Process of Cluster Formation in China: A Case Study of a Garment Town

Abstract

In China industrial clusters consisting of small and medium enterprises have been proliferating in areas where private sectors have successfully developed. This study inquires into the process of forming a new industrial cluster and the roles of local and distant urban traders in the garment industry in China. We found that the local marketplace, where enterprise managers can easily purchase materials from and sell products to local traders, plays a critical role in stimulating the entry of new enterprises in the early stage of cluster development. As a cluster develops, however, entrepreneurial ability in producing high-quality products and marketing them to urban traders plays a more significant role.