SCDigest Editorial Staff
Among the many economic and supply chain strategies China is pursuing is a concept known as “industrial clusters.”
The basic concept: economic growth is often most rapid when a cluster of many companies in the same basic industry develops within a fairly tight economic region, usually a city or metro area. One prominent US example: the high-tech Silicon Valley region in California.
The idea is that the close proximity of competing companies helps build related infrastructure, attracts talent, and pushes companies to compete and innovate. Additionally, the movement of many employees moving between companies results in knowledge transfer that, in total, pushes development of the industry along more than would occur if the same companies were more geographically dispersed.
Although the idea has been around for more than 100 years, the concept gained renewed currency in the book The Competitive Advantage of Nations by renowned Harvard business school professor Michael Porter. While most other global clusters developed naturally by luck or market forces, it is apparently a concept and philosophy being proactively embraced by the Chinese government. So says a recent report from the Wharton School of Business and the Boston Consulting Group.
For example, the Chinese government is orchestrating a cluster in the furniture industry in the city of Chengdu. It is just one of many more either currently being developed or in the planning stages (ship building, biotechnology, and many more).
Should Western Manufacturers Participate?
Western companies may be invited by some level of the Chinese government to bring production facilities or operations to a cluster. But should the offer be accepted?
“It’s a question I think about a lot,” says Benjamin Pinney, a principal in Boston Consulting Group’s Shanghai office. “There is no easy, right answer. It depends on who you are and the capabilities you want to tap into.
(Global Supply Chain and Logistics Article - Continued Below)