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A measure of industrial clustering: Considering relatedness and scale

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  • Ruan, Jianqing
  • Zhang, Xiaobo

Abstract

An industrial cluster is a geographic area with a concentration of large numbers of firms in related industries. However, many clustering measures, such as regional specialization and industrial concentration measures, often overlook the two core features of clusters: industrial relatedness and scale. A few recently developed measures which address both factors are limited to specific industries and do not provide a regional-level perspective. In this paper, we introduce a novel clustering index that incorporates both relatedness and scale. Taking China as an example, we demonstrate that our index significantly outperforms existing measures in predicting major industrial clusters, both in the short and long term. Additionally, we show a positive correlation between the initial level of our clustering index and subsequent local economic performance, as measured by nighttime light intensity, patent grants, and the number of new businesses.

Suggested Citation

  • Ruan, Jianqing & Zhang, Xiaobo, 2025. "A measure of industrial clustering: Considering relatedness and scale," China Economic Review, Elsevier, vol. 94(PB).
    • Handle: RePEc:eee:chieco:v:94:y:2025:i:pb:s1043951x25002366
    DOI: 10.1016/j.chieco.2025.102578
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    References listed on IDEAS

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    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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