A Study On The FDI And Economic Development From The Angel Of Industrial Cluster

Industrial clustering is the key source of a company's competitive advantages. Clustering of numerous enterprises will not only help to reduce production cost, but also build up a flexible framework of division of labor and bring about externality of knowledge innovation. Under the background of economic globalization, FDI often plays a significant role in the shaping of industrial clusters. Therefore, it is of vital importance to study the impact of FDI on the economic development of the host country from the perspective of industrial clustering.The main focus of this paper is as the following. (1) What is the internal motive and mechanism of industrial clustering? (2) What is the relationship between industrial clustering and FDI under the background of economic globalization? How shall the mechanism be understood? (3) What is the influence of the interaction between industrial clustering and FDI on economic growth of developing countries? The paper consists of the following sections.Chapter 1 is mainly on the literature review. Chapter 2 to chapter 4 is theoretical analyses. Beginning with dynamics of industrial clustering, Chapter 2 analyzes the mechanism of labor division and transaction cost in clustering economy, as well as innovation and externality in clustering. Chapter 3 extends the analyses to the situation in an open economy and concentrates on the correlation between FDI and industrial clustering against the backdrop of cross-border factor flows. A model depicting the relationship between FDI and industrial clustering is employed. Further analyses are then conducted on the effect of MNC's international division of labor on industrial clustering from the perspective of vertical specialization. Chapter 4 studies the relationship of industrial clustering, FDI inflow and welfare of the host country. After studying the impact of foreign capital inflow on capital accumulation of developing countries under the background of industrial clustering, the paper examines the effect of FDI on technological innovation and human capital accumulation, followed by analyses on the linkage between industrial clustering and industrial upgrading.Chapter 5 to 7 conduct empirical analyses with the example of Jiangsu province.