Restructuring Industrial Districts, Scaling Up Regional Development: A Study of the Wenzhou Model, China

Abstract

The Wenzhou Municipality in Zhejiang Province is spearheading China' marketization and development of private enterprises. Its successful development trajectory, centered on family‐owned small businesses embedded in thick local institutions, resembles Marshallian industrial districts (MIDs). However, with China' changing institutional environment and intensifying competition, Wenzhou has been facing challenges. Since the late 1980s, Wenzhou has gone through two major rounds of restructuring (from family enterprises to shareholding cooperatives to shareholding enterprises), that have included four major types of strategic response: institutional change, technological upgrading, industrial diversification, and spatial restructuring. Firms in Wenzhou have gone through localization and delocalization, and locational choices reflect the dual destinations of globalizing cities and interior cities. The formation of new firms and clusters has been accompanied by mergers, acquisitions, and the emergence of multiregional enterprises (MREs), some of which have relocated their headquarters and specialized functions to metropolitan areas, especially Shanghai and Hangzhou. More recently, Wenzhou' growth has slowed, leading some to question the sustainability of the Wenzhou model. We argue that Wenzhou' development is in danger of regional lock‐ins—relational, intergenerational, and structural. Wenzhou' experience challenges the orthodox concept of MIDs and calls for “scaling up” regional development.

Industrial relocation of Hong Kong manufacturing firms: towards an expanding industrial space beyond the Pearl river delta

“…The relocation of Hong Kong manufacturing firms firstly complements the research on the relocation of MNEs through a case study of the relocation of MNEs at the regional scale within countries (Brouwer et al 2004;Wei et al 2007). In addition, although the relocation of Hong Kong manufacturing firms spatially resembles the flying geese model, the underlying dynamics are different particularly referring to the regional policies and local institutions.…”

“…One of the explicit responses to the aforementioned changing institutional environment is to relocate outside the PRD, leading to the so-called spatial restructuring of the industrial districts in the region. As Wei et al (2007) proposed, the enterprises in Wenzhou are being transformed into Multi-regional Enterprises (MRE), Hong Kong manufacturing firms are also forced to adopted new location strategies according to the dynamic changes of policies and institutions.…”

Divergent growth trajectories in China’s chemical industry: the case of the newly developed industrial parks in Shanghai, Nanjing and Ningbo

“…These vary substantially within the Yangtze Delta region and find expression in different local traditions and business cultures. The province of Zhejiang with Ningbo, for instance, developed a network of entrepreneurs that started up many successful ventures involving substantial risks, especially since the Chinese economy opened up (Wei et al 2007). These businessmen formed close guanxi networks through which they were able to split risks but also mobilize large amounts of private capital for economic projects.…”

“…This would lead to new opportunities for collaboration, as well as competition, between the chemical industry parks in both cities. Although the NCIZ was not as modern and well-developed as the SCIP, it had considerable growth potential especially because of its new link with Shanghai and the entrepreneurial local business culture related to the Wenzhou business model (Wei et al 2007). In terms of research linkages, plans to support or create such linkages at the regional level did not exist.…”

“…• In the early 1990s, with an increasing market orientation and reduction of state control in economic development, another business model, the Wenzhou model, became very successful in the Zhejiang province. It is characterized and driven by successful local private enterprises, associated firm formation processes and a reduced role of the state (Wei et al 2007;Ong 2007). This model strongly shaped the growth trajectory of Ningbo.…”