Multinational Enterprise-Driven Industrial Agglomerations

Business Practices in China's Dalian Software Industry

Abstract

Dalian, China, has been noted for its software industrial agglomeration. Many studies have mentioned Silicon Valley, the archetypal high-tech industrial agglomeration, stating that companies gained the necessary resources by becoming familiar with the flexible business practices in the region. This is conventional wisdom. However, such a trend is barely found in Dalian. Much of the business of Dalian’s software industry is related to Japan, and a strong influence of Japanese multinational enterprises (MNEs) exists. Key enterprises within the industrial agglomeration adopt Japanese companies’ managerial system and then be able to gain business from their Japanese clients. In other words, even though both are high-tech industrial agglomerations, in Silicon Valley, companies were required to become familiar with local business practices to acquire resources, while in Dalian, local key enterprises were required to take on business practices of their customer MNEs to gain resources. Thus, it is not easy to make generalizations about high-tech industrial agglomeration models based on the case of Silicon Valley, which may, in fact, be a special case.