Insertion into Global Capital Networks: An Alternative Way for the Upgrading of Industrial Clusters

Abstract

Globalization has provided opportunities for industrial clusters to upgrade via inserting into the global value chain or global production networks both actively or passively (Coe et al., 2004; Coe et al., 2008; Gereffi et al., 2006). Previous theorizations and empirical studies on such phenomena have tended to be preoccupied with the production side while neglecting others channels through which local industrial clusters can upgrade. Financial globalization and the ubiquitous movement of capital provide new avenues for firms to access capital and capital to access firms. In this study, it is argued that insertion into the global capital networks (GCN) is an alternative way for regional clusters to upgrade. Insertion into GCN does not only bring about money from globe, but also it introduces external knowledge and information for the firms and the region which works as a global pipeline (Bathelt et al., 2004). The paper discusses upgrading through insertion into GCN in the case study of a food processing industrial cluster from Shandong’s Linyi city in China. This cluster has successfully upgraded since two leading firms within the cluster became listed on the Singapore Stock Exchange in the early 2000s. Connection of the firms to GCN brought benefits beyond the money raised from listing on the stock exchange. With new board members and senior managers joining the firms and internationalization, the leading firms improved their corporate governance in many perspectives, which would have been impossible without the overseas listing. Moreover, the firms raised their global visibility and enhanced their reputation which has significantly strengthened their product competitiveness in the marketplace. The case study shows the potential for industrial upgrading through insertion into GCN in Linyi’s food processing industrial cluster.