Industrial Clusters Affected By FDI And Network Governance Patterns

While industrial clusters are formed and developed, their governance patterns evolve gradually. In industrial clusters, firms aggregate along value chains. Studying industrial clusters from angle of global value chains is inevitable result of collaboration of regions and distributing of global industry. We should review network governance patterns of global value chains that industrial clusters integrating to study evolving process of industrial clusters. Dominant governance patterns of Chinese industrial clusters affected by FDI are transforming from strong relational networks to modular networks. The network governance patterns of global value chains these industrial clusters integrate present modular networks.The modular production network is a important industry innovation. Changes of industrial structures go with conformity of production in space. As level of world economy integration is improving, captive relational networks and independent industrial districts will be isolated in geography and space. The modular production network is an open system comparatively. As IT is handling widely and level of knowledge encoding and internationalize of production, industrial clusters basing on modular networks will play important roles in the bigger world production networks.Economic behaviors embed in social structures. Core social structures are social networks. Social networks industrial clusters insert will affect greatly on evolvement of network governance patterns. Basing on relational contract theory, the paper constructs a model that MNC play a nuclear role. Through the model, the paper interprets impact of institutional changes on changes of contract structure of the relational network. As social capital aggregates, cooperation order expands, cooperation scope enlarges and IT brings to use, intensity of ties in strong relational networks will decline. Cooperation scope of multinational corporations will go beyond intrinsic strong relational networks. They will construct modular networks.There are two modes FDI centralizes: whole ingoing and engrafting. Dongguan IT industrial cluster, Suzhou Taiwanese IT industrial cluster and Dongguan furniture industrial cluster behave as copy of infesting chains of foreign capital firms. Jiashanfurniture industrial cluster is the latter. FDI centralizing prolongs the former value chains. Whole ingoing industrial clusters locate in the labor-intensive segments of global value chains. They embed in the locality superficially. Now firms in Dongguan IT industrial cluster have show tendency of migration. Due to abundant human capital and superior investment environment, Suzhou IT industrial cluster shift to high value-added segments of value chains. Some foreign capital firms realize localization of high level and middle level manager. Local firms in Suzhou IT industrial cluster have join in cooperation networks of foreign capital firms. So foreign capital firms embed deep.Network governance structure of global value chains IT industrial clusters insert is modular networks. In global value chains, brand firms and contract manufacturers of America and Taiwan control the whole global value chains. Network governance pattern of Dongguan IT industrial cluster is modular network. Products of Dongguan IT industrial cluster chiefly are CD, mainboard and table computer. The value-added of these products is low. These products can be modularized highly. Relations between system firms and suppliers are unwound. Suppliers have no rights in the networks. In Suzhou IT industrial cluster, network governance pattern of system firms and standard component suppliers is captive relational networks. Network governance pattern of system firms and key component suppliers is captive relational networks. Because key components have high specifity, system firms must keep strong relational networks with them to assure supply.In Dongguan furniture industrial cluster, big multinational corporations play dominant roles. They construct complete working system. The governance pattern of Dongguan furniture industrial cluster is a modular network. In Jiashan furniture industrial cluster, the former governance pattern is equal relational networks. As Taisheng come, its governance pattern transform to a modular network.This shows that these industrial cluster present characteristics of modular networks more or less. As modularity in design, modularity in product, modularity in use and modularity in organization affects mutually and product characteristics of the industrial clusters differ each other. Their governance structures differ each other.