Entrepreneurship and Industrial Clusters: Evidence from China Industrial Census

This article studies the synergy effect of entrepreneurship on China’s industrial clusters. We propose an extension to Duranton and Overman’s (2005) method which enables us to delimit industrial clusters in space. The empirical model is identified with historical measures of local entrepreneur potential in the spirit of Chinitz (1961). We find that measures of entrepreneurship contribute significantly to cluster formation, cluster size, and cluster strength. Access to sea ports stimulates industrial concentration but agricultural legacy has the opposite effect. Light industries have more clusters which are also larger and stronger. Clusters also benefit from historical measures of market potential, localization/urbanization economies, and urban population density. Most of the results are robust to alternative instrumental strategies. Finally, we find evidence that the synergy effect is stronger where the local conditions are favorable to clusters.