PUBLICATIONS & REPORTS

Contents Introduction

In this paper, we look into the advantages that have contributed to the creation of Kunshan as an important ICT cluster in the world. One unique feature of Kunshan is that virtually all industries in the region have been transplanted from foreign countries, especially Taiwan. One obvious advantage of Kunshan is the availability of low-cost labor, which, however, is non-essential. Two essential advantages of Kunshan are its proximity to Shanghai, the industrial center of China, and its ability to create unique local institutions that allow the region to become a part of global production networks (GPN). Proximity to Shanghai allows the region to attract skilled labor, which is essential to the formation of a high-tech cluster, and to handle a large volume of trade in a speedy and flexible fashion, which characterizes the new methods of production in the ICT industry. Furthermore, Kunshan has created a unique set of local institutions which are loosely coupled with institutions in the rest of China, but are closely connected with international institutions that support the trans-boundary operations of GPN. This institutional design enables the poorly endowed Kunshan to leverage the Chinese resources to form alliances with foreign capital.