Although, developing agricultural machinery industrial cluster plays an important role in agriculture, countryside and farmers it is confronted with the background of export orientation, currency appreciation, ageism and rising labor cost as the other traditional industrial clusters. Since the early 80s, China implements the strategy of export growth, the ratio of sum export to GDP increased from 10.6% in 1980 to 24.92% in 2012; since the year of 2008s international financial crisis, threatened by Americans double deficits, the currency appreciate 9.20% in the short 4 years; the proportion of the people 65 or over of the total population rise 5.60% in 1984 to 9.10% in 2012.The staff average monthly income increases from 458.3 yuan in 1995 to 47593 yuan in 2012. In the meanwhile its extremely urgent that traditional low generation of processing gradually move into cost depression, such as India and Vietnam and high-end, green and intelligent manufacturing appeals and regresses to America, developed country, research the agricultural machinery industrial clusters new direction of transformation and upgrading. The paper takes example of Anji bamboo machinery cluster to discover the new upgrading path of agricultural machinery industrial cluster which is insertion in local cluster network as a transition way.
Presently, researches of industrial cluster upgrading path mainly concerns internal industrial upgrading and embeddedness in global value chain. In terms of industrial upgrading, industrial cluster network changes during different phases (i.e. emergence, growing, maturity and declining period) (Zhong, 2006). As network evolves, companies within the cluster affect each other through three levels of network, or to be specific, core network, facilitative network and interactions between internal-external environments (Lei et al., 2004). During this period, resource inflow and cluster innovation changes over time (Romanelli and Khessina, 2005), while the industrial upgrading can be influenced by connections between network nodes, roles of leading firms within the network, the network structure extension (Wang and Zhang, 2010; Wang and Wang, 2012); therefore, the specialization and cooperation, core firms introduction and fostering, as well as internal knowledge transfer are critical to industrial upgrading within a cluster.
Global Value Chain (GVC), on the other hand, is an extended network compared with local cluster network, to which the local cluster insertion mode changes over the cluster life cycle. The embeddedness mode four stages: Original Equipment Manufacturer (OEM), or mutual beneficial cooperation, turn-key project, exportation and Merger and Acquisition (M andA). The details are shown in Table 1.
As can be seen from Table 1, the advanced economies, attributed to the core technology and advantageous marketing network have been governing the primary stream of value chain for a long period which has hindered the transition from market to network mode and further transitions of leading firms in developing economies.
In the light of that, local cluster insertion to GBV can be achieved by cluster
market share expansion via embeddednes in local industrial chain and upgradingvia
specialization, core firm fostering and internal knowledge transfer. Based on
cluster embeddedness to local industry or other clusters and the pro-growth
effect (Ou-Yang, 2008), there are four cluster embeddedness
types: (a) New industry-oriented, (b) Local industry oriented, (c) High embedded,
(d) Low embedded (Fig. 1). The forth type is the favorable
type for cluster upgrading it closely links to the upper and down stream enterprises
and positively influences local cluster on employment rate of labor force, resource
utility rate and sustainability2.
BAMBOO PROCESSING MACHINERY CLUSTER: CURRENT SITUATIONS AND PORBLEMS
Ever since 1970s, when reform and opening up policies initiated, Chinas economy has experienced three phases, that is, mechanism transition (1979-1989), market orientation (1989-1999) and rapid growth (1999 to present) (Yang, 2008). Agricultural machinery, a traditional industry in China, developed at high pace during economic transition. The industrial product rose by 60 times from 5.422 bilion yuan in 1977-338.24 billion yuan in 2012 and China has become the second agricultural machinery manufacturer after the USA. The effects of industrial cluster has manifested itself and representative clusters can found in Shandong, Henan, Hebei, Jiangsu, Zhejiang, Jilin, Sichuan, Beijing, Tianjing and Chongqing. For instance, there are paddy rice planting equipment manufacturing cluster in Central and Southern China; the typical are Luqiao planting and protection machinery cluster, Jiaojiang spray and irrigation equipment cluster, Guanyun rotary cultivator manufacturing cluster and Chongqing small sized cultivating equipment cluster (Liu, 2012; Yang et al., 2007).
However, compared with the advanced economies, four problems can be observed in the domestic agricultural machinery manufacturing clusters. First, the overall technology level, especially the intelligent control technology, falls behind 20 to 30 years. Second, despite large number of enterprises, the industrial scale is too small to foster some leading firms or alliances that are internationally competitive. Third, the degree of specialization, consummate productive ability and value chain extension require improvements. Last but not least, there is regional imbalance in cluster development. As has been mentioned above, the research on Zhejiang cluster aims to explore the upgrading path which is of guidance and pragmatic significance.
Bamboo industry in Anji, Zhejiang grew rapidly in past 7 years. In terms of number of enterprises, the figure increases from 1882 in 2005 to 2427 in 2012; whereas the total product climbs from 5.4 billion yuan in 2005 to 15.8 billion yuan in 2012 at the annual growth rate of 16.58%. Bamboo processing machinery manufacturing industry is a traditional and characteristic industry in Zhejiang which is involved in the whole stage of bamboo processing from timbering to fine machining and strongly supported the bamboo industry. The cluster development can be dated back to late 1980s when the increasing growth of bamboo industry requires more machinery. In 1988, the first two bamboo processing machinery manufacturing joint ventures was established and mainly dedicated to bamboo mat production machines. In 1993, Xiaofeng Chiwu agricultural machinery manufactory innovatively product the first local machinery based by learning from Taiwan joint ventures. Xiangling, Tiangong and Jitai manufacture were founded successively in Xiaofeng Town, Anji and Xiaofeng cluster becomes domestically competitive in this area. Up to 2012, there are 26 main firms and some 50 private owned peripheral firms, contributing 0.67 billion yuan annual total product (Table 2). The products entail whole processing machinery of toothpicks, bamboo mat, bamboo skewers, chopsticks and bamboo floor. Additionally it has developed hydraulic press and accessories for reconsolidated bamboo floor production which covers 80% of market share.
In spite of the industrial growth displayed in Table 2, the cluster is faced wirh product homogeneity, low technology and shortage of supporting factors. Specialization coordination is not fully prevailed. For instance, within the 26 firms, only three that is, Tiangong, Yukang and Jianlin respectively focus on painting, hydraulic press and weaving machinery production. In contrast, more than half firms wire drawing machine, Bamboo planer and slicer. This persecutes economic scale and reduces product qualities. In terms of technology, the cluster majors the middle stream of the value chain and does not perform well in R and D. The products only cater for the need of micro-sized firms instead of large scale enterprise, the deteriorating cycle on one hand increases small scale and low end production; on the other hand it inhibits automation and informationalization. In addition, most products are tailored to the local bamboo species, hence cannot be applied to other regions with different species of bamboo. Furthermore, the region lacks universities, research institutions, government and intermediaries to support the clusters long term development. As the cluster is originated from town, the inconvenience increases living costs and makes it less attractive to talents. As the upper stream of the value chain transfers to districts (e.g. Jiangxi, Hunan and Fujian) with lower labor costs, these emerging regions are likely to be the future competitors of Anji bamboo machinery manufacturing cluster.
UPGGRADING PATH OF THE CLUSTER
The present markets saturation indicates that market expansion cannot simply limit to traditional bamboo processing machinery market. According to strategy of embeddedness to local cluster (Chen and Zhang, 2012), we regard Anjis local clusters (i.e. bamboo industrial cluster, bamboo processing machinery manufacturing cluster and chair industrial cluster) and external wood processing machinery manufacturing cluster as a overall system (Fig. 2).
|| Anji bamboo processing machinery manufacturing industry, an economic indices (2006-2012)
|Source: Anji bureau of bamboo industry development|
Bamboo machinery manufacturing clusters insertion to local cluster network
We suggest that the industry closely inserted to the internal cluster and that foster wood processing machinery manufactures to expand the market share.
Path 1: Insertion to bamboo industrial cluster: The closerelationship between bamboo processing and its equipment demonstrates that spatial expansion and value chain extension can increase the market share. According to the investigation, 65% of the machinery firms have more than half of their customers outside Zhejiang and with the emergence of bamboo industry in other province, the demand may increase. Additionally, more heterogeneous products can be developed as required by the local bamboo industry to prevent vicious competition.
Path 2: Bridging to local chair industrial cluster: As the headquarter of Chinas office chair industry, Anji has 758 firms reaching 26 billion yuan at sales in 2012, 33.2% (or 12.4 billion yuan) of which are achieved by enterprises of more than 20 million yuan annual sales. Two-third of the municipal tax is attributed to the industry and there were 283 export firms which had business relationship to 190 countries I nternationally, gaining export value of 1.47 billion USD.
Nevertheless, the chair industry confronts the rising labor costs pressure resulted from inflation, the minimum wage standard and higher income expectation. Hence, machine submitting labor force is inevitable in long term, thus offering the chance for bamboo machinery manufacturers to develop machines that can promote In the case of market upgrading, although the cluster has a lion share market and to some extent the reputation within the industry nationally, efforts sill need to be made in brand strategy, channeling and marketing. automation of chair production. For instance, the two leading firms of chair industry, Henglin and Yongyi, have cooperated with Jianlin Bamboo Machinery in R and D of automatic welding machine. It is reckoned that there will be 0.3 billion (45% of the present output value) extra annual earnings if bamboo processing machinery industrial cluster inserted to the chair industry.
Path 3: Extension to wood processing machinery industrial cluster: Although, there are differences between wood and bamboo, the principle of processing is similar; in particular, the painting and electric abrasive finishing are similar. Compared with bamboo machinery industry, the wood machinery industry covers larger market which created 10 to 1.2 billion yuan output value in 2012, almost four times the size of the bamboo market. Apart from that, the former industrys profit rate is 2-5 times the size of the latter. Hence it is promising for the bamboo machinery firms to penetrate to wood machinery industry based on their premier knowledge. Actually, some firms in the cluster have attempted to wood machinery and 20% of the clusters business went from wood machinery products in 2012, according to Anji Bamboo Processing Machinery Industry Association. The embeddedness strategy catalyzes mutual benefits and synergetic effects in that the bamboo machinery firms absorb knowledge from the wood industry and actualized the goal of economics of scale and internal upgrading.
To summarize, industrial insertion and embeddedness to local cluster network are the sine qua non of upgrading (IEU model); nonetheless, there are two paths for technological and market upgrading.
In terms of technological upgrading, when inserting to the local cluster network, enterprises can cooperate with local leading firms and MNCs by attaining information inflow and knowledge spill in order to enhance innovative capability. Taking the leading firm (Xiangling) in the cluster as an example, the company started R and D in reconsolidated bamboo products from (1997) and succeeded after 7 years of trial and errors. The advantageous competitiveness in higher efficiency, utilization rate and lower labor costs have drawn attention of other firms represented by Huabeng, Yukang and Huafeng to follow the step in technological progress. Up t 2012, 20% of the clusters total sales owed to reconsolidated bamboo machinery production.
Taking brand awareness as an example, there is only one firm that was awarded the municipal level of Famous Trademark Honor in 2006. Those can be enhanced by establishing intermediary institutions that provide consulting, training, certifying, assessment, testing, designing and accounting services.
Bamboo processing machinery manufacturing cluster upgrading technological and market improvements. Adapted from: Chen and Zhang (2012)
As has been discussed above, we recommend the synergic innovation stage of bamboo processing machinery manufacturing cluster based on technological and market improvements (Fig. 3).
This research is funded by National Science Foundation of China (71173188), Hangzhou Science and Technology Development Plan Soft Science Project Research on Intellectual Property Protection Mechanism in Hangzhou Combination of Industrial Self discipline and Government Interference (20130834M46) and the construct program of the key laboratory in Hangzhou.
1OEA:Original Equipment Assembly
2Employment rate of labor force in this case means the proportion of local employed labor force to the whole labor forced employment of the cluster inserting
in local chain. Resource utility rate is the ratio of local resource for production to the whole production resource. Sustainability is calculated by comprehensive
environment improvement costs