A Flowchart Approach to Asia’s Industrial Cluster Policy

Policy for forming an industrial cluster, or industrial cluster policy, plays an important role in developing a region in East Asia. Industrial cluster policy is followed not only in Japan by the Ministry of Economy, Trade, and Industry, but also in most countries in East Asia such as Malaysia and Singapore. Silicon Valley in the US and Bangalore in India are well-known success stories of development in information technology. Agglomeration theory and cluster theory explain that an industrial cluster is effective in generating external economies and reducing transportation costs. But it is necessary that we should make it clear what are the required conditions for f orming a cluster particularly in developing countries when discussing growth strategy. Porter (1998) paid attention to industrial cluster polic y as growth strategy. According to Fujita and Thisse (2002), central issues of spatial economics are to explain mechanisms for forming an agglomeration and linking an industrial agglomeration to innovations. Porter (1998) considered that the latter is more important than the former and examined how an industrial cluster brought innovations by us ing his diamond approach in cluster theory. There are two kinds of explanation of the former mechanism of forming an agglomeration: one is what factors form an agglomeration and the other is which equilibrium becomes a core industrial agglomeration under certain conditions in the case of multiple equilibria. The latter case of equilibrium theory is mathematically easy to analyze and we can find the equilibrium analysis of urban agglomeration in Nishikimi and Hamaguchi (1997). Many papers such as Sonobe and Kawakami (2001) explained industrial agglomeration in a country by econometric methods. Kuchiki (2003) found that conditions of forming new clusters in northern Vietnam were (a) industrial zones, (b) capacity building of physical infrastructure and institutional reforms in investment procedures, (c) anchor firms in the manufacturing industry, showing that industrial zones together with the combination of infrastructure and institutions played a crucial role in an industrial agglomeration and that Sogoshosha of Japanese trading corporations played an important role in inviting Japanese manufacturing firms to the industrial zones. The anchor firm of the cluster Canon, a Japanese firm, exported its products. We called this case the Canon effect. This paper will generalize the typical pattern of forming industrial agglomerations in East Asia by illustrating another case. The purpose of this paper is to build a framework to analyze industrial cluster policy. The framework is a …