Path Creation as a Process of Resource Alignment and Anchoring: Industry Formation for On-Site Water Recycling in Beijing

Abstract

Where and how new industrial paths emerge are much debated questions in economic geography, especially in light of the recent evolutionary turn. This paper contributes to the ongoing debate on path creation with a new analytical framework that specifies the formation of 'generic resources' in embryonic industries. It suggests that path creation processes are not only conditioned by pre-existing regional capabilities and technological relatedness, but also by the way firm and non-firm actors mobilize and anchor key resources for industry formation. Our framework elaborates on the early industry development phase, extending the focus on regional knowledge spill-overs in evolutionary economic geography literature with recent insights on industry formation dynamics from innovation studies. It understands early path creation as conditioned by four systemic resource formation processes-knowledge creation, investment mobilization, market formation and technology legitimation-that can be mobilized both from inside or anchored from outside the region. The use and value of the analytical framework is illustrated by a case study on on-site water recycling technology, based on interviews with 40 experts in three Chinese city regions. The findings suggest that, despite possessing the least favourable initial conditions, a sizable on-site water recycling industry developed only in Beijing. This is explained based on the specific anchoring process of the four key resources in the early development stage of the industry. Our results imply that evolutionary economic geography would profit from incorporating a broader set of variables than knowledge-based relatedness in explanations of regional industrial path creation.

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