building engines for growth.pdf

How Do SEZs and Industrial Clusters Drive China’s Rapid Development? 5zones. In China, SEZ normally refers to seven specific zones: Shenzhen,Zhuhai, Shantou, Xiamen, Hainan, Shanghai Pudong New Area, andTianjin Binhai New Area, which will be discussed later. In this book, however,the term is used in a broad sense; that is, it refers not only to theseven special economic zones (hereafter referred to as comprehensiveSEZs) but also to China’s economic and technological developmentzones (ETDZs), free trade zones (FTZs), export-processing zones (EPZs),high-tech industrial development zones (HIDZs), and the like.Industrial ClustersAn industrial cluster is generally defined as a geographic concentration ofinterconnected firms in a particular field with links to related institutions.Often included in this category are financial providers, educational institutions,and various levels of government. These entities are linked byexternalities and complementarities of different types and are usuallylocated near each other (World Bank 2009). Increasingly, both developedand developing countries use cluster initiatives to promote economicdevelopment, a concept supported by the development community atlarge. Popularized through such works as The Competitive Advantage ofNations (Porter 1990, 1998) and others (Schmitz 1992, for example),clusters have been viewed as a mechanism for enabling firms to join theirefforts and resources and work with government toward greater regional,national, and international competitiveness (World Bank 2010). Do clustersfoster innovation? Nadvi’s collective efficiency model (1999) highlightsfour key variables that determine competitiveness in enterprise clusters:market access, labor-market pooling, intermediate input effects, andtechnological spillovers. Nadvi (1997, 1999) and Meyer-Stamer (1998)recognize that clustering offers unique opportunities for firms to takeadvantage of a wide array of domestic links between users and producersand between the economy’s knowledge sector and its business sector. Suchlinkages have the potential for stimulating learning and innovation.Clusters, however, are not necessarily innovation systems (McCormickand Oyelaran-Oyeyinka 2007), and innovative clusters are not necessarilyhigh-technology clusters. Mytelka (2004) also emphasizes the role ofclusters in promoting the kind of interactivity that stimulates innovationbut cautions that the geographic proximity of actors does not automaticallylead to learning and innovation. However, there is a growing recognitionthat cluster initiatives could be an effective means for producing anenvironment conducive to innovation (Andersson et al. 2004). All thesearguments can find their roots in different cluster examples.