c) The free flow of information in a cluster supports innovation
by encouraging "intellectual overflow" among employees
of different organizations communicating informally in many
ways.
(Chen & Cao, 2006)
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14.  Low innovation capability
Excessive imitation and inadequate innovation lead to low
technology content and value addition.
 Lack of quality consciousness
In America, more than 50 per cent of technology innovations come
from SMEs, but in China’s SME clusters, 82 per cent of SMEs have
no technical inventions or patents at all. This reduce the probability
of improving production quality.
 Lack of trust
If there is lack of trust, it might hamper innovation.
(Chen & Cao,
2006)
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15.  Zhejiang Province is known as a home of many industrial
clusters; it has been attracting greater attention from business
researchers and policy makers.
 It presents distinct sort of supply chain management:
tight linkages between the industrial clusters and specialized
markets ; more efficient and effective. (它提出了不同的类型的
供应链管理：产业集群与专业市场之间的紧密联系;更加高效和有
效)
 The role of specialized markets is still crucial nowadays as a
powerful channel for the distribution of consumer goods as well
as a means of coordination of fragmented productions in China
and abroad. (专业市场中的作用仍然是至关重要时下作为一个强大
的渠道消费品的分配以及协调在中国和国外零散制作的一种手段。)
(Bellandi & Lombardi, 2012; Fliesher, Hud & MCG, 2010)
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16.  Statistical data (2006) from Zhejiang reveals there were 519 SME
clusters in the manufacturing and the agricultural sectors; one of the
largest SMEs clusters in the region.
 Main part of the SME cluster in Zhejiang is still labor-intensive (such
as spinning, garments and machinery). This is truly reflective of the
nature of SME clusters.
 Facing severe competition, more firms have begun to upgrade their
product quality. By the year 2007, nearly half of the sampled firms in
Zhejiang province had established registered trademarks and nearly
20 percent had become ISO certified.
(Bellandi & Lombardi, 2012; Fliesher, Hud & MCG, 2010)
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