Local Government Entrepreneurship and Global Competitiveness: A Case Study of Yiwu Market in China

Abstract

While it is widely agreed that local governments played a critical role in infrastructure building and industrial development in China – as key factors in its “economic miracle” - the relationship between local government entrepreneurship and the development of specialized markets through which products made in China are marketed to buyers worldwide is not well understood. This paper focuses on the rapid evolution of what is now the world’s largest wholesale market – the Yiwu Wholesale Market for Consumer Goods (the Yiwu Market) in Zhejiang province - and the key role played by local government at different points in its formation, development and continual upgrading. The fact that a global commerce hub such as Yiwu Market arose in an area with no discernible natural competitive advantage indicates that many prevailing theories on competitive advantage in locational decision-making may have overlooked the central role played by local governments as catalysts for local economic development. Our analysis underlines that local government entrepreneurship can be a major source of competitive advantage for firms.