An Institutional Research On The Evolution Of Industrial Cluster

The regionalization and localization of increasingly global economy have drawn extensive attention among academics and industries. In light of this development, considerable amount of studies concerning industrial clusters, which is a key governmental strategy for economic development, have been published by economists.This dissertation argue that industrial clusters are evolution-adaptive systems consisting of geographical element (industrial agglomeration), organizational element (industrial complexes) and cognitive element (the carrier of regional innovation and collective brand).It's our purpose to take Aoki's institutional perspectiv(eAoki, 2001)and analyze the evolution of industrial clusters with the help of game theory and the equilibrium of games. Institutions determine the behavior set of the firm, and institutional changes determine the progress of industrial clusters. The change of game rules from cost competition, speed competition to technological competition resulted in the evolution of the firm from regional agglomeration to regional competition and cooperation, regional brand innovation (i.e. the necessity of the evolution of industrial clusters); The institutions of network-based firm in game equilibrium and organized market institutions make the above evolution possible (i.e. the practicability of the evolution of industrial clusters). With the support of the game equilibrium, industrial clusters need to adapt themselves to the changes of game rules.In order to analyze the evolution from the institutional perspective, we draw two comparisons: one is to compare the intra-firm division to inter-firm division within an industrial syndicate, the other is to compare the homogeneous neoclassical"geographical space"to the"ecological space"as the carrier of regional innovation and brands.Such institutional analysis can not only allow us to clarify some key concepts concerning industrial clusters to expose their nature, but also to offer theoretical explanation to the questions of"the paradox of location","the dilemma of cluster"and the boundary of industrial clusters. The theory of"death of distance"developed by O'Brien and Cairncross is actually the modern version of the neoclassical concept of location. They identify location as homogeneous and geographical. Even when spatial differences are considered, they only attribute it to the differences in the quality of the key factors, which they believe will eventually be"eliminated"by technological progress and market competition. Thus they predict the"significance"of the"insignificant"concept of location will naturally"cease to exist"under the impact of information technology, WTO regulations and globalization. Unlike this neoclassical opinion, Ohmae,Coyle,Krugman,Porter,Scott,Fujita and Venables deem"the significance of location"differently . They view regions as ecological space and stress the heterogeneity of the"second nature"of regions and their unique role in knowledge production and nonlinear innovations by means of face-to-face communication. They refer to industrial clusters as the source of regional economic competitiveness.Tt is the dissertation's belief that O'Brien and Cairncross emphasize the"natural quality"and"physical quality"of a location, while Ohmae,Coyle,Krugman,Porter,Scott,Fujitaand Venables stress the"human quality"and"social quality"of a location. O'Brien Cairncross'idea of"the death of distance"is fundamentally"the death"of the geographical distance in the era of information technology, not the death of"organizational distance"or of"psychological distance"."the paradox of location"is simply a result of diverse perspectives on the same subject and not contradictive in nature. It is no surprise to see"the paradox of location"in light of the coexistence of"the death of the geographical distance"and"the revival of the organizational and psychological distance".The criticism raised by Feser,Bergamn,Pandit et al,Martin Sunley on industrial clusters, and the regional differences in developing of industrial clusters, a.k.a the"the dilemma of cluster", can be explained from two aspects.Firstly, industrial clusters are the unification of"geographical distance","organizational distance"and"psychological distance". They are not just an enclosure in the geographical sense (i.e. industrial agglomeration), but also an evolution-adaptive system. Secondly, the incompleteness or lack of institutions will damage the dynamic advantages of industrial clusters. It is vital both in theory and in practice for cluster theories to answer the basis question of the boundary of industrial cluster. In our point of view two questions need to be raised in order to discuss the boundary of industrial cluster: first of all, how to define the boundary of industrial cluster? Secondly, what factors determine the boundary of the industrial cluster?We argue that, industrial cluster being the combination of industrial agglomeration, industrial complexes and industrial innovations, its boundary should extend to cover geographical boundary, organizational boundary and cognitive boundary; If institutions are the foundation of the evolution of the industrial clusters, it ought to be considered as the deciding factor in defining the boundaries of industrial clusters. Current discussions on industrial clusters mostly concentrate on the geographical boundary and studies on the other two types of boundaries are rather scarce. To confuse industrial clusters with industrial agglomerations will inevitably result in mistaking the geographical boundary as the only boundary; Researches on the definitive factors of the boundary mostly involved cluster cost and gains, rather than on the institutional level.In conclusion, our industrial cluster theory has important implication for policy making, given the fact that industrial clusters are an evolution- adaptive system, institutions are the fundamentals for cluster evolutions, institutions construction should be the most significant behavior selection for government and cluster firm alike.