Transnational Corporations and Network Effects of a Local Manufacturing Cluster in Mobile Telecommunications Equipment in China

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The local formation, and benefits, of industrial clusters have received considerable research attention during the past decade. We argue that the existing literature has underestimated the role of external economies of collective bargaining and production capacity accruing to firms in clusters that are derived from traded relationships with institutions, firms, and customers outside local clusters. We define these benefits as non-cluster economies of traded interdependencies among firms in clusters. To illustrate our arguments, we examine the formation in Beijing, China, of one of the world’s few mobile telecommunications manufacturing clusters. We show how Nokia, the lead firm in the local industrial cluster, is able to create non-cluster external economies for its key suppliers co-locating in this purpose-specific industrial cluster.