Cluster Strategy and Supply Chain Management: The

Benchmarking: An International Journal Cluster Strategy and Supply Chain Management: The Road to Competitiveness for Emerging Economies AMIR IKRAM, Qin Su, Muhammad Fiaz, Ramiz Ur Rehman,

Article information: To cite this document: AMIR IKRAM, Qin Su, Muhammad Fiaz, Ramiz Ur Rehman, "Cluster Strategy and Supply Chain Management: The Road to Competitiveness for Emerging Economies", Benchmarking: An International Journal, https://doi.org/10.1108/ BIJ-06-2015-0059 Permanent link to this document: https://doi.org/10.1108/BIJ-06-2015-0059

Downloaded by Xi'an Jiaotong University At 06:58 28 May 2018 (PT)

Downloaded on: 28 May 2018, At: 06:58 (PT) References: this document contains references to 0 other documents. To copy this document: [email protected] The fulltext of this document has been downloaded 4 times since 2018* Access to this document was granted through an Emerald subscription provided by emerald-srm:367413 []

For Authors If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information.

About Emerald www.emeraldinsight.com Emerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services. Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. *Related content and download information correct at time of download.

1

Cluster Strategy and Supply Chain Management:


The Road to Competitiveness for Emerging Economies

Abstract Purpose – The paper highlights the characteristic role of specialized markets and traders in the internationalization of emerging economies by examining the linkages between supply chain management and industrial clustering in China. Design/methodology/approach – Multi-method approach was employed as primary data was collected from a case study of Shaoxing textile cluster, and was supplemented with secondary data to triangulate the findings. The proposition that competitive advantages of industrial clusters facilitate effective supply chain management was explored. Findings – The authors reveal that China’s cost advantage is manifested in the entire value chain. The provision of business friendly amenities as a result of synergetic benefits of vertical and horizontal integration of supply clusters promotes competitiveness of SMEs and region as a whole. Moreover, specialized markets and international traders found to play significant role in sustainable cluster development. Research limitations/implications – As with fieldworks and case studies, generalization should be drawn with care. Systematic synthesis of relevant case studies is recommended. Practical implications – The study endorses the construction of local supply chains and suggests implementation of cluster strategy by focusing on environment-specific execution of triple helix model. Originality/value – The article elaborates the linkages between cluster theory and supply chain management both within cluster and between interspersed clusters. It also explains how specialized markets and global players are enabling concentrated supply networks. The paper recommends extension of ‘Triple helix + 1 model’ by making local community part of the underlying framework. Keywords China, Industrial cluster, SMEs, Specialized markets, Supply chain management, Triple helix Paper type Research paper Introduction Globalization asks for ideal horizontal and vertical relationships, regardless of location (Blakely, 2001). However, cluster strategy defies this view and calls for capitalizing on cost advantages accruing through geographic proximity (Porter, 1998). China’s low-cost competitive advantage further endorses the implications of industrial clustering; though the supremacy is often attributed to low labor cost, but prevalence of numerous industrial clusters refutes the notion that low-labor cost is the sole source of competitive advantage (David, Dorn and Hanson, 2016). In fact, the supply chain in China is lurching because of rising real wages. Though labor cost increased more than 5 times from the late 1970s to 2012 (Li et al.,


2

2012) and cost of other factors of production is also increasing (Cuñat, 2013), still China’s competitive advantage is unshakeable and is the most sought after global sourcing destination. Several studies and popular media reports attributed the idyllic competiveness to indigenous industrial clustering (Bellandi and Lombardi, 2012; Ruan and Zhang, 2009; Wu et al., 2006). China is not naïve to industrial clusters; Zhejiang province accommodates as much as 519 SME clusters and majority of these specialty cities belong to textile and apparel sector (Chen and Cao, 2006; The China Analyst, 2010). Our study focuses on Shaoxing textile cluster, located in Shaoxing County [1] of Zhejiang Province, China. The decision to consider this particular textile cluster is not an intuitive one. China dominates the world’s textile business and is the largest exporter of textile and apparel (UN Comtrade, 2013). Hence the textile sector is an exemplar of the success of Chinese government’s attempt to maneuver development indirectly through local planning rather than complete state control (Barboza, 2004). It is often said ‘To know world textile through China is to know Chinese textile through Shaoxing’ (Rupp, 2010). Moreover, it serves as a typical case of a natural cluster formed from the bottom up; whereby emergence of cluster attracts the attention of local government and prospective entrepreneurs. The private sector is thriving and government is also exercising macroeconomic control in regional development since pursing opening up policies of late 1970s. Though ‘Shaoxing model’ is regarded as somewhat vague (Keane, 2013), the study endeavors to pick up the pieces and derive pragmatic implications. The specific objection of the research is to offer benchmarking practices for the widely prevalent traditional industrial clusters in the developing regions. In order to realize the primary objective, the paper seeks the answers of following three research propositions: first, how competitive advantages of industrial clusters benefit the textile industry and what entities are contributing in its internationalization? Second, how cluster characteristics help in deploying efficient supply chain management and what lessons can be learnt from concentrated supply networks? Third, the applicability of the triple helix model to traditional industries of China, such as textile sector, has also been explored. The paper discusses the relationship between Porter’s cluster framework and supply chain management by conducting a case study. Considering the provision of core segments of the value chain and internationalization, the context of Shaoxing Textile Industrial Cluster gives a distinctive perspective to analyze the implications of supply clusters and derive dynamic benchmarking practices involving emerging markets. The rest of the article is organized as follows: the paper opens with an overview of the relevant literature on cluster strategy, supply chain management and implications of their integration with specific reference to China. Next, we discuss the research methodology and the rationale for deploying case study approach. Subsequently, case study is presented: brief overview of the region is followed by case analysis of the focal company. We then delve into the essence of framework to illustrate the integration of textile supply chain and industrial cluster, in addition to underline the significance of support agencies, specialized markets and traders’ network. Following that, case examples from a representative textile company are presented to highlight the importance of Porter’s cluster (1998). Conclusions, implications for entrepreneurs and policy makers, and recommendations for further study bring the discussion to a close.

3


Literature Review Industrial Cluster Theory Marshall (1920) suggested that localization economies bring about labor market pooling, provision of industry specific goods at lower cost and knowledge spillover. However, the notion of industrial clustering was popularized by Michael Porter (1990), “the geographic concentration of interconnected companies and institutions in a particular field”. Long and Zhang (2011) describes it as a phenomenon in which a large number of highly interconnected and specialized firms are located within a well-defined geographic region. Literature wildly endorses the benefits of industrial clusters (Engel and del-Palacio, 2009; Porter, 1998; Sonobe et al., 2002). Industrial clusters not only contribute to new business formation but also a play significant role in the survival of start-ups. (Delgado et al., 2010). Ikram and Qin (2015) conducted cross-sectional investigation of the ready-made garments SMEs of Lahore and suggested that localization economy, as compared to urbanization economy, is more facilitative for entrepreneurial growth. Industrial clusters enable businesses, especially SMEs to have the advantages of scale without going into the intricacies of vertical integration (Bozarth et al., 2007; Porter, 2000). The following pertinent advantages of cluster strategy have been emphasized by numerous studies: i. Knowledge spillovers. The outcome of ‘knowledge spillover’ is often attributed to Marshall (1920). When personnel of proximate organizations interact informally, intellectual overflow expedites innovation (Chen and Cao, 2006). ii. Creation of complementarities and Emergence of Triple Helix model. In addition to enabling free flow of information, industrial clusters encourage government and academia to collaborate with enterprises to boost regional development (Bozarth et al., 2007; Ruan and Zhang, 2009). The interaction of university, industry and government prompts the emergence of neo-institutional policy framework of triple helix, also referred to as UIG model of growth (Leydesdorff, 2013). Though majority of the empirical research on triple helix model has been devoted to developed countries of North American and European Union region (D’Este and Patel, 2007; Leydesdorff and Meyer, 2010), the tripartite model exhibited its efficacy for emerging economies as well (Ikram et al., 2016; Tang et al., 2014). However, caution needs to be observed while applying western validated triple helix model to developing economies and regional dynamics should be taken into consideration (Torres et al., 2011). Case study of Chinese nanotechnology firm by Tang et al. (2014) reveals spin-in version of triple helix model whereby enterprise takes initiation and draws in university capabilities to support its technological development. iii. Accelerating innovation. Industrial specialization and institutional support in a given location enhances opportunities for innovation and entrepreneurial progression (Long and Zhang, 2011). The inherent nature of competition in industrial cluster prompts enterprises to upgrade their production quality (Fleisher et al., 2010), while cooperative environment leads to economies of scale and competitiveness of SMEs (Engel and del-Palacio, 2009; Porter 1998). iv. New business creation and regional development. Provision of ready access to suppliers, employees and basic inputs lowers the cost of entry and risk of failure, and thus

4


enhances the success prospects of start-ups (Fleisher et al., 2010; Porter 1998; Ruan and Zhang, 2009). Long and Zhang (2011) suggests that number of SMEs is growing faster in clustered areas than in non-clustered regions. Moreover, linked clusters in neighboring regions are found to be positively associated with entrepreneurial development (Delgado et al., 2010). Supply Chain Management (SCM) and Cluster strategy SCM is the management of upstream and downstream relationship in order to derive superior customer value at minimal cost (Christopher, 1998). Though there has been substantial increase of literature on SCM since mid-1980s (Stock and Boyer, 2009), the notion and its related topics, such as SCM integration and SCM collaboration, lack unanimous definitions (Chopra and Meindl, 2013; Skjoett-Larsen, 1999). Sandhu et al (2013) defines SCM as a chain of entities, ranging from producers to end consumers, in such a manner as to ensure the production and delivery of goods at the right place, right time and at the right cost. It is one of most important contrivance deployed by enterprises to improve customer value and minimize total costs (Lin and Shaw, 1998). Thus supply chain not only includes manufacturer and supplier, but also entails freight forwarders, warehouses, retailers and customers. SCM essentially means coordination of production, inventory, location, and transportation among the participants of value chain in order to derive best mix of responsiveness and efficiency (Simatupang and Sridharan, 2004). Likewise, Chopra and Meindl (2013) proposed five major supply chain drivers, namely, information, production, inventory, transportation, and location. The literature widely endorses the view that supply chain management functions are a source of core competencies and provides sustainable competitive advantage (Barney, 2012; Hitt, 2011). Christopher (2005) suggested four dimensions of logistics scorecard in order to develop an effective supply chain policy, viz., ‘better, faster, cheaper, and closer’; in other words, excellent quality that is realized in shorter time-frame at lower cost to the value chain as a whole, accompanied with robust relationships of supply chain partners. Supply chain integration entails curtailing boundaries through upstream and downstream integration, as well as horizontal integration among enterprises (Lin and Shaw, 1998; Skjoett-Larsen, 1999). Whereas supply chain collaboration suggests integration of resources for mutual gain (Simatupang and Sridharan, 2004). The decision criteria for the determination of geographical site of supply chain facilities should focus on whether to centralize activities in a proximate location to gain economies of scale (DeWitt et al., 2006), or whether to go for the best partners regardless of location (Blakely, 2001). These complex locational decisions has numerous strategic implications, for instance, cost of core facilities and skilled labor, better access to suppliers and trading cities, etc. (Chopra and Meindl, 2013). Locational decisions with respect to supply chain entities bring about the debate of integration of cluster strategy and supply chain management. Graphic distance increases logistic cost and often augments supply chain complexity, whereas a concerted supply chain promotes culture of cooperation (DeWitt et al., 2006). Ketels and Memedovic (2008) suggested industrial cluster provides conducive environment for acquiring supply chain excellence. We will further explore the interactional aspects of cluster strategy and supply chain management.

5


Supply Clusters and its Implications to Chinese Economy The evolution and predominance of industrial clusters in China attracted attention of various scholars (Bellandi and Lombardi, 2012; Fleisher et al., 2010; Sonobe et al., 2002). Economic literature and media reports widely talk about the significance of concentrated supply chains with different terms but similar connotations; supply chain cities, industrial clusters, supply clusters, and specialty cities (Barboza, 2004; The China Analyst, 2010; Wu et al., 2006). Agglomeration of multiple stages of value chain in specific locations is one of the success factors of China’s competitiveness (Gereffi, 2009). Adjacency of specialized markets to industrial clusters, especially in the case of Zhejiang province, is another attribute which enabled its transition from a rural economy to an industrial economy (Ruan and Zhang, 2009).

Research Methodology The paper adopts case study approaches of both Yin (1981, 2013) and Eisenhardt (1989). Interview protocol is based on a set of analogous questions (see Appendix), and was first pilot tested on three representative companies of the region (namely, Shaoxing Dandi Textile Co., Shaoxing Ya’s Textile Co., and Nateng Textile Co.). Afterwards, in-depth interviews, lasting more than 30 minutes each, were conducted from two representatives of the Shaoxing Mulinsen Textile Co., viz. the international representative and the general manager. Most of the companies in the region are performing both the manufacturing and trading function. And the textile companies in this historic cluster are, more or less, of the same classification. Thus our sample can be considered representative in non-statistical sense. The real-life setting of the textile industrial cluster and naturalistic approach of the study, triangulation with the literature and archival data enhanced validity and reliability of the study. Though it is a qualitative study, extensive efforts were made to ensure the validity of data. In the paradigm of qualitative research, researchers categorized data validity into following dimensions: credibility, transferability, dependability and triangulation (Golafshani, 2003). After completion of the findings, we followed up the respondents with email and QQ communication (famous Chinese messenger) in order to ensure credibility. Two fieldwork visits [April and December, 2014] not only entail case study of the textile cluster, but also take care of the changing context and dependability issue. The results are transferrable to numerous other contexts because industrial clusters are widely prevalent in China and many parts of the world, hence the study provides broader benchmarking practices which can act as a roadmap for emerging economies. Research validity is also concerned with the inferences of observations (Silverman, 2016, p. 213), and our comprehensive depiction of textile value chain (Figure 1) endorses this criterion. To fully probe the regional nexus of institutional support, the contemporary investigation of the focal company was supplemented with retrospective analysis of Shaoxing textile cluster. The exploration of the historical linkages and the evolution of the industrial cluster follow the method of Eisenhardt (1989). Caution was taken not to fully rely on the primary data, thus direct observation, media reports, national and provincial textile indices, websites of County administration, and BCB portals (www.alibaba.com and www.made-in-china) were deployed to triangulate the findings of the qualitative study. In brief, sources of the data are: (a) interviews, (b) direct observation, and (c) archival analysis.


6

The following points provide rationale for deploying case study approach: (a) Explorative research of complex settings comprising numerous factors and stakeholders, as elaborated in Figure 1 (Yin, 2013). (b) Considering the incompleteness of the framework on the integration between cluster strategy and supply chain management, case study approach is advisable (Yin, 2013). (c) A contemporary phenomenon in its real-life context and the boundaries between phenomenon and context are not clearly evident (Yin, 1981, p. 59). (d) Yin (2013, p. 4-5) suggested the suitability of case study approach when the main research questions are of ‘how’ and ‘why’ nature. (e) Retrospective analysis of a region calls for case study method as proposed by Eisenhardt (1989). (f) Lastly, the neo-institutional model of arrangements among different stakeholders, such as triple helix model, is suggested to be appropriate for case study analysis (Leydesdorff, 2013).

Case Study We begin by giving brief overview of the Zhejiang region in general and Shaoxing County in particular. Then we present a framework to illustrate the textile supply cluster and highlight the imperative role of support agencies and traders’ network in the internationalization of the region. Following that, we narrate the scenario of a representative textile company as an example. Brief overview of the region China’s Zhejiang province is a coastal area famous for its rural industrialization and prevalence of specialty cities. In addition to numerous industrial clusters, it accommodates specialized markets in proximity; the peculiar adjacency of trading cities and industrial cluster has been the focus of various studies and is sometimes referred to as ‘Zhejiang model’ (Chen, 2008; Long and Zhang, 2011; Ruan and Zhang, 2009). The province ranks first with respect to commodity markets and fourth in terms of gross regional product (China Statistical Yearbook, 2013). Its textile industry is the most contributing sector with its capacity to earn foreign exchange reserves ranks first in China (Bellandi and Lombardi, 2012). As Zhejiang province has become textile logistics center of China, its Shaoxing County is the hub of textile industrial cluster. Though there are as many as 32 industrial clusters in the County (Marukawa, 2006) and all of these industries belong to manufacturing sector ranging from textile fabric to machinery, textile fabric cluster stands out for being the most systematic and contributing one with northern part of the city virtually belongs to it. Situated south of famous Yangtze River, the prefecture represents a nice blend of modern civilization. There is traditional and social perspective to the emergence of textile cluster, and rural transition to industrialization can be traced back to the historical events. The affiliation of the area with textiles go back to the Spring and Autumn period (770-476 BC) as silk fabric was used to be produced in the Tang Dynasty (Bellandi and Lombardi, 2012). The evolution was based on township enterprises and was driven by government and market forces. It got


7

momentum with government’s privatization motives of late 1980s and 1990s, and now more than 99% of the enterprises are in the private sector (Rupp, 2010). In early 1980s, unstructured formation of rural bazaars attracted local fabric traders to the area. On October 1988, state administration established the textile trading market, also known as China Textile City [2]. Now this trading city is considered as Asia’s biggest textile collection center, with trade volume accounting for 1/3 of the national aggregate. It covers a market area of over 3.65 million square meters at present. Presence of foreign traders have internationalized the market; there are around 5500 permanent overseas purchasers,1000 permanent overseas representative agencies and around 100,000 traders flock the textile city markets on daily basis (Rupp, 2010). The region primarily emerged as a textile trading hub and is now evolving to embrace complete textile value chain (Bian, 2011), so the progression of Shaoxing prefecture is an evolution from ‘sold in Shaoxing’ to ultimately ‘created in Shaoxing’; Textile Supply Chain and Specialized Markets Shaoxing textile cluster necessarily begins with the prevalence of a robust synthetic fiber value-chain. It encompasses nearly the whole of textile supply chain; comprising fabrication of chemical fiber, spinning, weaving or knitting, dyeing and printings. Figure 1 depicts that comprehensive textile value chain is in place, ranging from chemical fibers to production of grey fabric, to dyed and printed fabrics and home textiles. It follows the pattern of localization economy with densest concentration of more than 10,000 textile businesses in an area of 1,177 square kilometers (Rupp, 2010), and phases of value chain are also concerted in specific towns within the county, for example, chemical fibers are fabricated in the town of Maan. The immediacy of the upstream and downstream players makes the industry more coordinated and competitive. The cluster enterprises not only cooperate within the cluster, many printing and design enterprises also collaborate with overseas companies, thus enabling global value chains (Keane, 2013). Numerous evidences of the pervasiveness of competitive benefits owing to agglomeration can be observed. In addition to fabricating more than three tons of chemical fibers, the region produces about 19 billion meters of printed and dyed fabrics. Majority of the businesses are dealing in polyester-related fabric and this can be attributed to the international trend of textile sector, whereby polyester consumption is growing and taking lead over other fabrics (Carmichael, 2015). Thus the focus on synthetic textile products to tap future market opportunities is perhaps a step in the right direction. However, owing to its international perspective, we can also find non-synthetic fabric, which is usually brought in from other regions; this trading of goods produced in the nearby regions results in the realization of scope economies (Bellandi and Lombardi, 2012). There is generally concentration of a part of supply chain in a given industrial cluster and occurrence of whole supply chain in a spatial location is uncommon (Hübner, 2007). Moreover, linked clusters in nearby regions benefit from inter- regional spillovers and are found to be positively associated with the start-up growth rate (Delgado et al., 2010). There is a chain of complementary clusters as Shaoxing textile industrial cluster is interlinked with clusters in other regions of Zhejiang province. While majority of the fabric is exported, some of it makes its way into the national garments manufacturing industries in the nearby cities - such as Zhili, Fengqiao and Shaoxing itself- to eventually complete the textile and apparel supply chain.

Shaoxing Textile Industry Cluster

Garments Manufacturing

Finished Fabric

Dying and Printing*

Grey Fabric

Knitting

Textile Raw-materials

Spinning / Twisting

Weaving

Textile Machinery

Chemical fibers fabrication*

(Nearby ports of Shanghai and

Exports*

Mobile Traders

Traders with stationary offices

Traders’ cluster

* Represents outsourcing; either within the cluster or to the nearby areas

Freight forwarders*

Logistics /

Stock-lot Market

Textile Fabric Market

Specialized Markets (China

Textile Supply Chain

[Industry / Government / Universities (Triple-Helix)], Local Community

Figure 1.


8

9


The regional command of textile supply chain and adjacency of specialized markets enable sort of just-in-time inventory system. The prefecture incorporates at least three categories of specialized markets (nationally known as China Textile City), namely raw-material, textile machinery, and textile fabric; there is a textile raw-material market, 5 textile machinery markets and 19 textile fabric markets (Bian, 2011). Though China Textile City (hereinafter CTC) is more famed for its wholesale distribution of finished fabric, it is achieving greater integration between market and industry by incorporating phase market functions as well. The auxiliary markets of raw material and machinery typically integrate with initial phases of textile supply chain. Phase markets refer to the place where component of a production process occurs with mutual cooperation and constructive competition, and they offer efficient provision of intermediate goods to local producers (Bellandi and Lombardi, 2012). Thus CTC offers combination of phase markets and distribution markets. The specialized market plays a central function with respect to the whole cluster; the phase markets and availability of numerous suppliers not only lessen the cost and holdup problem, the resultant price competition also stimulates process innovation (Chen, 2008). The success of specialized markets improves industrial image, which in turn reduces the marketing cost of individual industry players. Besides, specialized markets provide information on changes in demand and trends to the production stage, which makes it a two-way linkage. The pervasiveness of strong traders’ base owes to the provision of specialized markets. Because of industrial clusters and adjacent trading cities, overseas buyers often do not need to travel a lot to visit traders and manufacturers even in the geographically vast China. Fieldworks revealed an unlisted market dealing in stock-lot on the Xiao-ma road, which helps in minimizing the risk of surplus production by compensating to some extent. Outsourcing and transport infrastructure Outsourcing network is an important aspect of Shaoxing textile cluster. Various phases of supply chain are typically accomplished in specialized industrial units lying in the same county. Dyeing and printing phase is often outsourced especially when it comes to digital printing. The seemingly smooth integration of each phase of value chain process and corresponding specialized market is enabled through a complex logistic infrastructure. There are around 155 transportation companies delivering more than 2 million tons of cargo annually (Bian, 2011). The nearby ports of NingBo and Shanghai play a pivotal role in creating efficient logistic chain. Majority of the transportation companies are local, but one can also find quite a few international freight forwarders. In order to establish effective supply chain, logistics should ideally fulfill four attributes of ‘better, faster, cheaper, and closer’ (Christopher, 2005); the comprehensive nature of the industrial cluster qualifies the given attributes of logistics scorecard. Cluster framework and the textile industry Shaoxing County and vicinity accommodate no less than two clusters pertinent to the investigation of the industrial cluster, the textile supply chain and the traders’ cluster


10

(Figure 1). Integration is an important element of SCM (Naslund and Hulthen, 2012), the framework elaborates how supply chain is linked from the source of supply to the customer in a given industrial cluster. Internationalization of this cluster owe greatly to the prevalence of strong traders’ base. As contended by Friedman (2006) in his notion of Globalization 3.0, i.e. the era of 2000 to date, people from far-flung places will become principle players in the marketplace. The international traders are embedded in the cluster and have necessarily transformed it a middleman economy by establishing branch or representative offices. While various stages of the supply chain work in coordination with auxiliary markets, the last stage of finished fabric is linked to the specialized fabric market mainly through traders. The enterprises are primarily pursuing low-price strategy and this trend can be attributed to the predominance of price-sensitive traders, especially those belonging to South Asian countries. According to local officials with whom we interacted during fieldwork visits, majority of the international traders are from South Asia, namely Pakistan, India and Afghanistan. The economic influence of traders on this industrial cluster is enormous, as they are also patronizing hotel and restaurant industry of the area. Besides strong manifestation of traders, development of the region is significantly facilitated by the institutional support extended by state and academia. Shaoxing cluster can be regarded as a typical example of a natural cluster, because its evolution followed bottom-up approach; whereby success of the spontaneous cluster persuaded the government to establish economic development zone in 1993, officially known as Keqiao Economic Development Zone (KQEDZ). The operational strategy of neoinstitutional arrangements among university-industry-government exhibits the prevalence of triple helix model (Leydesdorff, 2013). The historical embedment of the local community in the industrial cluster extends it to triple helix + 1 model. Few practical examples of this innovation nexus are as follows: Regional government set up an incubator center with the name ‘Shaoxing textile technology center’ in 1998 (Rupp, 2010). In 2011, besides establishing largest textile testing lab of the Zhejiang province, online textile city project was launched which is regarded as the biggest ecommerce platform in the international textile industry (Bian, 2011).

Case Examples The following case examples illustrate the essential arguments of cluster framework and its application to the Shaoxing textile cluster. Company profile Shaoxing Mulinsen Textile Co. Ltd. (hereinafter SMC) is a limited liability company located in Shaoxing. The development trajectory of SMC spreads over two decades, as illustrated in Figure 2. SMC was established in 1999 as a family-owned enterprise dealing in the trading of finished fabric. Initially it was wholly relying on the distribution markets. Second phase of SMC’s development path begins in 2005, when prevalence of industrial cluster and influx of international traders persuaded the management to venture into the manufacturing business and realize horizontal alignment with phase markets of China Textile City. Though it imported few circular


11

knitting equipment from Switzerland, it has nicely embedded itself with the regional phase markets for the smooth supply of raw-material. The third phase of the development path of SMC was marked by the roller-coaster period of financial crunch. Many SMEs of the industrial cluster gone bankrupt and textile exports got seriously hampered (Rupp, 2010). SMC successfully survived the period of economic recession owing to its networking and pursuance of continuous process innovation. Being a private owned company, it has the luxury to be adaptable to the constantly changing textile business. The dedicated team of R&D specialists frequently cooperates with research institutes of the area and continuously comes up with new designs. In the aftermath of financial crisis, the company developed in-house facilities of printing and dyeing to entail vertical integration of supply chain. Now it is diversifying risks by expanding markets to Africa and South Asia. SMC is also exhibiting social responsibility and got duly awarded as ‘Superior Enterprise’ by Shaoxing City Construction Committee in 2014. Being a representative of the numerous manufacturing and trading companies of the region, the enquiry of SMC gives a wideranging perspective. Figure 2.

Development trajectory of the focal company

Source: Analysis of Company’s data and interviews

Applicability of Cluster Characteristics a) Enhancing productivity Cluster enables enterprises to operate more collaboratively and productively by offering better access to human capital, suppliers, infrastructure and information (Porter, 1998). We now critically analyze and trace applicability of each of these attributes to the focal company under consideration:

12

i.


ii.

iii.

iv.

Efficient access to human capital and suppliers. SMC’s experience is characteristic of a business in a typical industrial cluster, as they often hire skilled workforce from nearby areas. Vast majority of the representatives that we interacted with during fieldworks found to hail from Shaoxing region. Not only providing human capital, industrial cluster also aids in obtaining vital inputs from an extensive supplier base. By sourcing grey fabric and textile raw-material locally, enterprises are able to employ sort of just-in-time inventory system, reduce barriers to entry, and minimize the risk that suppliers will overcharge. Thus other things remain equal, local outsourcing is recommended as compared to distant sourcing (Porter, 1998). Instant availability of valuable information. In addition to performing distribution and phase market functions, CTC plays the role of information gathering and dissemination. Following the notion of ‘internationalization, specialization and marketization’, Shaoxing County administration has been organizing international textile expo since 1999 in collaboration with federal and industrial associations. The semi-annual event is often the epicenter for communications both within the country and with the outside world. Such networking and face-to-face relationships initially help in establishing weak-ties, which can often lead to durable bonds with frequent interactions (Engel and del-Palacio, 2009). Besides organizing trade fairs, various online data indices (like Keqiao trade index, and China Textile City Online) were also created to enable efficient decision making. SMC participates in trade fairs and has active presence on BCB portals, such as www.alibaba.com and www.made-in-china.com. Institutionalization. Public financing, such as provision of infrastructure and research institutes, boosts regional productivity (Porter, 1990, 1998). Emergence of textile cluster in the Shaoxing County persuaded the public agencies to construct regional innovation nexus and hence prevalence of triple helix model can be observed. For example, Shaoxing Textile Technology Center in collaboration with government and various industrial associations established Shaoxing Virtual Textile Research Institute (Bian, 2011). Collaborative efforts. “We endeavor to uphold collaboration; instead of beating the competition, we go for win-win situation”, said a representative of SMC. Its success depends not only on the reliable supply of grey fabric and other raw-material, but also on the influx of international traders and on the reputation of the region as a whole. These collaborative linkages among cluster members and between industry and specialized markets result in synergetic effect, as witnessed by the encouraging trade prosperity statistics (Keqiao Textile Index, 2014). Small and medium enterprises usually rely on cooperation, whereas large-firms generally exhibit less inter-firm connections as they are more concerned with beating the competition (Long and Zhang, 2011). Since the textile

13


cluster under study mainly comprises SMEs, stakeholders were found to pursue collaboration. b) Innovation Orientation i. Clusters enable enterprise’s intrinsic ability to transform by inculcating innovation and lowering experimentation costs (Porter, 1998). The inflow and outflow of technical personnel leads to rapid technical diffusion, and originates a cycle of imitation and innovation (Chen and Cao, 2006). The R&D specialists at SMC are constantly making efforts to instill dynamic benchmarking practices. SMEs in the cluster typically strive for costadvantage, and the benchmark of cost efficiency for competition often results in imitation rather than innovation. Once an entrepreneur succeeds, the neighborhood will endeavor to imitate his success and this results in the creation of industrial cluster. However, as competition increases and market gets saturated, the declining profit will force entrepreneurs to innovate. The alternation of imitation and innovation ensures regional competitiveness. This hypothetical explanation needs to be supported by further evidence. ii. Industrial cluster enables innovation feasibility and flexibility. Since cluster often encompasses urbane customers, enterprises inside clusters typically have a better view of the prevailing trends than remote competitors do (Porter, 1998). The textile cluster is linked to specialized markets and the subsequent close connections with customers assist in prompt recognition of market needs and opportunities. It is this very reliance that allowed SMC the luxury to expand and embrace manufacturing concern. c) Regional development The prerequisite resources are present in the cluster and are in the offing to be assembled (Porter, 1998). The prevalence of phase markets and instant availability of core inputs minimizes barriers to entry. This offers window of opportunity to prospective entrepreneurs. Besides enticing potential entrepreneurs, the competitive environment enhances the bargaining power of buyers and attracts international traders. SMC’s decision to venture into manufacturing business alongside trading concern was not something they walked into blindly. They were motivated by the extravagant success of the industrial cluster and efficient availability of auxiliary textile inputs. Cluster Strategy and Supply Chain Management Porter (1998) advocates that the competitive advantage will be determined by the adeptness of companies to exploit resources available in proximate environment. Thus the attention shifted from survival of the fittest to survival of the adaptable. Our study witnessed several evidences that Shaoxing textile industry cluster is expediting supply chain maturity by enabling enterprises to capitalize on their business environment. Major supply chain drivers, as proposed by Chopra and Meindl (2013), were found to operational in a coordinated and effective manner. Cluster strategy enhances

14


collaborative practices among stakeholders, and supply chain collaboration is found to enhance firm performance (Simatupang and Sridharan, 2004). Lack of coordination among supply chain entities can lead to bullwhip effect, in which a small change in demand among end customers can amplify and cause cycles of excess inventory and poor customer service (Sandhu et al, 2013). The propinquity of supply chain has the potential to enhance information sharing and lessen bullwhip effect. There is an overlay between these two notions, for example, information sharing and incentive alignments are important dimensions of industrial clusters (Chen and Cao, 2006; Long and Zhang, 2011), but also plays an imperative role in enhancing supply chain coordination and excellence. Sandhu et al (2013) suggested that adequate level of information sharing minimizes bullwhip effect and supply chain inefficiencies by extending order interval and curtailing batch size. Table I. SCM practices

Positive impact of cluster characteristics on SCM practices

Reference

Evidence from the textile cluster

Optimum inventory Chopra and Meindl, levels 2013 Information sharing Sandhu et al., 2013; Simatupang and Sridharan, 2004 Deriving best Christopher, 2005 responsiveness

Networking

Engel and Palacio, 2009

-

del- -

Provision of infra- Chopra and Meindl, structure and 2013 logistics Scope Economies

Bellandi and Lombardi, 2012 Integrated behavior Simatupang and and collaboration Sridharan, 2004 -

Enhanced customer Christopher, 1998 value

-

Distribution and phase markets enable efficient availability of core inputs Sort of just-in-time inventory system The proximity of supply chain reduces bullwhip effect (cycles of excessive inventory and poor customer service) Reliance on B2B platforms by almost all the companies. Specialized markets enable manufacturers to keep close contact with customers and instantly gauge their response to new ideas and products. International textile fairs and proximity of stakeholders help in building personal relations. More than 100 transport lines linking the Shaoxing textile cluster to rest of the country (Rupp, 2010). Nearby provision of ports (NingBo and Shanghai) Trading of fabric produced in the nearby regions. Outsourcing and alliances are common practices of the region. Production phases are connected with the nearby phase markets, while final stage of value chain, i.e. finished fabric, is linked to distribution market. Achieving enhanced customization level by producing as per customer’s given designs.

15


Along these lines, the notion of cluster strategy principally operates on the association and coordination among enterprises as dictated by supply chain theorists (Bozarth et al., 2007; DeWitt et al., 2006). Moreover, alliance management and collaborative strategic sourcing ensures optimum inventory levels and establishes two-way communication between manufacturer and supplier. Inherent competition of the cluster persuades entrepreneurs and industrial associations to pursue the contemporary supply chain management practices, as summarized in Table I. SMC was bestowed superior enterprise award for exhibiting social responsibility. There are few examples of enactment of green supply chain: Shaoxing County Ecou Textile Co. Ltd is involved in the ecofriendly manufacturing of textile fabric. Jishan Dyeing Plant is using innovative printing technology to minimize environmental waste.

Discussion and Conclusions The applicability of the linkage between cluster framework and supply chain management to the Shaoxing textile cluster endorsed research propositions that we formulated. The purpose of the study was to document an actual case that illustrates the implications of an indigenous industrial cluster with respect to SCM practices. By establishing an illustrative framework that incorporates the underlying interdependent stakeholders, we identified significant organizational and structural characteristics of supply clusters and exhibited that proximity can lead to desired level of supply chain excellence. The adjacency of specialized markets and manufacturing cluster facilitates enterprises by providing efficient marketing and distribution channels. Provision of phase and distributions markets help in forging the industrial chain by creating prerequisite linkages and subsequently these linkages are transforming the cluster to be an extensive one in a sense that the core segments of value chain are located inside the cluster. The horizontal and vertical linkages of supply clusters results in synergetic benefits: enterprises in an industrial cluster can exploit economies of scale by pooling their resources, and proximity of the members of value chain expedites efficient inventory management. The evolution of this particular industrial cluster created a business environment in which a pool of human capital, coupled with integrated specialized markets and traders’ cluster allow textile industry to operate more productively. Institutional support in the form of government’s patronage, R&D collaboration, sufficient supply of factors of production, provision of trading city and prevalence of international traders brought about sustainable city development despite the shockwave of global recession of 2008-2009. Several practical and social implications can be drawn from the inimitability of Shaoxing textile cluster. While deploying cluster framework for regional development, the local government should make efforts to lure international traders in addition to nurturing specialized and auxiliary markets. Vicinity of specialized markets not only facilitates industrial cluster, but also boosts tourism and hotel industry of the area. Entrepreneurs should pay due attention in constructing local supply chains because now competition is not between companies, but between supply chains (Naslund and Hulthen, 2012). Rather than relying on government


16

initiatives, managers of today ought to proactively engage with leading universities and participate in policy networks. Since textile industrial cluster mostly rely on indigenous factors of production, local universities are in a better position to play an active role in fostering regional innovation nexus. Also, research institutions should develop feasible business models to transform the imitation-oriented cluster into an innovative cluster. Furthermore, rising labor cost and currency value are posing a serious challenge to their competitive positioning as a low-cost sourcing destination (Cuñat, 2013). Friedman (2013) revealed that many developing countries have already surpassed China in manufacturing various products more competitively. Hence supply clusters can be a handy tool to sustain the competitive advantage. Few studies endorsed the synergy between cluster theory and supply chain management (DeWitt et al., 2006; Wu et al., 2006), what we add is the characterization of the linkages both within cluster and between interspersed clusters. The study underlines the prevailing patterns of clustering in traditional industries of China and elaborated how cost advantage is manifested in the entire supply chain. We contribute to the existing literature by explaining how specialized markets and global players are enabling concentrated supply networks. The study depicts that the entities belonging to diversified nationalities are playing a vital role in establishing global linkages and therefore it actually ratifies the notion of globalization 3.0 (Friedman, 2006). We also demonstrated the applicability of triple helix model to the textile cluster, and furthered the ongoing debate of extending the tripartite model by offering cluster-based perspective. Carayannis and Campbell (2009, 2012) suggested extensions to triple helix model with terms like ‘quadruple helix’ and ‘quintuple helix’, but we view it from the spectrum of industrial cluster and thus our recommendation is regional specific. In order to fully capitalize on the domestic human capital, which is usually rampant in such natural clusters, we commend the undertaking of ‘triple helix + 1 model’ (Ikram et al., 2016); where community is being made an essential participant in addition to traditional interplay of university, industry and government. As with fieldworks and case studies, generalization must be done with caution. Cross case or paired case analysis is advisable to strengthen the arguments of the study and draw more generalizable conclusions. Further research will strengthen the findings and may identify the key elements to enhance collaboration and product innovation in industrial clusters that typically strive for cost competition. The implications of interlinked clusters and the relative role played by logistics in emerging supply clusters need to be explained in further detail. Since most of the research on relatively nascent phenomenon of integration of cluster strategy and supply chain management is case study based, systematic synthesis (Rauch et al., 2014) of relevant case studies would highlight the dynamic benchmarking practices. Note 1.

There is difference between Shaoxing County and Shaoxing City; there are districts, villages and counties under Shaoxing city and Shaoxing County is one of them. And Shaoxing County seat is Keqiao; therefore, the particular textile area is sometimes referred to as ‘Keqiao’.

17


2.

The textile specialized markets of Shaoxing County was officially given the status of China Textile City in June 1992.

References Barboza, D. (2004), “In roaring China, sweaters are west of socks city”, New York Times, 24 December, pp. 24. Barney, J. B. (2012), “Purchasing, supply chain management and sustained competitive advantage: The relevance of resource‐based theory”, Journal of Supply Chain Management, Vol. 48 No. 2, pp. 3-6. Bellandi, M., and Lombardi, S. (2012), “Specialized markets and Chinese industrial clusters: The experience of Zhejiang Province”, China Economic Review, pp. 626-637. Bian, Z. (2011), “China Textile City alters fabric of the industry”, China Daily, 18 October, pp. 7. Blakely, E.J. (2001), “Competitive advantage for the 21st century city: can a placebased approach to economic development survive in a cyberspace age?”, Journal of the American Planning Association, Vol. 67 No. 2, pp. 133-41. Bozarth, C., Blackhurst, J., and Handfield, R. B. (2007), “Following the thread: Industry cluster theory, the New England cotton textiles industry, and implications for future supply chain research”, Production and Operations Management, Vol. 16 No. 1, pp. 154-57. Carmichael, A. (2015), “Man-made fibers continue to grow”, available at: http://www.textileworld.com/Issues/2015/_2014/Fiber_World/ManMade_Fibers_Continue_To_Grow (accessed March, 2015) Carayannis, E. G., and Campbell, D. F. (2009), “Mode 3 and Quadruple Helix': toward a 21st century fractal innovation ecosystem”, International Journal of Technology Management, Vol. 46 No. 3, pp. 201-34. Carayannis, E. G., Barth, T. D., and Campbell, D. F. (2012), “The Quintuple Helix innovation model: global warming as a challenge and driver for innovation”, Journal of Innovation and Entrepreneurship, Vol. 1 No. 1, pp. 1-12. Chen, T. (2008), “Industry cluster's innovation network structure and competitiveness in Zhejiang Province”, in proceedings of Fourth IEEE International Conference on Management of Innovation and Technology, ICMIT 2008, Bangkok, 21–24 September 2008, pp. 693–98. Chen, X., and Cao, L. (2006), “SME clusters in China”, Tech Monitor, July-August, pp. 38-43 Chopra, S., and Meindl, P. (2013), Supply chain management, 5th ed., Pearson Education, New York, NY, pp. 8-28. Christopher, M. (1998), Logistics and supply chain management, Financial Times Management, London. Christopher, M. (2005), Logistics and supply chain management: creating valueadding networks. Pearson Education, New York, NY, pp. 240-244. Cuñat, J. (2013), “China’s Transformation: Implications for Global Supply Chains”, The China Analyst, September, pp. 12-15.


18

David, H., Dorn, D., & Hanson, G. H. (2016), “The china shock: Learning from labor market adjustment to large changes in trade (No. w21906)”, National Bureau of Economic Research. Delgado, M., Porter, E. M., and Stern, S. (2010), “Cluster and Entrepreneurship”, CES Research Paper, U.S. Census Bureau, pp. 2-22. D’Este, P., and Patel, P. (2007), “University–industry linkages in the UK: What are the factors underlying the variety of interactions with industry?”, Research policy, Vol. 36 No. 9, pp. 1295-1313. DeWitt, T., Giunipero, L. C., and Melton, H. L. (2006), “Clusters and supply chain management: the Amish experience”, International Journal of Physical Distribution and Logistics Management, pp. 289-308. Eisenhardt, K. M. (1989), “Building theories from case study research”, Academy of management review, Vol. 14 No. 4, pp. 532-550. Engel, J. S., and del-Palacio, I. (2009), “Global networks of clusters of innovation: Accelerating the innovation process”, Business Horizons, pp. 493-503. Fleisher, B., Hu, D., McGuire, W., and Zhang, X. (2010), “The evolution of an industrial cluster in China”, China Economic Review, Vol. 21 No. 3, pp. 456-69 Friedman, T. L. (2006), The world is flat: A brief history of the twenty-first century, Farrar, Straus and Giroux, New York, NY. Friedman, G. (2013), “The PC16: Identifying China's Successors”, available at: http://www.stratfor.com/weekly/pc16-identifying-chinassuccessors#axzz3O2vurxuF (accessed 19 October, 2015). Gereffi, G. (2009), “Development models and industrial upgrading in China and Mexico”, European Sociological Review, Vol. 25 No. 1, pp. 37-51. Golafshani, N. (2003), “Understanding reliability and validity in qualitative research”, The qualitative report, Vol. 8 No. 4, pp. 597-606. Hitt, M.A. (2011), “Relevance of Strategic Management Theory and Research for Supply Chain Management”, Journal of Supply Chain Management, Vol. 47 No. 1, pp. 9-13 Hübner, R. (2007), Strategic Supply Chain Management in Process Industries, Springer, New York, NY. Ikram, A., and Qin, S. (2015), “Determinants of Productivity in the Ready-made Garments SMEs of Lahore, Pakistan” in Proceedings of the 5th International Asia Conference on Industrial Engineering and Management Innovation (IEMI2014) in Xi’an, China 2007, Springer, Vol. 1, pp. 81-86 . Ikram, A., Qin, S., and Sadiq, M.A. (2016), “Technical efficiency and its Determinants: an empirical study of surgical instruments cluster of Pakistan”, Journal of Applied Business Research, Vol. 32, No. 2, pp. 647-660. Keane, M. (2013), Creative industries in China: art, design and media, John Wiley and Sons. Hoboken, NJ. Keqiao Textile Index (2014), available at: http://en.kqindex.gov.cn/Indexs/?module=prospIndex (accessed 28 March, 2015).


19

Ketels, C. H., and Memedovic, O. (2008), “From clusters to cluster-based economic development”, International journal of technological learning, innovation and development, Vol. 1 No. 3, pp. 375-92. Leydesdorff, L., and Meyer, M. (2010), “The decline of university patenting and the end of the Bayh–Dole effect”, Scientometrics, Vol. 83 No. 2, pp. 355-62. Leydesdorff, L. (2013), Triple Helix of university-industry-government relations. Springer, New York, pp. 1844-51. Li, H., Li, L., Wu, B., and Xiong, Y. (2012), “The end of cheap Chinese labor”, Journal of Economic Perspectives, Vol. 26 No. 4, pp. 57-74. Lin, F. and Shaw, M.J. (1998), “Reengineering the order fulfillment process in supply chain networks”, International Journal of Flexible Manufacturing Systems, Vol. 10 No. 3, pp. 197-229. Long, C., and Zhang, X. (2011), “Patterns of China's industrialization: Concentration, specialization”, China Economic Review, pp. 593-612. Marshall. (1920). Principles of Economics. Macmillan, London. Marukawa, T. (2006), “The geography and history of industrial clusters in Zhejiang Province, China”, working paper, Asian Industrial Clusters”, Lyon, 29 November. Näslund, D. and Hulthen, H. (2012),"Supply chain management integration: a critical analysis", Benchmarking: An International Journal, Vol. 19 No. 4/5, pp. 481501. Porter, M.E. (1990), The competitive advantage of nations, Free Press, New York, NY. Porter, M. E. (1998), “Clusters and the new economics of competition”, Harvard Business Review, Vol. 76 No. 6, pp. 77–90. Rauch, A., Doorn, V. R., and Hulsink, W. (2014), “A Qualitative Approach to Evidence-Based Entrepreneurship: Theoretical Considerations and an Example Involving Business Clusters”, Entrepreneurship Theory and Practice, pp. 33368. Ruan, J., and Zhang, X. (2009), “Finance and cluster-based industrial development in China”, Economic Development and Cultural Change, Vol. 58, pp. 143–64. Rupp, J. (2010), “China Textile City”, available at: http://www.textileworldasia.com/Issues/2010/April-MayJune/Features/China_Textile_City (accessed 10 December, 2014). Sandhu, M.A., Helo, P. and Kristianto, Y. (2013),"Steel supply chain management by simulation modelling", Benchmarking: An International Journal, Vol. 20 No. 1, pp. 45 – 61. Silverman, D. (Ed.). (2016), Qualitative research, Sage. Simatupang, T.M. and Sridharan, R. (2004), “Benchmarking supply chain collaboration”, Benchmarking: An International Journal, Vol. 11 No. 5, pp. 484 – 503. Skjoett-Larsen, T. (1999), “Supply chain management: a new challenge for researchers and managers in logistics”, The International Journal of Logistics Management, Vol. 10 No. 2, pp. 41-54.


20

Sonobe, T., Hu, D., and Otsuka, K. (2002), “Process of cluster formation in China: A case study of a garment town”, Journal of Development Studies, Vol. 39 No. 1, pp. 118-39. Stock, J.R. and Boyer, S.L. (2009), “Developing a consensus definition of supply chain management: a qualitative study”, International Journal of Physical Distribution & Logistics Management, Vol. 39 No. 8, pp. 690-711. Tang, L., Shapira, P., & Meng, Y. (2014), “Developing an innovative materials enterprise in China: a nanotechnology small business case study”, Chinese Management Studies, Vol. 8 No.2, pp. 201-17. The China Analyst (2010), “Why and What to produce - China's leading industrial clusters”, May 2010, pp. 26-27. Torres, A., Dutrenit, G., Sampedro, J.L. and Becerra, N. (2011), “What are the factors driving university-industry linkages in latecomer firms: evidence from Mexico”, Science and Public Policy, Vol. 38 No. 1, pp. 31-42. UN Comtrade (2013), “UN International Merchandise Trade Statistics”, available at: http://comtrade.un.org/pb/CommodityPagesNew.aspx?y=2013 (accessed 28 October, 2014). Wu, L., Yue, X., and Sim, T. (2006), “Supply Clusters: A Key to China's cost advantage”, Supply Chain Management Review, pp. 46-51. Yin, R. K. (1981), “The case study crisis: Some answers”, Administrative science quarterly, pp. 58-65. Yin, R. K. (2013), Case study research: Design and methods, 5th ed., Sage publications. Thousand Oaks, CA.

21

APPENDIX Interview Protocol * 1. Brief introduction: 2. How is the region / industrial cluster facilitating you in achieving growth objectives? 3. How is government and regional institutional nexus of academia supporting you in enhancing R&D collaboration and quality? 4. What are the main problems faced by the regional enterprises and start-ups? 5. How often do you collaborate with the regional research institutions? 6. If you need to hire more workforce, are they easily available?


7. What imperative role phase and distribution markets are playing in your supply chain management? Where / who are your main suppliers? 8. How do you achieve supply chain excellence (business partners, suppliers, vendors)? 9. Are specialized markets supporting you in risk taking and new product development? And what do you do with the rejected material? 10. How did you cope with the financial crisis of 2008-2009? 11. Any other feedback?

*

Interview protocol was first pilot tested though three regional companies, namely Shaoxing Dandi Textile Co., Shaoxing Ya’s Textile Co., and Nateng Textile Co. There were two interviewees: the international representative and the general manager. Though international representative was found to be well conversant in English language, native Chinese facilitated us during fieldwork visits.

Chemical fibers fabrication*

Textile Supply Chain

Knitting

Garments Manufacturing Cluster

Finished Fabric

Dying and Printing*

Grey Fabric

Weaving

Spinning / Twisting

Shaoxing Textile Industry Cluster

Logistics /

(Nearby ports of Shanghai and NingBo)

Exports*

Mobile Traders

Traders with stationary offices

Traders’ cluster

* Represents outsourcing; either within the cluster or to the nearby areas

Freight forwarders*

Stock-lot Market

Textile Fabric Market

Textile Raw-materials

Textile Machinery

(China Textile City)

Specialized Markets

[Industry / Government / Universities (Triple-Helix)], Local Community

Figure 1.




Figure 2.

Development trajectory of the focal company

Source: Analysis of Company’s data and interviews

Table I. SCM practices

Positive impact of cluster characteristics on SCM practices Reference

Evidence from Shaoxing Textile cluster

Optimum inventory Chopra and Meindl, levels 2013 Information sharing Sandhu et al., 2013; Simatupang and Sridharan, 2004 -


Deriving best Christopher, 2005 responsiveness

Networking

Engel and Palacio, 2009

-

del- -

Provision of infra- Chopra and Meindl, structure and 2013 logistics Scope Economies

Bellandi and Lombardi, 2012 Integrated behavior Simatupang and and collaboration Sridharan, 2004 -

Enhanced customer Christopher, 1998 value

-

Distribution and phase markets enable efficient availability of core inputs Sort of just-in-time inventory system The proximity of supply chain reduces bullwhip effect (cycles of excessive inventory and poor customer service) Reliance on B2B platforms by almost all the companies. Specialized markets enable manufacturers to keep close contact with customers and instantly gauge their response to new ideas and products. International textile fairs and proximity of stakeholders help in building personal relations. More than 100 transport lines linking the Shaoxing textile cluster to rest of the country (Rupp, 2010). Nearby provision of ports (NingBo and Shanghai) Trading of fabric produced in the nearby regions. Outsourcing and alliances are common practices of the region. Production phases are connected with the nearby phase markets, while final stage of value chain, i.e. finished fabric, is linked to distribution market. Achieving enhanced customization level by producing as per customer’s given designs.