Does Spatial Clustering of Foreign Direct Investment Foster Global Production Networks? The Case of Qingdao, China

Abstract

This article examines how spatial clustering of foreign direct investment (FDI) can foster a global production network (GPN). The cluster concept, in general, stressed inter-firm relations between local and regional firms while neglecting global–local linkages in the spatial context. In contrast, GPN focuses on the advantages of international production organization and governance structure but underestimates regional or localized channels of production arrangement. By integrating the conceptual framework of spatial clustering of FDI and GPN, this paper provides empirical evidence of various channels to knowledge and innovation transfer between domestic firms and foreign-invested enterprises. This paper demonstrates that the different types of linkages formation are key determinant factors for establishing cluster through contributing to local economic development.

Acknowledgements

The author is grateful to two anonymous referees for insightful and constructive comments on improving an earlier version of the paper. All remaining errors remain the responsibility of the author. This work was supported by a grant from the Kyung Hee University in 2007 (Khu-20071380).

Notes

Italic emphasis is added by the author.

For instance, when local second- or third-tier suppliers receive the purchasing order from FIEs, they are also provided with component specification which contains detailed information of the component. Manufacturing the component allows second- and third-tier suppliers to achieve the technology which is finally utilized for the final product by local large firms.