Formation of FDI clustering - a new path to local economic development? The case of electronics cluster in Qingdao City

Abstract

This paper investigates the clustering of Chinese electronics manufacturers, both large and small, alongside established foreign producers in Qingdao, North China. It examines how the supplier-buyer linkages between foreign invested enterprises (FIEs) and local firms has driven the development of a successful electronic industry cluster around development zones established by the local authority, underpinning the success of the large domestic firms both at home and abroad. We also analyze how FIE’s collaboration with local firms foster local economic development in Qingdao. By integrating the theoretical perspectives of hub-and-spoke model from economic geography and flagship-and-five partner’s model in the science of strategic management, we develop our own theoretical lens to investigate the inter-firm network between the FIEs and local firms. The secret of the success of the Chinese electronic producers lies in their ability to drive, rather than being subordinate to, this network.