Greening of industrial hubs: A 21st century development strategy

July 18, 2019

The author acknowledges that this paper was originally contributed as Chapter 24 of The Oxford Handbook of Industrial Hubs and Economic Development, edited by Arkebe Oqubay and Justin Yifu Lin (Oxford University Press, 2020)

 

Abstract

 

After the success of East Asian industrialization efforts in the late 20th century, the 21st century has witnessed the turn of industrializing giants, led by China and India, to claim the fruits of advanced manufacturing industries. At the scale of transformation engaged in by these giants, the traditional fossil fuelled pathway involving oil, gas and coal is simply not feasible – for reasons to do with energy and resource insecurity and catastrophic urban pollution as much as for concerns over global warming and climate change. The key to success in their endeavors lies not just at the macro level of national industrial sectors, or the micro level of firms, but at the meso level of suprafirm structures and dynamics, involving clusters, industrial hubs and EPZs. These hubs or clusters provide the optimal setting for greening initiatives, as the industrial parks are turned into eco-industrial parks based on circular economy principles.

 

Keywords: greening industry; green growth; circular economy; industrial hubs; industrial parks; clusters; eco-industrial parks

 

1. Introduction

 

Industrialization, or industrial development, remains the passport to wealth generation, and as such is sought by countries everywhere. The industrial revolution brought wealth to western Europe, followed by North America in the 19th century and in the 20th century by Japan and then the tiger economies of East Asia, Korea, Taiwan, Singapore and Hong Kong. With its opening up policies of the 1980s leading into the 21st century, China followed these East Asian predecessors, to emerge rapidly as the world’s largest manufacturing nation. Now China is followed by India – and these two industrializing giants are blazing a trail that will doubtless be followed by others such as Indonesia, Vietnam, Brazil, and countries in Africa like Ethiopia. There is no secret as to why these countries are so keen to master manufacturing industrialization for themselves – they want to become rich.

 

But there is a problem. At the scale at which China and India are industrializing, expanded by the contributions from all other contenders, the traditional pathway powered by fossil fuels looks more and more precarious. There is by now widespread agreement that there is no future in a fossil fueled world. The argument is usually presented as a response to growing evidence of climate change and other effects of carbon emissions from the burning of fossil fuels. It so happens that the world’s largest emitters of carbon are coming to be the world’s most recent industrializers, namely China and India. In following a traditional fossil fueled pathway, like all their industrial predecessors, these countries face condemnation as climate destroyers, and are brought under great pressure to curb their carbon emissions, in effect by sacrificing their growth prospects.

 

In extreme forms the argument is presented as a case against economic growth, on grounds that on a finite planet the economy cannot go on growing indefinitely. True as this is, the case against growth ignores the fact that new industrial giants like China and India are emerging, and are lifting hundreds of millions of people out of poverty as they industrialize. A reframing of the development pathways is needed, as a green growth pathway -- framed as a strategy that delivers on economic growth while minimizing its ecological footprint. The advantage of reframing development as green growth is that it takes the emphasis away from moral and ethical considerations – what should the world be doing about climate change (where the tendency is to blame China and India for problems caused by the western industrializers) – and instead brings the focus back to the industrial dynamics of greening.

 

This chapter offers such a reframing of the greening development model, viewing it as a means of capturing the advantages from the falling costs of renewable energy and recirculated resources, and as providing security of supply of energy and resources – against the insecurities and vicissitudes of fossil fuel supplies and mined commodities. Such a perspective starts with the advantages derived by developing countries as they adopt a green growth model of development, including the development of export platforms for the future. An industrial dynamics perspective on greening brings the focus back on to the clusters and industrial hubs that are best fitted to carry a development strategy – which is where the focus should always have been, and which has been the focus of China and India as they make their way back into the driving centre of the world economy (a position they held until the rise of western Europe in the 17th and 18th centuries).

 

The novel contribution offered in this chapter is to bring these two perspectives together – those of greening and of industrial hubs. Each has powerful insights needed in framing a development strategy, but when brought together they offer a powerful synthesis – as the greening of industrial hubs. In this chapter I probe the advantages to be captured by such a synthesis – in the sense that industrial hubs offer optimal settings in which green initiatives can flourish (e.g. as collective energy centres aggregating low-cost renewable energy supplies) and in the sense that greening strategies such as circular economy initiatives stand best chance of success when implemented in existing agglomerations of firms, i.e. in existing industrial hubs. In such settings closure of industrial loops can be most readily identified and implemented.

 

These two great literatures – the greening of industry on the one hand and the industrial dynamics of clustered development on the other – work well on their own in accounting for the major features of development. But they work best when they are combined into a “greening of industrial hubs” perspective, where they work off each other and generate synergies not otherwise available. Our task in this chapter is to highlight these processes and frame them so as to be applied by newly industrializing giants in Africa and elsewhere.  

 

2. Industrialization in 21st century: Scale effects

 

The starting point for an industrial dynamics perspective on the global green shift is a clear sense of what is driving industrialization in the 21st century. The scale of industrialization in present decades is beyond anything previously experienced. As China and then India confront the strategic choices needed as they industrialize their giant economies, they face choices never before encountered.

 

Figure 1. Shift eastwards of global manufacturing value-added

 

Figure 1 shows how the centre of world manufacturing value-added has been shifting eastwards, as the wealthy OECD member countries see their share decline from over 80% in the mid-1990s to just over 50% in the present decade – and (doubtless) to less than 50% by 2020. The countries that have seen the biggest transfer are China, of course, and India. As they build vast manufacturing engines of prosperity, so they move from simpler activities like labour-intensive manufacturing to higher levels of value-added and greater scale of production to meet their vast domestic demand as well as exports.

 

The rise of China in particular has been relentless, overtaking Germany in the year 2000 (just prior to China’s joining the World Trade Organization in the year 2001), then Japan in 2006/07, and finally the USA in 2010 – and rising to account for 25% of world manufacturing value-added by 2015, and doubtless for more than 30% by the present time (Figure 2).

 

Figure 2. China’s rise as premier manufacturing power

The immediate question raised by this unprecedented development is this: what is the energy source that can drive this enormous manufacturing engine? And what is the evidence that the new industrializing giants of the 21st century have already made the energy and resource circulation commitments that will take them inevitably on a new (green) industrial trajectory?

 

3. Green vs black tendencies: China’s experience, and globally

 

Like all previous industrial powers, China has relied initially on fossil fuels – particularly coal – to power its industrial engine. Coal was the cheapest of the fuels, and the most readily available. These facts account for the rapid rise in coal-fired electric power seen in China, particularly after the country’s accession to the WTO, which effectively equated to a declaration that the country was “open for business”. As shown in Figure 3, China’s coal consumption rose rapidly from 1 billion tonnes in the year 2000 to more than 4 billion tonnes by the year 2012 – resulting in China acquiring the unwelcome label as world’s largest producer of carbon emissions from the burning of so much coal. But the year 2012 saw coal consumption seemingly “capped” at 4 billion tonnes, and falling each year thereafter (with a modest increase in 2017). This development reveals the government’s response to the overwhelming damage caused by this coal-fired transition in the form of ubiquitous particulate pollution, or urban smog – making the air in industrial cities almost unbreathable.

 

Figure 3. China’s black shift: One face of China’s energy expansion

 Source: John Mathews and Carol X. Huang, 2018, The greening of China’s energy system outpaces its further blackening: A 2017 update, Asia-Pacific Journal: Japan Focus, 16 (9): 2, at: https://apjjf.org/2018/09/Mathews.html

 

And then there is the green face which represents a quite different set of choices. It is harder to see these green choices and the greening tendencies they unleash because the whole system is still dominated by fossil fuel consumption. We need to capture the data in a way that brings out clearly the greening trend that is steadily turning the entire energy system into one which will be more green than black within just a few years. Figure 4 displays the data for electric power generation in such a way, demonstrating that in terms of generating capacity, electricity sourced from renewable water, wind and sun (WWS) has risen from 25% in 2009 to 37% in 2018 – or a 12% increase in proportion from WWS capacity in a decade. This is a remarkable green shift in just a decade, in the world’s largest electric power system. The data for electricity actually generated shows the same trend but at a lower level – with WWS-sourced electricity rising from 16% in 2008 to 26% in 2018, or a 10% green shift in electricity generated in the past decade. If these green trends persist, as they show every sign of doing (given the commitment of the Chinese government to this green shift trend) then the whole electric power system promises to be more green than black by 2030 or earlier.

 

Figure 4. China’s green shift: Proportion of WWS electric power

Indeed, China is now indisputably the world’s renewable energy superpower, with WWS sources of power reaching a capacity of 696 GW (billion watts) by 2018. Other industrial powers are coming a long way behind – the US at 245 GW, Brazil (mainly hydro) at 136 GW, India at 118 GW and Germany at 120 GW (Fig. 5). These are facts: the issue for us as social scientists is to frame hypotheses that help to account for these facts. Why is China going to such inordinate lengths to equip itself with a post-fossil fuels electric power system and energy system more generally (e.g. rapid build-up of electric vehicles with associated battery production and charging infrastructure)? This is indeed a central question to be answered in explicating the global green shift in energy production.

 

Figure 5. China now a renewables superpower

Source: John Mathews and Carol X. Huang, 2019, Accelerated greening of the world’s electric power system, Global Green Shift, May 17 2019, at: https://www.globalgreenshift.org/single-post/2019/05/17/ACCELERATED-GREENING-OF-THE-WORLD’S-ELECTRIC-POWER-SYSTEM

 

To what extent do developments at the global level mirror those that are clearly under way in China itself? Figure 6 shows how at the global level there has been an increase in capacity sourced from WWS from 22% in 2007 to 32% in 2018 – again, a 10% green shift towards WWS sources in a decade. The way to interpret this is to view the China 10% shift as the driver of a comparable shift at the global level. As China’s WWS capacity expands, so it expands the market and reduces costs – with follow-on effects in other countries, thereby producing the global result shown. Countries around the world benefit from this global green shift and associated cost reduction, thereby driving the propagation of the green shift as optimal way forward for developing countries.[1]

 

Figure 6. Global electricity capacity, 2001-2018: Rise of WWS sources

When we turn to consider resources there is a striking tendency towards an economic system where the focus is on recirculation of resources, in order to enhance resource security and to improve resource efficiency. Again it is China in the lead with its moves to establish a new system of closed industrial loops, characterized in China as a move towards a Circular Economy. The first such closed loop industrial system that received national recognition was the Guitang sugar-related series of industrial loops (Fig. 7).

 

Figure 7.  Guitang closed loop sugar-based industrial system

Source: Mathews and Tan (2011), based on Fang et al. (2007), Lowe (2001) and Zhu & Côté (2004). The variation in the thickness of the lines is an indication of the magnitude of the flows; the squiggly lines indicate the raw materials taken from nature outside the eco-industrial parks. kt = kilotonne.

 

China has now embarked on a nationwide effort to relieve resource insecurity by recycling materials from urban waste. In the case of electronic waste (encompassing TV sets, IT equipment, printers, FPDs etc) there is now sufficient experience to be able to estimate the costs involved, and to formulate the testable hypothesis that urban mining of e-waste is by now more cost-effective than virgin mining of materials in traditional mining operations.[2]

 

4. Global expansion of green platforms and cost reduction

 

What options then do the 21st century giant industrializers face? If they were to follow the traditional pathway of development – the pathway pioneered by all previous industrializing powers – then they would face choices that involve impossible hurdles. Consider the cases of China and India and the looming gaps they face between fossil fuel consumption (steadily rising) and domestic production – small or falling. These gaps have to be filled by imports – which are not only a strain on the countries’ balance of payments, but a source of extreme energy insecurity.

 

A green development pathway presents a way of avoiding these looming hurdles. Reliance on renewable energy sources, which involve manufactured devices; and reliance on circular flows of materials in place of linear flows (from virgin materials at one end of the value chain and waste dumping at the other end), offer a means of enhancing both energy security and resource security. The energy security comes from the fact that manufactured devices can be produced domestically, under the control of the industrializing country – as compared with dependence on mining or drilling for fossil fuels in trouble spots around the world.

 

Resource security comes from the growing dependence on existing resources that are recirculating within circular flows rather than on imported materials mined or drilled or grown in hostile parts of the world. Urban mining of resources utilizing e-waste as “raw material” represents a much more secure means of obtaining resources than traditional pathways.

 

On top of these advantages, there is the fact that fossil fuel consumption inevitably carries with it particulate pollution which creates urban smog that has reached unbearable levels in parts of China and India. The only way to reduce such urban smog is to discontinue the use of the source of the pollution, namely the use of the fossil fuels themselves.

 

Such a choice is made more attractive by the falling costs of renewables and recirculated materials. The falling costs are not contingent on arbitrary political events (as occurs with oil or gas prices, up one day and down the next according to the political situation) but on the reliability of the learning curve, which is associated with every manufacturing operation.[3]

 

Figure 8 reveals the learning curves for two key renewables devices, namely silicon solar cells (where the costs drop by 24.3% for every doubling of production) and for lithium-ion batteries, where the costs drop by 21.6% for every doubling of production.

 

Figure 8. Learning curves for solar PV cells and lithium-ion batteries

Source: BNEF

 

It is these systemic cost reductions, that promise to continue into the future as manufacturing efficiencies improve, that are the driving force behind the global green shift and its propagation from countries like China and India to other developing countries. This demonstrates the clear advantage of a perspective based on industrial dynamics over a perspective on greening derived from a moral response to climate change. But of course it is a fact that choices made to green the energy and resources system driven by energy and resource security considerations at the same time have welcome results in reducing carbon emissions and the global footprint of industrial activities generally. This is indeed a convenient truth.

 

5. Industrial hubs: Industrial dynamics in suprafirm structures

 

Firms do not exist on their own. Or “no firm is an island”.[4] Rather they have multiple connections with other firms and economic entities – connections via contractual networks both vertical (upstream and downstream) and horizontal as well as in networks, clusters, industrial hubs, industrial parks and other suprafirm structures. Firms reach out to form these networks or clusters on their own initiative, as they did in the industrial districts formed in Europe (e.g. Solingen in Germany, Sheffield in Britain or Prato in Italy). But in the 20th century the East Asian late industrializers took steps to ensure that firms would be able to operate taking full advantage of their cluster dynamics – as in the industrial parks formed in Japan, Taiwan or Korea, in Singapore, and then most emphatically in the “special economic zones” formed in China after the opening up of 1979 and in the succeeding years leading into the 21st century.

 

The question has to be raised: what is the reason that these industrial hubs are so prevalent? I attempted an answer to this question in my 2010 Crafoord lecture, delivered at the University of Lund in Sweden. In this lecture I distilled the reasons that smart countries form industrial clusters or hubs into seven points.[5] These capture the industrial dynamics of the evolution of industrial hubs or clusters.

 

1) The cluster concentrates economic activity

Clusters or hubs create multiple inter-firm linkages, and thereby concentrate economic activity in the area demarcated by the firms. Clusters form a suprafirm system, or “industrial bloc” within the economy – as distinct from an industrial sector. Economic development is best captured as an evolutionary process that sees the formation and linkage of these industrial blocs, through intermediary firms identifying gaps in value chains and taking steps to plug these gaps. In this process they can be guided by government intervention – as has been clear in East Asian experience and most recently in the experience of China with its Special Economic Zones. Through concentrating economic activity, clusters generate “knowledge spillovers” – as famously captured by Marshall in his phrase that in clusters the secrets of trade are “in the air”.

 

2) The cluster expands the market

The most significant “output” of a cluster as systemic suprafirm entity is its expansion of the market for the goods or services produced by the firms participating in the cluster. Adam Smith in 1776 captured this idea with his theorem that “the division of labour is limited by the extent of the market” – meaning that specialization and production of intermediary goods can be enhanced as the market expands. And the fastest way to expand the market for a set of goods is to facilitate interfirm linkages between the firms producing the goods, to encourage specialization and the capture of increasing returns (or systemic returns).

 

3) The cluster defines itself through joint action

While simple agglomeration economies are available to firms in clustered settings (hubs) (due to knowledge spillovers and shared infrastructure), cluster dynamics really generate competitive advantages when firms undertake joint actions of various kinds (e.g. export consortia, R&D consortia). These actions generate the collective efficiencies that self-define clusters. Other than these collective efficiencies clusters do not possess legal definition – except when they are founded and managed through agencies created for the purpose by governments (e.g. Hsinchu Science Park in Taiwan).

 

4) The cluster is open to flows of goods (trade), capital (FDI) and labour

Clusters are self-contained islands of concentrated economic activity within a wider economy, and as such they operate best when open to economic flows – of goods (trade), of capital (FDI) and labour. Clusters decline when these flows are curtailed. They may be thought of as the “nutrients” that keep the cluster alive.

 

5) The cluster strives to link with other clusters at a higher level of recursion

Clusters generate flows of activities that were called by Alderson (1965) in his functionalist theory of marketing as “transvections” (by contrast with individual transactions) – now better known as value chains. Profit incentives lead to multiplication of value chains (or transvections), and as firms form these cross-linkages so they expand economic activity. In this way industrial “blocs” multiply and connect with each other to generate increasing returns and concentrate overall economic activity.

 

6) The cluster works best in an institutional environment that promotes circular and cumulative causation

A cluster that is founded (or forms spontaneously) through the operation of these five theses can still fail if its operating environment is unfavourable. Countries and regions only derive the full benefits from clusters when they create a favourable business, legal, tax and entrepreneurial environment within which the success of one cluster helps to propagate success across to other nascent or developing clusters. This propagates a pattern of “circular and cumulative causation” or as Nicholas Kaldor (1970) aptly put it, an industrial “chain reaction” where one cluster works off and multiplies the effects of other clusters, capturing systemic synergies.

 

7) The cluster evolves through a shuffling and reshuffling of its collective resources; through a shuffling and reshuffling of its activities (transvections); and of its collective routines

While the firm may be described and analyzed strategically most effectively through its constituent resources, activities and routines, these factors come into their own when applied at the level of clusters.[6] Clusters are rich in resources (skills, technologies, know-how), and it is the constant shuffling and reshuffling of these resources that gives the “spring” or “bounce” to a cluster. This constitutes the cluster-level analog of the genome of a species, whose reshuffling provides the species with its adaptability to a changing environment. Firms put these resources to use in implementing activities, which generate revenues. The firms shuffle and reshuffle these activities (or transvections) as environmental conditions change; these changes constitute the cluster-level analog of phenotypical expression of genotypes. Firms link their resources to activities via routines (such as procurement routines, sales routines, R&D routines); as they do so repeatedly they generate cluster-level routines that embody higher-order capabilities, which account for the “causal ambiguity” of successful clusters. Clusters are created and re-created over the long-term. Their evolutionary and entrepreneurial dynamics provide the key to regional and national competitive advantage.[7]

 

As discussed in several chapters in this Handbook, clusters or industrial hubs underpin industrial success, even if they are not always recognized as being the critical factors that they are. But successful cases of industrial development – going back to Europe and the United States in the 19th century; to Japan, then Korea, Taiwan and Singapore in the 20th century; and certainly China and India in the 21st century – all can be shown to depend on explicit cluster-level policies and government actions. As recognition grows of the significance of industrial clusters or hubs in industrial success, so they are becoming the focus of industrial policy by industrializing countries in the 21st century.

 

By the end of 2011, China boasted no fewer than 131 national economic and technological development zones, 169 high-tech development zones, more than 1300 industrial parks managed at provincial level, and a further 2500 industrial parks of various kinds.[8]  This is a far more intensive reliance on related groups of firms (industrial parks) than for any previous industrializing nation.

 

Indeed the Chinese Academy of Social Sciences has been tracking the “Top 100 industrial clusters” in China for some time. The latest graphic is reproduced in Fig. 9.[9] The chart reveals how some industrial cities can boast three, four or five separate industrial clusters, each one usually specializing in some specific sector such as electronics, IT, clothing and footwear, general engineering, petrochemicals, automotive and so on.

 

Figure 9. Top 100 industrial clusters in China.

India has been pursuing likewise systematic policies of creation and management of industrial clusters or hubs, largely through the creation and management of EPZs. The Chinese model doubtless looms large in India’s EPZ strategy, even if it has not proven to be as successful in India as it has in China.[10]

 

Other countries such as Ethiopia are now taking up the challenge of co-locating firms in purpose-built industrial parks, or hubs, or EPZs or SEZs.[11] They do so in order to derive the obvious benefits from doing so – following on the success of China and India.[12]

 

6. Greening of industrial hubs

 

We now link the twin features of the argument of this chapter, namely the greening of development strategies and the role of industrial hubs or clusters, in the process of greening of industrial hubs. Both aspects are significant. While the difficulties involved in greening the economy are considerable, they are much diminished when the focus is restricted to greening of existing industrial hubs. And industrial hubs or clusters provide a ready-made setting for greening strategies, in that firms which are already co-located and interlinked via value chains, enjoy the greatest possibilities of capturing resource and energy efficiencies through implementing green strategies at the cluster level.

 

Clusters, then, form the optimal setting for greening initiatives, for a number of reasons. In terms of energy, a hub or cluster facilitates the creation of energy centres to serve the co-located firms -- a common electric power source, managed across all users to optimize efficiency, and provide a ready market for local renewable generation. The hub or cluster accommodates shared infrastructure such as water and steam supplies, encouraging recycling and efficiency improvements. In terms of resources, the co-located firms can capture opportunities for the closing of industrial loops, turning outputs into inputs of fresh processes and eliminating waste generation. The cases of urban mining in industrial hubs, where resources are recirculated rather than dumped as waste, provide excellent examples where industrial parks are turned into eco-industrial parks through greening initiatives. China is an exemplary case where this strategy is being pursued at a national level, as a fundamental national development strategy. China’s Circular Economy ambitions have been clear ever since the release of the White Paper “Opinions on Accelerating the Development of the Circular Economy” by the State Council in 2005.[13] Measures to promote Circular Economy initiatives utilizing existing industrial parks were outlined in the 11th Five year Plan (2006 to 2010), 12th FYP (20111 to 2015) and 13th FYP (2016 to 2020). Industrial parks provide the optimal setting for initiatives such as improved waste collection and treatment facilities, platforms for resource exchanges, R&D in water purification technologies, and CE measurement and indicator systems. These initiatives culminated in the adoption in 2016 of a strategy for focusing Circular Economy (CE) initiatives on existing industrial parks, as stated explicitly in the 13th FYP.[14] China is now proceeding to set national standards to guide the development of such eco-industrial hubs.[15]

 

The Chinese approach of converting industrial parks to eco-industrial parks is best exemplified in cases such as the closed loop eco-industrial transformations undertaken in the Nanjing Chemical Industrial Park, or by the urban mining initiatives undertaken in the Suzhou New District.[16] The Nanjing Chemical Industrial park (NJCIP) was established in 2001, and is now one of the largest agglomerations of chemical industry activities in China. An existing value chain in the park involves petrochemical organic solvents such as benzene and propylene, produced by the Chinese company Sinopec Yangzi Petrochemicals. To avoid waste generation by closing industrial loops, the Park administration induced the UK firm INEOS to form a Joint Venture with Sinopec Yangzi, with the goal of making use of benzene, propylene and hydrogen from upstream enterprises to produce phenol and acetone as inputs for downstream polycarbonate manufacturers involving recovery of recirculated propylene oil.

 

The Suzhou New District (SND) is one of China’s oldest industrial parks, having been established in 1990, and was designated as a National Hi-Tech Industrial Development Zone by the central government in 1992. In its more than two decades of experience it has attracted 16,000 enterprises, with total industrial output reaching US$ 42 billion. The SND is now a prime site for the demonstration of urban mining, with the recirculation of copper used in printed circuit boards (PCBs) as principal activity. The PCBs are key components in IT products produced in the SND. In the past the copper utilized in the PCBs would have been derived from traditional mining activities, and after disposal of the IT products as waste, the PCBs no longer needed would be disposed of in landfill. Now instead recirculation of copper is effected through companies extracting copper from waste etching solution, waste copper foil and sludge.[17] This is of economic and environmental benefit, in that companies are enabled to find a profitable niche where none was recognized before, and in doing so they drastically reduce the environmental footprint of the IT manufacturing activities in the SND.

 

7. Concluding remarks

 

In this chapter the argument is developed that countries newly embarked on industrialization programs in the 21st century have everything to gain by focusing their economic activities in agglomerations of firms known as industrial parks or hubs or clusters (e.g. EPZs or SEZs) where the firms can generate increasing returns through capturing systemic synergies. At the same time such countries stand to benefit by switching from a traditional fossil fueled development pathway, with all its side effects in the form of particulate pollution and energy and resource insecurity, to a pathway based instead on renewable energy sources and circular economy resource pathways. These are not programs fit only for rich countries but are instead eminently suited to the needs of industrializing countries, because of their intrinsic advantages and the diminishing costs associated with such pathways through the learning curve.

 

The chapter’s principal contribution lies in linking these two arguments, in the claim that green initiatives face the best prospects of success if undertaken in industrial hubs, turning industrial parks into eco-industrial parks – with China as exemplary case where this strategy is already being pursued. The hubs provide prospects for success because of the existing colocation of firms and existing initiatives to capture joint efficiency effects (through shared resources and inputs). And the green initiatives such as switching to renewable energy sources and closing industrial loops to produce circular resource flows stand best chance of success if implemented in existing colocations of firms, namely industrial parks or hubs.

 

In spite of all the obstacles, industrializing countries have every prospect of success in advancing their industrializing agenda if they do so through green growth strategies involving industrial hubs, or what I am describing in this chapter as pursuing a strategy of greening industrial hubs.

 

 

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Zeng, D.Z. 2015. “Global experiences with Special Economic Zones: Focus on China and Africa.” Policy Research Working Paper 7240. Washington DC: World Bank

Zeng, X., Mathews, J.A. and Li, J. 2018. Urban mining of e-waste is becoming more cost-effective than virgin mining, Environmental Science and Technology, 52 (8): 4835-4841

 

 

 

[1] A different way of viewing the same process is to bring out the black vs green capacity additions made each year. This is to focus on the differential, or rate of change of the system. Ever since 2014 the green additions to global electric power capacity have exceeded – or outranked – the black additions for each year. This is a trend that can only be expected to accelerate as coal is phased out as fuel of choice in the electric power system globally. See John Mathews and Carol X. Huang, 2019, Accelerated greening of the world’s electric power system, Global Green Shift, May 17 2019, at: https://www.globalgreenshift.org/single-post/2019/05/17/ACCELERATED-GREENING-OF-THE-WORLD’S-ELECTRIC-POWER-SYSTEM

 

[2] The results confirming this hypothesis, secured by my Chinese colleagues Dr Xianlai Zeng and Dr Jinhui Li and published jointly, are found in Zeng, Mathews and Li (2018).

 

[3] This chapter draws on my work on greening of development strategies, from Mathews (2008) to Mathews (2019a; 2019b).

 

[4] The phrase recalls John Donne’s 17th century classic poem, “No man is an island”. See Håkansson and Snehota (1989).

 

[5] See the published version of the 2010 Crafoord Lecture in Mathews (2012).

 

[6]  See my 2006 book on this theme, Mathews (2006).

 

[7]  There is a clear biological analogy to the evolutionary pathways of industrial hubs. As I suggest, the collective resources of a hub parallels the biological genotype, while the set of revenue-earning activities parallels the biological phenotype. By this reckoning, there is no biological equivalent to the set of routines. Note that this interpretation differs from that offered by Nelson and Winter (1982) in their justly famous contribution, where they suggest that firms’ evolutionary dynamics are driven by adaptation of their routines.

 

[8]  See Mathews, Tan and Hu (2018), Note 5, p. 179. The Chinese source is China National Institute of Standardization, “Guidelines for Circular Economy in Industrial Parks”, 2012.

 

[9]  The chart is produced via the Li & Fung Research Centre in Hong Kong and Beijing Axis Analysis, and carried by BSA China Sourcing at: https://www.bsasourcing.com/sourcing-from-china.

 

[10]  See discussion of positive and negative experiences in India in Aggarwal (2012) as well as in the chapter XX in this Handbook.

 

[11]  On the experience of SEZs in Ethiopia, see Oquba (2019; 2020).

 

[12] On the experiences of China, Africa and elsewhere with SEZs, see the World Bank reports from Zeng (2011; 2015).

 

[13] See the text of the White Paper at: http://www.asianlii.org/cn/legis/cen/laws/ootscoatdore734/

 

[14]  See Chapter 43 of the 13th FYP, on promotion of conservation and efficient use of resources, with Section 5 devoted exclusively to Circular Economy initiatives. The 13FYP is available in an official English translation at: http://en.ndrc.gov.cn/policyrelease/201612/P020161207645766966662.pdf

 

[15]  See Huang et al (2019).

 

[16] These cases are drawn from Mathews, Tan and Hu (2018).

 

[17] Hao Tan and I described this case of urban mining at SND in our article in Nature (Mathews and Tan 2016).

 

 

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