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Clustering Innovation: Regional Economic Development Path in
Jiaodong Peninsula1
ZHANG Ping1, WANG Weide2
1. School of Economics, Shandong Institute of Business and Technology, P. R. China, 264005
2. School of Traffic and Architecture, Beihua University, P. R. China, 132001
Abstract: Clustering innovation is an innovative organization, which enhances clustering
competitiveness and regional competition through competitive and cooperative innovation. Much study
on it has been done by domestic and foreign scholars. Industrial clusters in Jiaodong Peninsula, which
have a foundation as well as some urgent problems, is playing an important role in regional economic
development. Clustering innovation, which will promote industrial structure adjustment, reinforce
production interaction and increase economic development along with industrialization and
urbanization, is a regional economic development path in Jiaodong Peninsula.
Keywords: Clustering innovation, Jiaodong Peninsula, Regional economy
1 Introduction
Clustering innovation can be simply defined as technological innovation through clustering advantages.
It is an innovation configuration, which makes the region obtain more clustering and international
competitiveness through competitive and cooperative innovation. It creates clustering innovative
advantages and effects with specialization and collaboration by related firms or industries which sit
together. Much study on the theory of clustering innovation advantages has been done by domestic and
foreign scholars.
1.1 Theoretical study of foreign scholars on clustering innovation
Representatives on industrial clustering innovation are Economic Externality Theory of A. Marshall,
Industrial Location Theory of K. J. Button, Innovation Environment Theory of Groupement de
Recherche Europeensurles Milieux Innovalieurs (GREMI) as well as New Competitive Economy
Theory of M. E. Porter and etc. Study on industrial innovation are from various angles.
Location economist A. Button discusses the relationship of innovation and industrial cluster. [1]
1.1.1 There must be competition, which promotes innovation, between enterprises because of
geographical concentration.
1.1.2 Geographical concentration itself is helpful for more free information outspreading among
manufacturers, suppliers and customers. Considerable innovations are just the results of solution of
customers’ demand and enterprises’ supply.
1.1.3 Superior communication tools in concentration location accelerate the adoption of innovation by
the enterprises in the location.
Based on the definition of environmental innovation of GREMI, GREMI studies clustering innovation
from innovation environment and innovation network. They link spatial concentration with innovation
and stress the collective efficiency of regional innovation and collaborative effects of innovation
conduct. They maintain that cluster has superior advantages of large scale, specialization of auxiliary
industries, specialization creation and innovation of enterprises organization to single enterprise. It
owes to innovative environment that innovative enterprises concentrate in a location with respective
characteristics. Theory of innovative network pays more emphasis on interaction and interrelation
among enterprises in clusters and between enterprises and institutes concerned, which generates
endogenous creation and improves continual clustering innovation in enterprises. The effective
1
Research Fund: Natural Science Foundation of Shandong Province (2009ZR2009HL012).
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network of innovation is comprised of formal and informal communication and contact among
enterprises.
Professor Porter from Harvard Business School argues that enterprise cluster initiate from one or two
innovative enterprises which stimulate others’ growth in concentration location such as MCI and AOL
who lead the telecommunication cluster in Washington. D. C. Moreover, Fisher and Bergman outline
the advantages sources of clustering industries: external economies, innovative environment,
cooperation, competition and qwerty. [2] From empirical study, Saxenian proves that there are
innovative advantages among clustering industries such as high mobility of technician in Silicon Valley
is a main path of technological expansion in Silicon Valley, which largely promotes the capacity of
regional innovation. [3] Baptists and Swann maintain that cluster generates promotion in regional
innovation.
1.2 Theoretical study of domestic scholars on clustering innovation
Wang(2002) suggested that innovation in regional economy often stems from clustering industries.
There are not only enterprises and institutes that get pressure of innovation, but also stable and
cooperative mechanism of study and communication and progress. Cluster creates a cooperation course
for innovation of enterprises and organizations as well as advantages for individual and collective
innovation. Clustering innovation, which has advantages of stimulation, study, cultural atmosphere and
services, is an effective organization for technological innovation of enterprises especially small and
medium ones. Liu(2003) proposed that advantages of innovation in clustering industries is mainly
created in less transaction costs, value chain sharing, assets inter-complement, knowledge externality
and economies of scale. These institutes and famous scholars talk about the advantages of clustering
innovation from various angles such as external economies, the relationship of enterprises clusters and
innovation, growth course of enterprises clusters, innovation network and environment, sustainable
competition and their life cycle and etc. The paper maintains that clustering advantages realize the
combination of vigor of enterprises innovation and economies of scale of innovation from innovation
of single enterprise along with resources advantages of innovation scale of professional labor of
enterprises, public goods and services concerned in clustering in clustering industry which may
generates advantages of core ability, competition and innovation and etc.
2 Jiaodong Peninsula Regional Economic Development Status Quo
Shandong Peninsula is located in the economically developed areas in eastern China, including Jinan,
Qingdao which are two sub-provincial cities, and six cities of Zibo, Dongying, Yantai, Weifang, Weihai,
Rizhao. It has 22 cities, 14 counties in 30 areas, with a total area of 7.3 million square kilometers,
accounting for 46.6% of the total area of Shandong Province. Qingdao, Yantai, Weihai are also known
as Jiaodong Peninsula area. Jiaodong Peninsula area, gathered in the main advantages of resources and
advanced productive forces, is driving the economy and the province of Shandong unconventional,
high-speed, leap-forward development of the "leading" regions as well as the highest level of
developed, the greatest potential and the strongest economic region. Since 2003, the Jiaodong
Peninsula, becoming the popular place following the Pearl River Delta, Yangtze River Delta to foreign
and domestic enterprises. From the township and village enterprises, "every village fire, every
household smoking" of the decentralized industry structure coming numerous industry clusters like
"Planet around stars", industry cluster is the support of Jiaodong Peninsula which is highlighted in
Shandong economic map. Through years of development and construction, manufacture in the
peninsula is gradually developed into an effective platform for international industries transfer and
open economic development in Shandong province. In2009, GDP of Jiaodong Peninsula is 1,058.837
brillion yuan, accounting for 31.3% of GDP of Shandong Province which is 3,380.53 trillion yuan. In
which Qingdao has 489.033 billion yuan, Yantai City, 372.868 billion yuan, 196.936 billion yuan in
Weihai City. It can be said that industrial clusters is a powerful vehicle of regional economic
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development and core power of regional economic development as well as the pocketbook of all
levels of government finances and economic growth points.
Industrial clusters in Jiaodong Peninsula, which have a solid foundation and part of which development
have been on a higher level, is playing an important role in regional economic development with
fundamental function of clusters. However, compared to industrial clusters in developed areas, there
are many urgent problems which are unreasonable allocation of resources, low level relationship of
enterprises and technology, weak competition of industries as a whole. The issues will hinder the rapid
development of industrial clusters and even may make the momentum of development of industrial
clusters tend to be reversed if not handled well.
3 Main Issues in Regional Economic Development in Jiaodong Peninsula
Industrial clusters in Jiaodong Peninsula are in the embryonic and developing period with many
evident weaknesses to solve. In addition to other reasons of history, economy, culture and region and
etc, Industrial clusters in Jiaodong Peninsula still have some issues.
3.1 The environment for development is imperfect, which has adverse factors for the growth of
industrial cluster
In promoting the development of industrial clusters and the whole economic development, the
government plays a leading role in ensuring the market mechanism in the process of economic
operation and the allocation of resource. However, there are some parts of Jiaodong Peninsula, mainly
depends on land management and policy incentives of various enclosure investment, taking attracting
investment as its main function of the development of industrial clusters, and in the concept of
industrial clusters based on local characteristics of the industrial structure, construction intermediary
service system, the establishment of workforce education and training institutions, etc., the lack of
comprehensive planning and effective action. Meanwhile, some localities also eager to build the
so-called local brand names, resort to various administrative measures Destructive Enthusiasm, but
they ignore the inherent laws of the formation of industrial clusters, are not good from the
specialization and market segments that opportunity, training of local economic characteristics. Unable
to provide a sound development environment, leading to industrial cluster inadequate supply of public
goods, and many related industries and the lack of support for cluster industries, the lack of effective
social service system support, hindering the further development of industrial clusters.
3.2 The low level industrial clusters are not able to obtain sustainable competitive advantage
On the view of industrial clusters in Jiaodong Peninsula as a whole, most clusters are immature. Main
features are that Most of the cluster a competitive advantage based on low-cost, low prices, especially
on the basis of cheap labor, individual, small-production family enterprises occupy a large proportion,
in addition to some key leading enterprises, not only the process generally relatively backward
equipment and lack of skilled workers, technical level is not high. Strong competition in Qingdao City
of traditional industries of textile and garment industry cluster, for example, although the start to the
high-end development, but is not yet as advanced as the fashion in Paris, France or Italy as the cluster
of high-grade garments cluster. Can not meet the needs of low-cost changes in industrial structure, and
can easily lead to vicious competition, resulting in clusters recession. From the demand perspective,
the industrial cluster of workers and peasants to labor-intensive processing industry, so long standing
problem of insufficient domestic demand, these companies want to expand market share, more difficult.
From the supply perspective, the labor-intensive industry, low barriers to entry, resulting in an
increasingly competitive, and production cost competitiveness between enterprises based mainly
inevitably to frequent price wars, a serious impediment to the overall development of the cluster.
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3.3 Weak capacity of self-innovation is difficult to make the enterprise bigger and stronger
Because the lack of high-quality talents, imperfect industry allocation, inadequate supply of public
goods and other reasons, enterprises lack talents of self technology innovation, assets system and
environmental basis with immature innovation system of clusters in Jiaodong Peninsula. Most
companies do not own the core technology, but remain at a low level of reciprocating production, poor
ability to resist risks. R & D capability is not only weak, but the basis of technological innovation as
the low level of labor skills, many companies there is a "first class equipment, second-rate management,
third-rate products," the phenomenon. Low starting point in most enterprises, small-scale and
widespread low-level repetitive and excessive competition, the industrial division of labor between and
within clusters and specialization must be limited. In addition, the industrial clusters in the pursuit of
enterprises of different degrees, "small and complete" the tendency, not only has the potential to affect
the growth of large enterprises, but also weakened the profitability of small enterprises and
development of space, impeding the extension of industrial chain, threatening the Clusters of
self-development and upgrading of competitiveness clusters. In short, the loss of creative power of the
industrial cluster is impossible to maintain the sustainable development capacity, the cluster can not
break through competitive enterprises bigger and stronger. Keep people lack reasonable business,
employment mechanism. While low labor costs are Jiaodong Peninsula, the cost advantage of
industrial clusters, but this cost advantage is not suitable for senior personnel within the enterprise,
professionals, internal human mechanisms causing unreasonable senior technical personnel, the
outflow of professionals.
4 Clustering Innovation: Development Path of Jiaodong Peninsula Regional
Economy
4.1 Promoting structural adjustment of industries in Jiaodong Peninsula
Clustering innovation by raising product, industry turnover, prompting a number of emerging and
growth industries continue to rise, some of the existing status of the industry declined, or preliminary
been eliminated and transferred to other regions, thereby promoting the industrial structure update
Jiaodong Peninsula. Clusters and the promotion of innovation not only caused the upgrading of the
product, but also changed the induction and orientation of the consumers consuming demand, leading
to regional changes in consumption structure. Changes in consumption structure of production
activities not only guide the promotion of regional industrial structure adjustment, but also instructions
on the role of business and trade activities, lead and facilitate regional trade structure changes.
4.2 Strengthening interactive effects of products in Jiaodong Peninsula
Companies through joint use of public facilities to reduce the spread of local additional investment to
increase by industry to achieve the spatial agglomeration of similar enterprises in increasing the overall
size of the external economies of scale generated by specialized division of labor among enterprises
access to external economies of scope. Positive feedback mechanism, where once the industry cluster
in certain areas, the external economy will become a new business to choose the location of the driver,
this self-reinforcing mechanism to promote greater concentration outside the body for further economy.
There are also conducive to professional depth. Clustering Innovation for the cluster of enterprises
specialized division of labor. Specialization and division of the interests of the early writings of
economist Adam Smith have been especially emphasized. Smith said: division of labor is the core of
economic growth. In reality, the clustering innovation greatly facilitates the business and professional
cooperation between enterprises to significantly reduce the cost and enhance international
competitiveness of the region. When the Italian manufacturer of furniture from a single company a
complete product transition to a single company only completed two processes together, specialization
not only reversed once the original furniture industry slump, but also to the Italian furniture industry to
become internationally international competitiveness of the richest in the industry.
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4.3 Pushing forward industrialization and urbanization in Jiaodong Peninsula
Industrialization and urbanization and clustering innovation are inseparable. Clustering Innovation can
lead to the town and attract small businesses gather, share infrastructure, thereby contributing to the
factors of production, including labor, including the continued shift from agriculture to industry to
accelerate the industrialization process; the same time, industry cluster itself is the process of
urbanization, promoting the construction of infrastructure, transport, communications and information
modernization, urban development has provided financial, human, industry support, and promote the
development of tertiary industry and market prosperity. Industrialization also contributed to the
development of the cluster, and enhance the regional economy of scale, promote the natural formation
of the city, improve the regional international competitiveness, promote the industrialization process.
Cluster development to promote the rational flow of rural surplus labor and optimize the configuration,
will gradually ease the problem of long-term employment, accelerate our long-standing and can be
extremely difficult transformation of the dual economic structure, will continue to improve the region's
per capita income, improve region's international competitiveness.
4.4 Promoting economic growth in Jiaodong Peninsula
Clustering innovation has spawned many new products and services to meet the people's income and
standard of living higher level after the demand for consumer goods. Industry clusters for more
participants to enter and open new markets and enhance market competitiveness and the evolution of
the new market structure. Meanwhile, extending from the industry chain and inter-industry cost
savings resulting from consolidation, a large number of enterprises has greatly added to its value,
which will ultimately increase revenue and by lower prices for consumers. Meanwhile, clustering
innovation requires a lot of senior talent, personnel training and investment in human capital has
significant economic effects of the double is to a certain level of economic development to promote
regional economic cycle, after the booster, is itself a human capital investment have good labor market
prospects of senior personnel production process itself can stimulate an increase in employment and
labor productivity, human capital spending as a driving force of economic operation of the final in the
modern economy can greatly stimulate production growth, thus contributing to regional economic
development and regional economic growth.
4.5 Enhancing international competitive advantages in Jiaodong Peninsula
Clusters form through corporate gathering, internal through forward, backward vertical linkages to
form the vertical integration of large enterprises like the production process, and by the level of
cooperation and competition among enterprises, promote innovation cluster is beneficial improve the
overall efficiency and competitiveness, not only in terms of cost, price, marketing has certain
advantages in international competition, and similar products of industrial clustering, products
differentiation and diversification of function also has certain advantages in international competition,
promoting the regional brand building. Meanwhile, the formation of industrial clusters of external
barriers maintains a competitive position; internal promotion of the professional market, standardize
competition and cooperation between enterprises in the cluster, and promote industrial development
within the region. In China, the economy is relatively developed provinces cluster innovation is
achieved by the great economic success. Is a typical, Zhejiang's industrial clusters in the textile,
electrical, hardware, household commodities, and many other industries have achieved a competitive
advantage.
5 Conclusion
Based on the theoretical study of foreign and domestic study, the paper proposes that the path of
developing Jiaodong Peninsula regional economy is clustering innovation after analyzing status quo
and existing problems in Jiaodong Peninsula regional economy. Clustering innovation will promote
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industrial structure adjustment, reinforce production interaction and increase economic development
along with industrialization and urbanization in Jiaodong Peninsula regional economy.
References
[1]. Tang Ming, Zhang Tinghai. Innovative Advantages of Industrial Clusters and Efficiency
Improvement of SME Clusters in China, Economy and Management, 2004,(9) (in Chinese)
[2]. Feser, E. Bergman, E. National Industry Cluster Templates: A Framework for Applied Regional
Cluster Analysis. Regional Studies, 2000,34(3)
[3]. Saxenian, L. Regional Advantage: Culture Competition in Silicon Valley and Route 128. Boston:
Harvard University Press, 1994
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