Interactions Between Specialized Market And Industrial Cluster

Specialized market and industrial cluster are two important newly emerging economic phenomena in coastal regions of China since the reform and opening up. The specialized market has a function of agglomerating regional industries. Generally, many industrial clusters take one or several specialized markets as the sources of information about commodity and price. Meanwhile, industrial cluster provides the specialized markets with millions of cheap commodities and keeps the later being prosperous. Researches about the internal mechanism of their interactions will be helpful understanding the relationship among the expansion of specialized market, growth of industrial cluster and regional economic development. The aim of this paper is to explore the interactive mechanism between them and its impact on local economy.I find that there exists a kind of interactive relationship between specialized market and industrial cluster at many times. On the one hand, firms in local clusters can sell their products through the specialized market at low cost. One the other hand, with this shared transaction platform, various factors and raw materials can flow into the industrial clusters. The economies of scale on sale and production are obtained by firms in local industrial clusters, which promote the growth and upgrading of them. Meanwhile, the development and long-term prosperity of specialized market require strong support from local industries. The development of industrial clusters provides competitive products for specialized markets and facilitates the realization of economies of scale and economies of scope.After theoretical analyzes, taking Yiwu small commodity market for instance, this paper empirically studies the interactive mechanism between specialized market and industrial cluster. Firstly, the characteristics of specialized market have significant influences on its role in promoting the development of local industrial clusters. Meanwhile, based on panel data from Yiwu, Zhejiang province, this paper empirically studies the impact of industrial agglomeration on specialized market's development by dividing the dynamic externality into three types: specialization, diversity and competition. I find that, in the regional coordination network which is centered with Yiwu small commodity market, the economies of specialization of industrial agglomeration consist the core competence of specialized market. The diversity effect of industrial agglomeration also has significantly positive impact on the development of specialized market. Local competition, however, has negative effect on specialized market's development.