Sustaining Competitiveness: Moving Towards Upstream Manufacturing in Specialized-Market-Based Clusters in the Chinese Toy Industry

Abstract

Western industrial cluster literature pays little attention to specialized markets (SMs) and the geographical agglomeration of distributors or sale agencies (SAs). This paper takes Linyin, Shandong, a famous commodity city in Northeastern China, as an example, to discuss the determinants that make SAs in SMs of the toy industry move towards upstream manufacturing. A structured questionnaire survey and subsequent interviews were carried out during 2011 and 2012 to collect data, and a Binary Logistic Regression Model was used to process the data. This paper looks from the perspective of global production networks theory, establishes an analytical framework that combines individual motivations of intra-firm coordination, local inter-firm relationships and dynamic cross-regional level relationships. The findings indicate that the expansion of SAs towards manufacturing allows them to sustain competitiveness under changing circumstances. The local inter-firm relationships within SM-based clusters not only makes it easy to obtain material and human resources with lower manufacturing costs, but also facilitates the access to production knowledge and technologies for an expansion of production scale. Cross-regional relationships with suppliers provide an informal channel for SAs to obtain skills, which is fundamental for an expansion into manufacturing. In addition, it is a preference for strengthening competitiveness rather than the simple pursuit of economic profit that encourages SAs to invest in manufacturing.

Introduction to the Special Issue on the Sustainable Asia Conference 2015

“…To determine the changing role of sales agencies (SAs) in the specialized market cluster (SMs), Zhu et al (2016) [13] used binary logistic regression, which starts with all variables in the regression equation, and then removes the independent variables that have no significant effect on the dependent variable according to the probability value of statistics derived from the maximum likelihood estimation .…”

“…Yiwu City in the Zhejiang Province and Linyi City in the Shandong Province are two typical examples of "commodity markets", situated in the north and south of China, respectively. Using Linyi City as the case study, Zhu et al (2016) [13] empirically tested the factors influencing the expansion of SAs from wholesale to manufacturing and on the scale of internal production with three kinds of determinants: individual motivations of entrepreneurial innovation, local agglomeration effects of SMs, and dynamic relationships with cross-cluster cooperation. The empirical results show that individual motivations of intra-firm coordination, regional inter-firm relationships, and cross-regional inter-firm relationships have a significant and positive impact on the upgrading of local industrial clusters to sustain local competitiveness.…”

Spatio‐temporal dynamics of technical efficiency in China’s specialized markets: A stochastic frontier analysis approach

“…A growing body of literature has started to point out that China’s industrial clusters and specialized markets have increasingly confronted challenges from globalization and market openness (Bellandi & Lombardi, 2012; Zhu et al., 2016). Wei et al.…”

“…They may pay less attention to the building of local kinship‐based social networks (Li, Bathelt, & Wang, 2012) and become more outward‐looking and open in firm management and market strategy (Wei et al., 2007). Both aforementioned cases not only reshape the developmental trajectories of industrial clusters, but also impact their related specialized markets, in terms of the relations between market sellers and buyers and the configuration of supply chains and production networks (Zhu et al., 2016; Zhu & Pickles, 2015). These cases have shown that globalization can enable the openness and adaptability of specialized markets, which in turn may improve their technical efficiencies.…”

“…A large number of specialized markets in coastal regions, in particular, have spatially expanded their branches in the country's central and western regions (Zhang & Ning, 2011). Some of these transplanted specialized markets have become less dependent on their original local clusters but more on globalized marketing/supply channels, financialization, and brands (Zhu, Huang, He, Li, & Ren, 2016). Many specialized markets, together with their production clusters, have been globalized (or delocalized) in function, relocated/expanded in geography, and diversified in industry, namely, undergoing a process of restructuring in a fast‐changing and transitional context (Zhu & Pickles, 2015).…”