Research on Small and Medium-sized Enterprise Clusters in Wuhan Optical Valley

ORIENT ACADEMIC FORUM
Research on Small and Medium-sized Enterprise Clusters in
Wuhan Optical Valley
XU Niya1, 2
1. School of Economics and Management, Wuhan University, Wuhan, China, 43007
2. Economy College, South-Central University for Nationalities, Wuhan, China, 430074
[email protected]
Abstract: Today's world, small and medium-sized enterprise clusters as a feature-rich form of economic
organization play an increasingly important role in the regional and global economic growth. Research
of SME clusters has extremely important meanings to promote SME development and improve
industrial competitiveness. This text study on SME clusters in Wuhan Optical Valley, and analyzes the
current situation of the SME clusters in Wuhan Optical Valley and existing problem, lastly put forward
the corresponding measure.
Keywords: SME Clusters, Problem, Countermeasure
1 Introduction
There are many small and medium-sized enterprise clusters around the world, such as Silicon Valley's IT
industry clusters, Hsinchu , Taiwan high-tech industrial clusters, Wuhan "Optical Valley" optoelectronics
industry clusters, etc. SME clusters as a kind of economic phenomenon exists extensively, and attract
many domestic and foreign economists to their theoretical study and discussion.
1.1 Foreign scholars study of SME clusters
The first study on the issue of SME clusters is Marshall (1890), he discussed this issue from the
"external economy" perspective. He considered it is "general developed economy" caused by specialists,
special machinery and materials, convenient transportation and technology diffusion that makes small
businesses to form clusters.
Webber, Industrial location economist, first proposed agglomeration of economic theory, in his book
"Industrial Location Theory", published in 1909, he divided location factors into regional location
factors and agglomeration factors. He believed that concentration factors can be divided into two phases:
first phase means enterprises gain agglomeration advantages by the expansion of their own, which are
the initial stage; second stage means achieve industrialization by connection of enterprises, this is the
most significant high-gathering stage. Obviously, the advanced stage of concentration is SME clusters,
which we want to discuss.
Williamson considered the SME clusters formed by many small and medium enterprises, based on
specialization and cooperation. This organizational structure is between the pure market organization
and bureaucratic organization .It is more stability than market, and flexible than the hierarchical
organization.
In 1998, Porter released the article, "Clusters and the new economics competition" .It puts the enterprise
cluster theory to new heights. Based on his theory of competitive advantage, from the standpoint of the
organizational change, value chain efficiency and flexibility of competition ,he reexamine the formation
mechanism of clusters and value, the system put forward a new theory of competition, clusters
economics. Porter considered enterprises cluster is concentrated on specific regions, in the business of a
group of interconnected companies and associated institutions, including the provision of spare parts and
other middlemen upstream and downstream channels and customers, offering complementary goods
manufacturers, and has the relevant skills, technologies or common inputs belong to other industry
enterprises. In addition, it included government and nongovernmental agencies. Gathered in space, these
bodies form a flexible production complex. He thought small and medium enterprises in the cluster
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could be better close to suppliers and professionals, easy access to specialized information, the SME
cluster members provide complementary and supporting of products and services to attract customers,
which generate comprehensive physical production of flexible core competitiveness of the region.
Porter and other Western scholars illuminate the rich insights, but it should be noted that their research
background and research object are clusters in developed countries, and China's current economic
system transformation and the early stages of industrialization, small and medium enterprises in the
background is not the same cluster of their. China's economy is in a transition state, and because of the
traditional and informal systems of social factors, we should not only learn from the Western perspective
and methods of academic research, but also special emphasis on the characteristics of SME clusters
in-depth study.
1.2 Chinese scholars on the study of SME clusters
Chinese scholars on the study of SME clusters relatively late, some scholars studied the specific area of
the formation and development of SME clusters. Fang Yao (2008) studied the formation of SME clusters,
Hsinchu Taiwan and development; she summarized the successful experience of Hsinchu. Firstly, local
government support and actively cooperate with, such as provide a range of preferential policies to
encourage and stimulate investment to create a good service environment, and set a large number of
technology funds inspired and innovative high-tech enterprise gathering enthusiasm. Secondly,
universities, research institutions and enterprises closely linked, act in harmony, effectively promoting
innovation activities continue to expand, and ensuring sustainable development of regional innovation
networks. Thirdly intermediary professional development of the park service has played a synergistic
effect.
Mainland scholars study of SME clusters mainly in economically developed Jiangsu and Zhejiang.
Wang Zuqiang (2006) believed that the rise of Zhejiang SME clusters is related to local traditional
industries, technical talent pool, business skills, and social capital. It is the result of the collective actions
of entrepreneurs and enlightened policy-making of local governments. Its typical characteristics are
domestic private capital and private enterprises as the main cluster of specialized division of labor
within the fine based on the formation of specialized division of labor among enterprises, the network
structure. Jun Peng (2003) analyzed the performance of Wenzhou small and medium enterprises, in his
view from the practical analysis of view, the formation of a single small business to produce
commodity-based clusters is much higher than the competitiveness of a small number of large
enterprises core formed to produce a certain technical content of brand-based clusters, which is the
current regional economic conditions by the Wenzhou result. Li Hong (2010) study on the Yiwu SME
clusters, he noted that the enterprises should pay attention to the cluster group in the innovation
advantages of this carrier to take advantage of industrial clusters, innovation and aggregate resources of
many enterprises to enhance innovation capability of enterprises Yiwu. Strengthen the integration of
enterprises, universities and research institutions, and make use of foreign enterprises brain to
implement technological innovation. Cultivate and support leading enterprises, playing its role in
stimulating innovation, and enhance specialized division of labor and collaboration among enterprises.
Construct innovation network of cluster, and perfect service system innovation.
Wuhan Optical Valley since its inception, more than two decades of the development process, made a
rather remarkable achievement, SME cluster has considerable size. However, research on SME clusters
in Wuhan Optics Valley is almost a blank. Therefore, this article view SME clusters in Wuhan Optics
Valley as the research object, analyzes its development status; the main problems encountered and
propose countermeasures to promote its development.
2 Development of SME Cluster in Wuhan Optics Valley
Since 2001, "Optics Valley of China" was approved for construction; it has been taking the country as
the carrier of optoelectronic information industry base, and integrates domestic and foreign scientific
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and technological resources to build innovative business system. After years of construction, Wuhan
Optics Valley formed a photoelectron information industry as a leader, biological engineering and new
medicine, energy, environmental, mechanical and electrical integration of the coordinated development
of high-tech industry industrial pattern. Optical Valley built the largest fiber-optic cable, optical
components production base, the largest optical communication technology R & D base, the largest laser
industrial base. Optical fiber and cable production scale ranks the second largest domestic market share
of 50%, 12% international market share. There has formed a variety of distinctive industrial parks, such
as Kanto Optoelectronics Industrial Park, Tangxun Lake University Science Park, Optics Valley
Software Park, etc. And 2,000 high-tech enterprises classified together.
In 2006, the region had 86 billion industrial output values, while software and information services
revenue reached 13.633 billion. In 2008, the industrial output value exceeded 200 billion, software and
information service revenue reached 22 billion. These all reflect the growth of SME clusters in Wuhan
Optical Valley and its important role in the economy.
3 The Main Problems in Development of SME Clusters in Wuhan Optics Valley
3.1 Unclear division of labor within the enterprise group led to horizontal division of labor and in
the same competition
The enterprises in the clusters still lack of collaboration and an effective division of labor mechanism.
Unclear division of labor makes enterprises in the same horizontal division or the same market.
Moreover, there existed internal information blockade, and lack of mutual technical cooperation. In
order to prevent technology leakage to local competitors in the cluster, enterprises always search foreign
companies to cooperate. It often leads to the spillover demand, especially the core businesses and
multinational companies in the region always purchased parts from other provinces or even abroad.
According to statistics, 70% of the relevant services need to be imported from abroad in the Wuhan
Optical Valley each year. Overall, the Optics Valley has not yet formed a complete industry value chain.
Whether in inter-industry or within the industry, companies can’t cooperate effectively.
At the meantime, the horizontal division of labor makes the enterprises compete in a crowded market
and other field can not be fully developed, for lack of enterprise participation. In this contradiction,
efficiency of enterprises can not be improved and will waste a lot of resources.
3.2 Business, government, non-profit mutual inter-agency coordination mechanism is not perfect
Intermediary agencies are not perfect. Professional intermediary service institutions such as banks,
lawyers, consultants, and other high-tech enterprises and support services agency imperfect, in particular
lack of adequate venture capital.
Enterprises, universities and research institutions are not closely linked. Accumulated in Wuhan Optical
Valley of Wuhan University, Huazhong University of Science and Technology, Wuhan Research
Institute of Posts and Telecommunications and other famous universities and institutes, where has a
good research material and scientific equipment. But lack of cooperation mechanism makes Wuhan
Optical Valley not become an important source of scientific and technological innovation. Local
businesses do not effectively use the knowledge of the overflow, this affect the formation of the
aggregate.
Meanwhile, the collaboration between enterprises and the government isn’t perfect. Government does
not fully play its function of guidance and services. Such as lack of guidance of mutual cooperation
between enterprises, not create collaboration environment and conditions, etc.
3.3 Lack of effective and sustainable financing, small business faces the problem of money
The financing difficulty is bottleneck factor of small and medium-sized hi-tech enterprises. On the one
hand, many enterprises have not built a sound profitable mode to attract foreign venture capital to join.
On the other hand, bank loans tend to mature optoelectronics business. For instance, eight commercial
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banks have provided nearly 25 billion Yuan of loans for the Wuhan Optical Valley. But mostly are in
favor of Yangtze Optical Fiber and Cable Company (YOFC), Fiber Home Technologies and other
mature technology companies. But these companies have no strong demand for credit funds. On the
contrary, small business is difficult to loan from banks, because of its own characteristics: small size,
high risk, unsecured property, high cost. Lack of effective and sustainable financing channels restrict
further development of industrial clusters in Wuhan Optical Valley.
3.4 Regional culture of promoting the growth of high-tech clusters has not yet formed
In Wuhan Optical Valley, culture of encouraging risk-taking entrepreneurship and community
collaboration is quite scarce. Enterprises in the region are alone, not form an effective communication
mechanism for problems encountered. If form a culture of mutual aid and informal communication, it
can avoid the problem recurring. What’s more, being a high-risk industries, high-tech industry needs
courage to take risks of innovation. And its success depends on the rapid collection of information and
the rapid integration of various resources. Cooperation contributes to this rapid integration. As the
uncertainty of innovation makes the cost of innovation is not a business can afford, if the formation of
business alliances conduct risk assessments together, the park will accelerate technology innovation.
And business alliances would make cluster technology diffusion effect fully utilized.
4 Countermeasures and Suggestions to Promote the Development of SME
Clusters in Wuhan Optical Valley
4.1 Strengthening specialized division of labor and cooperation between enterprises
In the face of fierce competition, Wuhan Optical Valley should strengthen specialized division of labor
and cooperation between enterprises. Build enterprise tier to form effective vertical division of labor.
This will optimize the product structure, strengthen product diversion and improve support capabilities.
Among them, the first-tier is made up of core enterprises companies within the cluster, these enterprises
should be "fine, sharp, excellent", developing high-tech products, and creating brand. Such as YOFC
focus on the optical fiber and cable technologies, acquired first-class technology in the world. The
second tier of the enterprise is regarded as leader within the cluster, but the strength is not enough to
compete with large international enterprises. These enterprises should be "special" and "fine", choose
the potential products for investment, and form their own features, in order to avoid excessive
competition. Third-tier is small enterprises. Such enterprises are often overlooked, but their advantage is
to create the basis of the cluster. Therefore, we should support these enterprises to enable them to meet
the need of first-tier and second tier.
With the specialized division of labor and construction of enterprise echelon, the cluster of enterprises
within the region will find its place in the division of labor. It makes enterprises focus on different field.
As a result, the problem of repeated and blind investment is solved..
4.2 Improve the cooperation mechanism between the business, government and non-profit
institution
Speed up the construction of intermediary service organizations. Intermediary services as an important
part of the third industry will be scientific and rational planning, and encourage enterprises to organize
different types of industry associations. Gradually replace the government with trade association, and
give the social, economic, service work to the industry associations; and improve the quality of
intermediary service .organizations
Make universities, research institutions and enterprises keep in close contact. Universities and research
institutes as source of knowledge and technology innovation, business innovation as the main body of
the technology innovation, if contact closely, it is conducive to continually innovation activity and the
sustainable development of regional innovation network.
Improve the service function of government. The government should increase policy support. For
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instance, government should provide a good development environment for the enterprises, such as road
traffic, water conservancy, electrical supply, etc. Create a good environment for investment and
entrepreneurship. In addition, the local government must improve the intellectual property protection
laws to meet the demand of high-tech enterprises.
4.3 Improve the regional capital market system to solve money problem
Give full play to the guiding role of the government, in order to build a sound system of risk investment.
For example, government can set up a special venture capital fund, and give interest-free loans to
venture capital firms; as well as make loan guarantees to venture capital firms, if they invest in high-tech
enterprises. In addition, encourage financial institutions increase loans to high-tech enterprises.
Government should formulate appropriate incentives to promote cooperation between enterprises and
financial institutions, and improve the regional capital market system to solve money problem of Wuhan
Optical Valley.
4.4 Create a favorable cultural environment for the region
High-tech industry is a high risk industry, and this industry's development can not do without innovation.
Only have lots of technological innovation, the high-tech industries can be eternity. But innovation is to
bear great risks, which needs spirit of creative and adventurous. But only depends on spirit of innovative
and adventurous is not enough, they also need support and tolerance that allows them to stand up again
when they fail. So the park should form a culture of tolerance, understanding and support for failure.
Then, risk-taker will lose the burden of fear of failure. And enterprises obtain the driving force of
sustainable development.
5 Conclusion
In summary, the SME clusters in Wuhan Optical Valley have achieved remarkable results. But they also
encountered many problems. How can we solve these problems? It requires businesses and government
to strengthen communication and cooperation. Government should be service-oriented government, and
provide a healthy environment for enterprises. While, enterprises should follow the market law of
development, and form the collaboration culture between government and enterprises. Finally, achieve
win-win situation.
References
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2005(in Chinese)
[6]. TANG Xiao-hua, Industry Cluster: Choice of Economic Growth in Liaoning, Beijing: Economic
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