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Low-Quality Crisis and Quality Improvement: The Case of Industrial Clusters in Zhejiang Province

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Industrial Districts in History and the Developing World

Part of the book series: Studies in Economic History ((SEH))

Abstract

Supporting institutions and policies are key in helping firms improve product quality. However, the emergence of quality-supporting institutions has not been well studied. Based on both qualitative and quantitative evidence from Chinese clusters, this chapter shows that quality-enhancing institutions and policies often emerge in response to crises. Crises such as consumer boycotts and impositions of export barriers can catalyze collective actions by entrepreneurs and local governments to improve product quality.

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Notes

  1. 1.

    There is a large body of literature on the relationship between competition and innovation. However, the empirical findings are mixed. Using data from publicly traded manufacturing firms in the United States, Hashmi (<CitationRef CitationID="CR21" >2013</Citation Ref>) finds a mildly negative relationship between competition and innovation, offering support to the Schumpeterian view. In contrast, a few empirical studies based on UK data (Blundell et al. <CitationRef CitationID="CR8" >1999</Citation Ref>; Bloom et al. <CitationRef CitationID="CR7" >2011</Citation Ref>) reveal a positive correlation between competition and innovation. To reconcile the conflicting findings, Aghion et al. (<CitationRef CitationID="CR2" >2005</Citation Ref>) expanded the Schumpeterian model to allow an inverted-U shape relationship between competition and innovation. In their model, whether the relationship is positive or negative depends on a product’s distance from the world technology frontier, which in turn may be determined by institutions and policies.

  2. 2.

    See http://stat.wto.org/CountryProfile/WSDBCountryPFView.aspx?Country=CN&. Export performance may not be a perfect measure of a country’s product quality as a country can use “high-quality” versus “low-price” growth strategies (Hallak and Schott <CitationRef CitationID="CR20" >2011</Citation Ref>). Nonetheless, as noted by Rodrik (<CitationRef CitationID="CR36" >2006</Citation Ref>) and Hausmann et al. (<CitationRef CitationID="CR24" >2007</Citation Ref>), China has comparable export quality to the most developed economies in the world.

  3. 3.

    Strictly speaking, trademarks and patents are evidence of both innovation and upgraded quality. They do not necessarily represent only upgraded quality.

  4. 4.

    The literature on regulations is too broad to comprehensively review (Coase <CitationRef CitationID="CR19" >1959</Citation Ref>; Joskow and Rose <CitationRef CitationID="CR27" >1987</Citation Ref>). Here we primarily mention a few works related to the emergence of regulations.

  5. 5.

    The exchange rate in 2004 was about 0.13 USD:1 Yuan.

  6. 6.

    People’s Republic of China Product Quality Certification Regulations was introduced in 1991. China Quality Certification Centre (CQC) was created as a professional certification body to provide quality certifications. For a firm to apply for a quality certification is optional but costly (about 2000 US Dollars for each certification). CQC sends auditors to inspect factories and certify if their product quality complies with a certain standard. The most common standard is ISO 9001 drafted by the International Organization for Standardization. Certification is helpful for firms as a means to signal their product quality and increase exports.

  7. 7.

    The information can be searched from the webpage of the Zhejiang Bureau of Quality and Technical Supervision (http://www.zjbts.gov.cn/search/cxzx.aspx).

  8. 8.

    In many workshops, workers eat, live, and work in the same place. They are often called “three-in-one” workshops.

  9. 9.

    Here we mainly examined the correlations between crises and quality upgrade. One should be cautious in drawing any strong inferences on causality.

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Author information

Authors and Affiliations

  1. China Academy for Rural Development, Zhejiang University, Zhejiang, China

    Jianqing Ruan

  2. International Food Policy Research Institute, Washington, DC, USA

    Xiaobo Zhang

Authors
  1. Jianqing Ruan
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  2. Xiaobo Zhang
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Correspondence to Jianqing Ruan .

Editor information

Editors and Affiliations

  1. Kobe University, Kobe, Japan

    Tomoko Hashino

  2. Kobe University, Kobe, Japan

    Keijiro Otsuka

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Ruan, J., Zhang, X. (2016). Low-Quality Crisis and Quality Improvement: The Case of Industrial Clusters in Zhejiang Province. In: Hashino, T., Otsuka, K. (eds) Industrial Districts in History and the Developing World. Studies in Economic History. Springer, Singapore. https://doi.org/10.1007/978-981-10-0182-6_10

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  • DOI: https://doi.org/10.1007/978-981-10-0182-6_10

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  • Print ISBN: 978-981-10-0181-9

  • Online ISBN: 978-981-10-0182-6

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