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Related Variety, Global Connectivity and Institutional Embeddedness: Internet Development in Beijing and Shanghai Compared

2011; Routledge; Volume: 47; Issue: 7 Linguagem: Inglês

10.1080/00343404.2011.622744

1360-0591

Jun Zhang,

Regional Economics and Spatial Analysis

Abstract Zhang J. Related variety, global connectivity and institutional embeddedness: Internet development in Beijing and Shanghai compared, Regional Studies. This paper employs the notion of 'related variety' to compare the emerging Internet industry in China's two largest city-regions: Beijing and Shanghai. The findings confirm that the replication and diversification of related variety play a leading role in shaping the locational dynamics of an emerging industry. However, the localized nature of new firm formation cannot be taken for granted as transnational entrepreneurship and venture capital are playing an increasingly salient role. The contrasting experience of the Internet evolution in these two Chinese city-regions also suggests that a region's enduring political–institutional embeddedness significantly influences the generation and evolution of their related variety. Zhang J. 相关多样性、全球联系以及制度嵌入:北京与上海的互联网发展比较研究,区域研究。 本文运用相关多样性方法对中国北京、上海两大城市的网络产业发展进行了比较研究。研究结果表明,相关多样性的复制以及多样化在构建新兴产业地方活力中发挥着主导作用。然而,在新公司的地方化中,不能忽略跨国创业以及风险投资日益突出的作用。对比上述中国两个城市区域中互联网演进的经验研究发现,持久的区域政治制度的嵌入性显著地影响了相关多样性的生成与演进。 相对多样性 机构 连接性 网络 中国 Zhang J. La variété liée, la connectivité mondialisée et l'enracinement institutionnel: une comparaison du développement de l'Internet à Beijing et à Shanghai, Regional Studies. Cet article se sert de la notion de 'variété liée' afin de faire une comparaison de l'industrie de l'Internet naissante dans les deux cités-régions les plus grandes en Chine: à savoir, Beijing et Shanghai. Les résultats confirment que la reproduction et la diversification de la variété liée jouent un rôle majeur dans la structuration de la dynamique de localisation d'une industrie naissante. Cependant, il faut faire attention au fait que la création d'entreprise s'avère très localisée parce que l'esprit d'entreprise et le capital-risque transnationaux jouent un rôle primordial. L'expérience contrastée de ces deux cités-régions chinoises quant au développement de l'Internet laisse supposer aussi que l'enracinement politico-institutionnel durable d'une région influe sensiblement sur la production et le développement de leur variété liée. Variété liée Institutions Connectivité Internet Chine Zhang J. Verwandte Varietät, globale Verbindungen und institutionelle Eingebettetheit: Vergleich der Internet-Entwicklung in Peking und Schanghai, Regional Studies. In diesem Beitrag werden anhand des Begriffs der 'verwandten Varietät' die entstehenden Internet-Branchen in den beiden größten Stadtregionen Chinas miteinander verglichen: Peking und Schanghai. Die Ergebnisse bestätigen, dass die Replikation und Diversifizierung von verwandter Varietät eine führende Rolle bei der Gestaltung der ortsgebundenen Dynamik einer neu entstehenden Branche spielen. Allerdings ist das ortsgebundene Wesen neuer Firmengründungen keine Selbstverständlichkeit, da transnationales Unternehmertum und Risikokapital in diesem Bereich eine immer wichtigere Rolle spielen. Die kontrastierende Erfahrung der Internet-Evolution in diesen beiden chinesischen Stadtregionen legt außerdem den Schluss nahe, dass sich die kontinuierliche politische und institutionelle Eingebettetheit einer Region erheblich auf die Erzeugung und Entwicklung ihrer verwandten Varietät auswirkt. Verwandte Varietät Institutionen Verbindungen Internet China Zhang J. Variedad relacionada, conectividad global e integración institucional: comparación del desarrollo de Internet en Pekín y Shanghai, Regional Studies. En este artículo empleamos la noción de 'variedad relacionada' para comparar la emergente industria de Internet en las dos regiones metropolitanas más grandes de China: Pekín y Shanghai. Los resultados confirman que la reproducción y diversificación de la variedad relacionada desempeñan una función principal a la hora de definir las dinámicas de ubicación de una industria emergente. Sin embargo, la naturaleza localizada de la formación de nuevas empresas no se puede dar por sentada puesto que el empresariado y capital de riesgo transnacionales tienen un papel cada vez más destacado. Las experiencias opuestas de la evolución de Internet en estas dos regiones metropolitanas chinas también indican que la permanente integración política-institucional de una región influye en gran medida en la generación y evolución de su variedad relacionada. Variedad relacionada Instituciones Conectividad Internet China Keywords: Related varietyInstitutionsConnectivityInternetChinaJEL classifications: B52L52L86R11 Acknowledgements This paper is part of the author's dissertation work conducted at the University of Minnesota that has gone through a long process of writing and revision. Particularly, the author is grateful to his advisor, Eric Sheppard, for unyielding support throughout the years and for valuable comments and suggestions on various drafts of this paper. Larry Ma's comments on an early draft of this paper are also appreciated. Notes Whenever a firm had multiple types of operations, the single most significant operation was viewed as determining the subsector to which the firm is assigned. This is determined by the author with reference to the interview data, Zero2IPO data, the company's website, and other published information available on reputable newspapers and business magazines. Interview with the director of a major state-owned Internet media, Beijing, 25 May 2002. Interview with the founder and Chief Executive Officer (CEO) of a pioneering Internet firm, Beijing, 29 April 2002. The author thanks an anonymous reviewer for highlighting this point. In 1988, Zhongguancun was already recognized by the central government of China as the Beijing High-Technology Industry Development Experimental Zone (cf. Zhou, Citation2008). Personal interviews with executives of several Shanghai Internet firms, Shanghai, September 2003. In the non-state sector, the dominance of organizational founders over individual entrepreneurs reveals the stringent constraint of finance capital at the time. Financing was largely unattainable for individuals, except from informal channels or some established firms in the high-technology sector, whereas organizational founders could be financed at least partly through corporate retention. Defined as those VC firms with at least five investment deals by the end of 2008. One firm may have multiple offices: headquarter, subsidiary or representative. This part of the discussion is based on a personal interview with Charles Zhang and his secretary in Beijing on 28 July 2002. Special permission was granted for information disclosure. Zhang's story has become widely publicized in China with the subsequent success of Sohu. The two professors are Edward Roberts, Chairman of MIT's Entrepreneurship Center, and Nicholas Negroponte, founder and Chairman of MIT'S Media Lab. Personal interview in Beijing on 11 June 2002. A typical VC firm begins with fundraising by its general partners from its limited partners, including institutional investors and wealthy families. Once the target amount of money has been raised, the fund is said to be closed and a life cycle (normally ten years) begins. Cash is then made available to selected firms with high growth potential in exchange for shares. Returns are expected to be realized within a time frame (usually three to seven years) through exit events such as an IPO or trade sale of the company. A new round of fundraising starts once an existing fund is liquidated. Larger VC firms usually have several overlapping funds at the same time. Fifty-three VC firms had offices in both Shanghai and Beijing by 2008. Forty-five Beijing firms and seven Shanghai firms were founded by overseas returnees or foreigners after they worked in a local company for a couple of years. They are also considered here as non-local founders. Personal interview with Eric Xu in Beijing on 16 August 2003. Special permission has been granted by the interviewee for information disclosure. Personal interview in Beijing on 10 August 2003. According to Zero2IPO (2009), Shanghai also had China's largest concentration of VC-backed firms in the sector of integrated circuits, especially integrated circuit manufacturing. This also implies the long shadow casted by Shanghai's historical strength in manufacturing activities. Without special notice, information in this section is extracted from Zero2IPO data and individual company websites. In this view, the Internet industry is essentially different from other high-technology manufacturing industries such as telecom equipment and integrated circuits, which are characterized by the heavy involvement of multinational corporations and an export orientation. Shanghai has been more successful than Beijing on the manufacturing side of high-technology activities due to its historical strength in manufacturing and aggressive policies of attracting foreign direct investment. The author appreciates an anonymous referee for highlighting these points.