In both developed Western nations and developing countries, economic growth was based on the development of industrial districts, which were much more organized and institutionalized in modern Japan than economist Alfred Marshall had described. Local trade associations played an important role in enhancing Marshallian externalities, arising from the ease of imitating improved ideas and transacting unfinished products among clustered enterprises by facilitating joint actions in the supply of public goods, such as through the creation of local district brands and through the efficient provision of business information. These activities were clearly beyond the scope of agglomeration economies. This article examines the case of Kiryu, one of the best-known silk weaving districts in Japan.

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This paper explores the institutionalisation of technical education for the indigenous Japanese weaving industry and studies the necessity of such education for traditional weavers operating in the modern economy of Meiji Japan. It focuses on how these institutions influenced the government's subsequent institutionalisation of formal technical education. Differing from the state's industrial modernisation programmes that were led by the establishment of technical high schools and engineering universities, trade associations played a major role in the institutes in the weaving districts. The paper also highlights the importance of grass roots activities in the successful adoption of new Western technology among locals.

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The Kiryū silk weaving district, located 200 kilometres north of Tokyo, has been one of the most advanced silk weaving districts since the Tokugawa period (1603–1868). In the 1870s, it was a pioneer in the export of silk products from Japan and the leading producer of traditional Japanese kimono and obi (sash belts) for domestic markets. This study finds that the developmental process of the Kiryū district from 1895 to 1930 can be divided into at least two phases, that is, one of gradual growth based on an inter‐firm division of labour using hand looms and one of dynamic development based on the factory system using power looms. Weaving manufacturers‐cum‐contractors pioneered gradual growth by sub‐contracting with rural village out‐weavers and with a number of specialized, supporting firms in Kiryū town, and grew faster than factory production systems. New joint‐stock firms played the role of genuine entrepreneurs by introducing power looms, thereby realizing significant economies of scale. During this new phase, the weaving manufacturers‐cum‐contractors survived and also introduced new production systems.

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The production of habutae, a simple silk fabric, expanded rapidly between 1890 and 1918 in Japan's Fukui Prefecture, with large exports to Europe and the United States. The production of habutae, initially woven by hand, was labour intensive, but it gradually became capital‐intensive after the introduction of power looms. Production and export of this fabric declined precipitously from 1918. In this paper, we attribute the rise and then fall of Japan's production and export of habutae to its changing comparative advantage, which is associated with shifts from labour‐using to capital‐using production technology initiated in the United States.