Abstract
Communities are important intangible assets for regional development, yet current literature either overemphasizes local institutions and localized social networks or focuses on transnational Communities. In this study, I propose a transregional perspective on this issue and try to reveal how the transregional community is a facilitating mechanism for regional economic development. Based on the empirical case of the Chaoshan region in China, I find that transregional communities help a region construct relational proximity with other localities by building distant clusters, sustaining transregional transaction, creating transregional buzz, and initiating transregional start-ups. As a result, regions are able to obtain nonlocal assets to enhance their competitiveness in both domestic and global markets.
Keywords: Transregional communities; regional economic development; small and medium enterprises (SMEs); China
Introduction
Many local governments encourage industrial clusters in the belief that an agglomeration economy would enhance regional competitiveness. Communities are considered essential intangible assets in successful clusters. As Rodriguez-Pose and Storper (2006) point out, communities have beneficial effects by generating trust, reducing transaction costs between economic agents, limiting moral hazards and “free-riding,” mitigating information asymmetries, and enabling the matching of individuals to aggregate interests. Local communities thus are important to support regional collaboration and innovation.
At the same time, some researchers point out the crucial role of transnational communities for regional upgrading in the era of globalization. Transnational communities facilitate ongoing transnational inter-/intrafirm communication and transfer skills and tacit knowledge to developing regions (Yeung, 2009). Indeed, communities are not confined by regional boundaries, but current studies either overemphasize a local level or are trapped in a local/global dichotomy. Hence, I propose in this study the concept of a transregional community, referring to a large group of people sharing a common identity and maintaining social, cultural, economic, and/or political connections although dispersed throughout more than one region. A transregional community at a national scale may also help regional actors access nonlocal assets and promote regional economy.
In this study I attempt to reveal how transregional communities contribute to regional economic development. Empirical studies of the Chaoshan region in China demonstrate that local manufacturing firms, especially small and medium enterprises (SMEs), cooperate with distributors in distant specialized markets through transregional communities to enter and respond to external markets rapidly. The Chaoshan region is the primary settlement area for the Teochews, a subethnic Chinese group. Teochews migrate to different cities in China and abroad while maintaining Teochew identity along with social and economic connections to their hometown. Teochew networks in Southeast Asia, as a prominent example of a transnational community, contribute to transnational business transaction and cooperation (Redding, 1990; Yeung, 2000). Manufacturing firms in Chaoshan also use transnational and transregional Teochew social ties to develop global and domestic markets, respectively. Admittedly, transregional communities are not a necessary condition for regional development. Nevertheless, these social and cultural networks are significant for those regions that lack efficient channels to approach external markets. Transregional communities offer opportunities to strengthen regional competitiveness by using nonlocal resources such as capital, information, and so on.
I present the findings of my research here in six sections. In the next section I offer a literature review and theoretical framework, followed by an empirical background overview and explanation of the methodology. In the fourth section I describe the development of the toy and ceramic industries in Chaoshan, which serve as the case for this study. In the fifth section I discuss how transregional communities contribute to these two industries’ domestic marketing by connecting Chaoshan with distant, specialized markets. In the final section I summarize findings and briefly discuss implications and future research agendas.
Communities and Regional Economic Development
Since the 1970s the mass production of standardized products has been unable to meet rapidly growing consumer demand for specialized and differentiated goods. A flexible production regime has increasingly replaced Fordism (Piore & Sabel, 1984). Regions that successfully adapted to flexible specialization were usually made up of a number of small and medium enterprises (SMEs) connected by specialized transaction linkages and coordinated by social networks (Sforzi, 2003). The sustainable success also depended on “the local culture, the shared understandings and practices that unify a community and define everything from labor market behavior to attitudes toward risk-taking” (Saxenian, 1994, p. 7). Local communities thus were important because this new production regime requires rapid information exchange for speedy response to markets together with in-depth communication for collective learning and regional innovation (Cooke & Morgan, 1998; Storper, 1997).
Meanwhile, transnational communities emerged from the enhanced global mobility and connectivity of those who shared common norms or purposes across the world. In East Asia, transnational communities have long been considered a key factor for regional development. Ethnic Chinese transnational business networks promote foreign investments, shape transnational economic transactions, and facilitate the rise of high[1]tech industrial clusters (Dicken & Hassler, 2000; Hsing, 1996; Saxenian & Sabel, 2008; Yang & Hsia, 2007; Yeung, 2000). Transnational communities provide “a direct mechanism for transferring the skills and tacit knowledge that can dramatically accelerate industrial upgrading in their developing countries” (Saxenian, 2002, p. 186). They coordinate transnational firm relationships particularly when firms are based in regions with different languages and business cultures.
Accordingly, geographical boundaries do not confine the impact of communities on economic activities. Communities facilitate interactions between regional and nonregional actors by providing common social space for dispersed members to overcome geographical distances, no matter whether members are located transnationally or not. Firms and extraregional partners within a country may benefit from the integration of social and economic relations if they are embedded in the same community. The following scenario explains the geography of a transregional community’s impact on a region. One region as well as parts of other regions is embedded in the same transregional community. Firms in these places are able to maintain business transactions with the help of transregional communities. This transregional community also sustains the agglomeration of firms in the regions external to the first region. In other words, the cluster in the first region has social linkages with clusters in other regions.
Because the first region is situated in a transregional community, it obtains exogenous assets from the other regions. A transregional community offers a facilitating mechanism for local firms’ transregional economic activities in four aspects. First, local firms benefit from various channels of communication with their nonlocal counterparts such as casual social visits, collective events organized by community organizations, and so on. Second, common language and cultural background within a community enhance mutual understanding of transregional actors and hence improve the efficiency of communication, particularly in tacit knowledge.
Third, local firms are likely to build mutual trust with extraregional business partners within a transregional community. Transregional actors share the cultural foundation to construct trust on the basis of certain sets of conventions and social norms, while social networks consisting of community members reduce information asymmetry and foster trust. Finally, rules and conventions within a community may support the transregional transactions of its members. With rules and conventions, firms are able to cooperate with nonlocal partners within the community in more flexible and effective ways than in their collaborations with outsiders.
In short, the existence of transregional communities means that regional firms can benefit from additional channels of interregional information exchange, smooth and effective communication, mutual trust, and supportive conventions and rules. Relational proximity is created as an alternative to geographical proximity. Local firms take advantage of transregional knowledge and information flows as well as trust building and thus enhance competitiveness.
Empirical Background and Methodology
The Chaoshan region is located in Guangdong Province and includes three municipalities: Shantou, Chaozhou, and Jieyang. Along with the Pearl River Delta, Chaoshan is characterized by a significant agglomeration of industrial clusters in Guangdong (Figure 1). A Special Economic Zone was set up in Chaoshan in the early 1980s mainly because of its famous transnational business networks of overseas Teochews. As Figure 2 shows, Chaoshan’s economy has taken off since then, especially as a result of the rapid growth in manufacturing sectors (secondary industries).
In the late 1990s, Chaoshan experienced a major downturn in its regional economy due to the severe impact of the Asian financial crisis on exports. The annual growth rates of gross domestic product (GDP) slowed from 19.6% in 1997 to 7% in 2000 (Statistical Bureau of Guangdong Province, 1997, 1998, 2000, 2001). Nevertheless, Chaoshan started another period of economic growth in the 2000s, together with a change from an export[1]oriented economy to a hybrid of both exports and domestic sales.
In 1993 there were only 1,046 enterprises without foreign investment that had an annual output value of more than 5 million yuan in the Chaoshan region. This number increased to 1,618 in 1998, and dramatically reached 4,763 in 2008 (Statistical Bureau of Guangdong Province, 1994, 1999, 2009). At the same time, the region’s economic development is no longer highly dependent on exports. The share of exports in GDP in the 2000s was always less than 35%, compared with more than 50% for most of the 1990s (Figure 3). This index fell from an average of 51.8% in 1990s to 26.4% in the 2000s, even though the annual export value has exceeded the historical peak since 2007 (Statistical Bureau of Guangdong Province, 1992–2011). In other words, domestic sales began to lead regional economic growth.
The change in the economic growth pattern in Chaoshan has been associated with the boom of specialized markets in China since 2000. As for markets with an annual turnover greater than 100 million yuan in China, specialized markets contributed to 70.77% of the national total in 2006 (Lu & Wang, 2010, p. 75). Distributors for Chaoshan firms are usually located in specialized markets. Domestic sales, which occur mainly between Chaoshan firms and distributors located in distant specialized markets in China, have driven the Chaoshan economy since 2000. Teochews within China play a significant role in sustaining the transregional economic interaction between Chaoshan and these specialized markets.
In this study I use the toy and ceramic sanitary ware industries in Chaoshan and corresponding specialized markets in Yiwu and Foshan as a case study. Toy and ceramic industrial clusters are critical for the Chaoshan economy: The China National Light Industry Council calls Chaozhou the “China Ceramic Capital” and Shantou the “China Toy City.” Both industries experienced a change from a highly export-oriented pattern to a hybrid of exports and domestic sales. Chaoshan has a long history of making ceramic products, while the toy industry emerged in Chaoshan in the late 1980s. Yiwu and Foshan have the largest specialized markets of toys and ceramic sanitary ware in China, respectively. Therefore, the toy and ceramic industries are representative of the Chaoshan economy and can be used to understand how Teochew transregional communities facilitate domestic marketing networks among Chaoshan firms.
In this study I use qualitative methods, mainly because qualitative research is a useful tool to produce empirically rich accounts of concrete and socially situated economic processes (Peck, 2005). I conducted 11 months of fieldwork in Chaoshan, Yiwu, and Foshan, collecting data from written documents, observation, surveys, and interviews. I conducted a total of 82 semistructured, in-depth interviews that serve as the primary data
set for this research, including interviews with Chaoshan manufacturing firms and distributors of Chaoshan products in Yiwu and Foshan, Teochew associations, local industrial associations, and government officials. I base the selection of interviewees on purposeful sampling because qualitative research depends on information-rich cases rather than large, randomly selected samples. My interviewees consist of manufacturing firms with different sizes and various types of nonlocal partners. Among the Chaoshan firms I interviewed, 22% employ more than 100 people and 17% employ fewer than 20 people, covering a range from large firms to SMEs. Distributors in specialized markets include independent trading companies, wholesalers, exclusive trading agents, and sales branches of Chaoshan firms. In addition to background information, in the interviews I focus on how Chaoshan firms and distributors conduct their transregional transactions and how Teochew social networks affect this process. Questions include those on the partner-searching process, the management of transregional relations, and transregional activities in terms of economic transactions, financial flows, transfer of knowledge, technology, market information, interpersonal communication, and others, as well as different collaborative patterns between Teochew partners and non-Teochew partners. Each interview lasted between 45 to 90 minutes.
I conducted two sets of surveys in the toy industry as a supplement to the interviews, with 40 samples for each set: distributors in a specialized market in Yiwu (with a response rate of 87.5%) and local manufacturing firms in an exhibition in Chaoshan (with a response rate of 85%). The questions for distributors cover the reasons for starting a business, transregional business relations, financial transactions, communications with Chaoshan suppliers, and the interactions with other Teochews in Yiwu as well as the impact on their business. For Chaoshan manufacturing firms, I gathered information on the percentage of Teochew buyers in their exports and domestic sales, respectively, the approaches to attract domestic buyers, transregional business relations, financial flows, and the transregional communication with their distributors/buyers.
In addition, I participated in a biannual meeting of Teochew associations, attended dinners with Teochew business people, and made casual visits to Teochew distributors in specialized markets for observation. Statistical yearbooks, newspaper reports, and government documents offered secondhand data to supplement the research materials. Based on qualitative and quantitative data, I find that transregional Teochew communities contribute to the Chaoshan economy by constructing relational clusters in specialized markets.
Toy And Ceramic Industries: From Overseas To Domestic
Teochews living overseas directly influenced the emergence of the toy industry in Chaoshan. In the 1980s, Hong Kong experienced an industrial restructuring process that led to the relocation of manufacturing industries, including the toy industry (Chiu, Ho, & Lui, 1997). Sometime in the 1980s, Teochews operated one of the biggest toy companies in Hong Kong, Playmates Holdings, and moved its manufacturing lines to a local collective[1]owned enterprise in Chaoshan after Chaoshan officials visited the Teochew entrepreneurs during Chinese New Year. Building on the experience of this firm, an increasing number of local firms joined in producing toys with the help of their relatives or friends in Hong Kong who had related resources in the toy industry (Chen & Chu, 2008). The ceramic industry, in contrast, has existed in Chaoshan for hundreds of years because of the china clay reserves in this region. As soon as economic reform began in China in the 1980s, the ceramic industry attracted foreign investment, most of which came from overseas Teochews (Du & Huang, 1996, p. 191). Foreign investments in ceramic companies drove the development of local ceramic firms by outsourcing. In addition to foreign investment, overseas Teochews connected Chaoshan firms with international buyers. Nearly half (48%) of export-oriented firms founded before 1997 that I interviewed gained their first international orders directly from overseas Teochews.
China’s reform in enterprise ownership has stimulated a boom of private firms in Chaoshan since the 1990s, and thus catalyzed the development of industrial clusters. Many firms joined these two industries not only in manufacturing but also through producing plastics and dye, offering packaging materials and services, serving as raw material suppliers or traders, and so forth. An agglomeration economy emerged in the Chaoshan region, characterized by back-and-forth interlinkages of firms, large labor pools to provide skillful workers, and localized relational assets for information exchange, cooperation, and innovation (Scott and Storper, 2003). Local firms benefited from such an industrial environment and grew rapidly.
In the 1980s and 1990s, both the ceramic and toy industries were highly export oriented, but in the late 1990s sale patterns changed. On the one hand, the role of Teochew traders in linking Chaoshan and the global market became increasingly less important. None of the firms founded since 1997 that I interviewed depended on overseas Teochew traders for their first international orders. As the industry began to agglomerate, international buyers came to Chaoshan directly for purchasing. Chaoshan firms now also bypass Teochew traders and find international buyers through trade fairs and online business. On the other hand, Chaoshan firms expanded domestic markets dramatically; 87.5% of toy firms and 70% ceramic firms I interviewed have both exports and domestic sales today. Chaoshan firms depend on extralocal distributors for their domestic sales rather than facing end customers directly. These distributors promote both domestic markets and global markets because they also may bring international orders.
Teochew transregional communities in China became important resources for Chaoshan firms’ domestic marketing. According to my survey on toy manufacturing firms, 75.8% of Chaoshan firms use Teochew distributors for their domestic sales. All local firms I interviewed use Teochews— who might be family members or relatives, friends, previous employees, or others who had social relations with the firm—as distributors to enter a new market. As opposed to overseas Teochew traders who usually migrated abroad earlier, the emergence of domestic distributors is associated with the development of Chaoshan industries. Because of greater mobility and easier access within a country than in global markets, it is easy for Chaoshan firms to acquire a qualified distributor through their Teochew social networks, and Teochews are likely to find a firm that needs a distributor and move to another city in China to serve as the firm’s distributor. Most (80%) of the manufacturing firms I surveyed consider “referred by Teochews” as an important or very important reason to use a Teochew distributor for domestic sales. In other words, the development of toy and ceramic industries in Chaoshan reinforces the growth of Teochew distributors within China, which is unlikely to happen in the case of exports.
Specialized markets, in particular, attract these distributors because of the agglomeration effect for offering a large pool of buyers nationally and globally. Yiwu, in Zhejiang Province, has the world’s largest small commodity wholesale market (Lu & Wang, 2010, p. xviii) and has an annual turnover of more than 4 billion yuan in toys. More than 60% of toys sold in Yiwu come from a toy-specialized industrial town in Chaoshan (Fang & Zhang, 2008). Foshan, Guangdong Province, is the largest ceramic tile production base in China and has specialized markets of ceramic tiles and sanitary wares (Shen & Wei, 2011). It attracts a large number of distributors of Chaoshan ceramic sanitary ware; most are Teochews. A ceramic distributor working in Foshan for decades estimates that at least 70% of ceramic sanitary wares in Foshan are made in Chaoshan and distributed by Teochews (interview in Foshan, 31 August 2010a). The agglomeration of Teochew distributors creates proximity between Chaoshan and the specialized markets relationally rather than spatially, which I discuss in the following section.
Building Relational Proximity With Distant Clusters
Teochew distributors cluster in distant specialized markets and serve as business partners for Chaoshan firms. These distributors are exposed to domestic and foreign buyers more than the Chaoshan firms because of their location. At the same time, they are still socially embedded in Chaoshan because their families, parents, relatives, and friends are living there, and are still maintaining dense social interactions in Chaoshan. These social interactions offer Chaoshan firms and their distant Teochew distributors additional avenues for communication and collaboration than an arm’s-length transaction. In fact, transregional cooperation generates more than just the sum of local and nonlocal assets. Collective learning occurs during the transregional integration of economic and social activities, and hence strengthens the competiveness of Chaoshan firms. Through the Teochew communities, Chaoshan firms share a relational proximity with distant specialized markets and integrate exogenous assets into regional competitiveness. In this study I uncover four mechanisms by which the Chaoshan economy takes advantage of transregional Teochew communities: by building distant clusters, sustaining transactions, creating transregional buzz, and initiating start-ups.
Supporting Teochew Clusters In Specialized Markets
The agglomeration of Teochew distributors is attributed to economic externality and sociocultural similarity. Due to their familiarity with Chaoshan and Chaoshan products, Teochew business people serve as distributors for Chaoshan firms. Specialized markets attract domestic and global buyers for certain types of commodities, such as toys and ceramics in this case. By clustering in specialized markets, Teochew distributors gain a larger pool of buyers than elsewhere. At the same time, Teochew communities help maintain relational proximity between the clusters of Teochew distributors and the Chaoshan region.
Teochew distributors in specialized markets have developed a pattern of “product exchange” among themselves: Because Chaoshan products are relatively homogeneous, distributors can potentially repackage one product to substitute for another. When distributors have to deliver products immediately but lack enough storage, or have to show a buyer certain samples that are out of stock, they usually can find substitutes from other Teochew distributors nearby. They purchase at the price that they directly buy from Chaoshan manufacturers and then change the packages. The Teochew distributors I interviewed all admitted that they had done this with other Teochew distributors, whereas none had done this with non-Teochew distributors. With the help of product exchange, Teochew distributors in distant specialized markets benefit from rapid product fulfillment at low costs.
Teochew communities also sustain cooperation across different industries within the agglomeration of Teochews in specialized markets. For example, in the Chenghai Commercial Association of Yiwu, 55.7% of 135 members are in the toy business in Yiwu: 5.3% in trading and 1.5% in logistics. Teochews within these related industries tend to cooperate closely. A total of 82.4% of the distributors I interviewed have Teochew collaborators in the market for their business. As one interviewee said, he cooperates with Teochews because he is familiar with those who share dense social networks with him. The “fluent and natural conversation” in the Teochew dialect makes him less worried about the cooperation. He believes that Teochew partners “put their heart and soul into taking care of my commodities” because “we (Teochews) are a unit, to compete with the others” (interview in Yiwu, 04 October 2010). A Teochew manager of a logistics company also describes different ways of doing business with Teochews and non-Teochews:
“If customers are non-Teochews, we have to clarify every item of the contracts very explicitly. But if they are Teochews, we can communicate more easily. We understand and trust each other. If some incidents happen, we can cooperate to deal with the incidents first, rather than clarifying who have the responsibility first [as when doing business with non-Teochews] (interview in Yiwu, 09 April 2010).”
This demonstrates that smooth communication and mutual trust among Teochews in Yiwu facilitate interindustry cooperation, and even lead to collective action to cope with incidents. It reflects Zhou’s (2000) discussion of Chinese service industries targeting Chinese firms in the United States, but furthers this argument in light of subethnicity within a country rather than at a global scale. In the case of transregional communities, a group of people collaborates in a place where they are not socially and culturally embedded to compete against others. In fact, Teochew communities facilitate not only economic cooperation but also knowledge sharing and collective learning, which I discuss in terms of transregional buzz later.
Sustaining Transregional Transaction
My fieldwork uncovers a high degree of Teochew involvement in Chaoshan firms’ domestic sales. Most (75.8%) toy manufacturing firms surveyed have Teochews engaging in their domestic sales. More than a third (37%) of local firms with domestic sales interviewed claim that Teochews make up the majority of domestic buyers. More than half (63%) argue that Teochew buyers are more helpful for their business than non-Teochews, including seven firms whose main buyers are non-Teochews.
My fieldwork uncovers a high degree of Teochew involvement in Chaoshan firms’ domestic sales. Most (75.8%) toy manufacturing firms surveyed have Teochews engaging in their domestic sales. More than a third (37%) of local firms with domestic sales interviewed claim that Teochews make up the majority of domestic buyers. More than half (63%) argue that Teochew buyers are more helpful for their business than non-Teochews, including seven firms whose main buyers are non-Teochews.
Chaoshan firms and Teochew distributors usually adopt flexible ways of payment and cooperation. All Teochew distributors I interviewed note that they delayed payment to their suppliers in Chaoshan. A local entrepreneur describes the “mutual help” between him and his Teochew distributors in terms of finance:
“If they [Teochew distributors] have some difficulties in capital flows, I often allow them to pay me later. But they also help me. For example, in 2008, my exports shrunk. They [domestic Teochew distributors] kept regular purchase and even paid me in advance in order to help me obtain enough capital to sustain the basic production (interview in Chenghai, 30 September 2010).”
This kind of mutual help results from long-term cooperative relationships, and yet should be interpreted from the perspective of transregional communities. As a ceramic exclusive distributor explains:
“How dare a Teochew distributor cheat a local firm? Unless he/she doesn’t want to come back home anymore. But even so, his/her parents would be in trouble…. We [Teochew distributors and Chaoshan producers] know each other well. It’s not easy to treat each other rigidly… (interview in Foshan, 31 August 2010b).”
In short, Teochew transregional networks provide an informal monitoring mechanism for local producers and nonlocal distributors due to the low levels of information asymmetry within a community and both parties’ social embeddedness in Chaoshan. Hence, producers and distributors can accept flexible payment without written contracts.
In addition, Teochew distributors in specialized markets sometimes act as informal branches of Chaoshan firms to satisfy customers’ demands, while Chaoshan firms may respond and deliver to a distributor’s buyer directly under the name of that distributor. Mr. Li’s story shows how Teochews use their transregional social networks to enhance the competitiveness of Chaoshan products. Mr. Li was a trading agent in Yiwu. When he received orders for Chenghai toys, he directly passed the orders to his friends in Chenghai, who may be toy manufacturers or local traders. His friends arranged the production and delivered the products directly to the buyers under Mr. Li’s name. In this way, Mr. Li was able to offer low prices and speedy response to his buyers, and hence his competitiveness was strengthened. Similarly, for buyers who directly go to Chaoshan for locally made commodities, they may also attempt to purchase certain complementary commodities, such as cabinets for sanitary ware purchase, or a small number of plush toys for electronic toy purchases. Teochews in related specialized markets, such as Mr. Li, take charge of this part of the order and serve as a nonlocal branch of local firms in name. Nearly 30% of distributors I interviewed act as branches of Chaoshan firms though they are independent from those firms, while 25.9% of manufacturing firms have sold products under their distributors’ names. Certainly the transregional “buzz” is vital for local firms to exchange information in time and choose trustworthy cooperators at a distance. This flexible collaborative form effectively speeds Chaoshan firms’ responses to the market.
Constructing Transregional Buzz
Geographers use the term “buzz” to refer to the information and communication created by face-to-face contacts, co-presence, and co[1]location of people and firms within the same industry and region. This buzz consists of “specific information and continuous updates of this information, intended and unanticipated learning processes in organized and accidental meetings, the application of the same interpretative schemes and mutual understanding of new knowledge and technologies, as well as shared cultural traditions and habits within a particular technology field, which stimulate the establishment of conventions and other institutional arrangements” (Bathelt, Malmberg, & Maskell, 2004, p. 38). Many studies reveal that local buzz is essential to sustaining regional innovation systems and is primarily based on localized social and cultural networks. In this study I argue that buzz can be transregional and support transregional economic transactions and learning processes.
My fieldwork in both Yiwu and Foshan uncovers transregional buzz generated through frequent daily communication among Teochew business people. All Teochew distributors admit that they spend much more time in social interaction with other Teochews rather than non-Teochews in specialized markets. They describe it as “natural” and “inevitable” because of the co-location and similar cultural background (interview in Foshan, 31 August 2010a). The buzz comprises abundant information related to their business such as market trends, experiences of some distributors and Chaoshan producers, and so on (interviews in Foshan and Yiwu from August to October, 2010).
For example, my survey of Teochew distributors in Yiwu reveals that the most important reason to open a store is a suggestion from local friends who operate a similar store in the area (Table 1). In Foshan, a distributor took me to visit another distributor; when we walked through a specialized market, he said hello to many Teochew distributors and stopped for small talk. When I was interviewing a distributor in his store in the evening, several Teochew distributors dropped by to chat. They talked about a Teochew distributor who just closed his business in Foshan, and analyzed the reasons for his failure. Later, a distributor considered renting the failed distributor’s warehouse and asked for others’ references. They also discussed best locations for a warehouse. Both the survey and observation indicate that Teochew distributors exchange business information and perform collective learning in management through daily communication.
This buzz in specialized markets is also transmitted to Chaoshan. Frequent visits to Chaoshan offer face-to-face communication opportunities for Teochew distributors and local producers. In my survey, 58.8% of respondents said they communicate “often” or “very often” with Chaoshan manufacturing firms. There must be more transregional communication happening than this number shows, because some respondents may consider their communication with Chaoshan partners to be personal interactions with “friends” rather than business interactions. In fact, all distributors I interviewed agree that they share product and market information with their suppliers during their home visits. Nearly half (47.1%) of the distributors I surveyed note that they frequently communicate with Chaoshan firms about new product development, while 20.6% say their communication focuses on market trends. Three-quarters of respondents get this information mainly from buyers’ feedback, and 70.8% from their observation of other stores in specialized markets. Thus, in learning from this knowledge generated in specialized markets, Chaoshan firms are able to adapt to changes in domestic and global markets rapidly.
Transregional communication is primarily based on social ties rather than economic relations. Most (80.9%) respondents point out personal relationships as “very important” or “important” factor in determining the frequency of transregional communication. More than three-quarters (78.6%) of Chaoshan manufacturers I interviewed agree that transregional buzz helps their business, but many of them consider discussions about specialized markets casual conversation with friends rather than business activities. In other words, the buzz results from the integration of economic and social relations; the transregional transfer of information and knowledge happens during this face-to-face social communication.
Teochew communities in Chaoshan develop pipelines differently than that described in Bathelt et al. (2004) and others’ research (Bathelt & Schuldt, 2008, 2010; Trippl, Todtling, & Lengauer, 2009). This literature focuses on joint action frames and projects that are organizational, such as international trade fairs, research and development (R&D) partnerships, and so on. In fact, the buzz-and-pipeline model can occur in an informal way, such as in the casual visits in Chaoshan. Transregional communities transfer extralocal buzz to a region. Furthermore, transregional communities create new buzz about Teochews in a distant locality, and finally help two regions share common buzz, which helps Chaoshan firms develop their domestic marketing (and global markets) in specialized markets. Thus, local firms in Chaoshan share the buzz with Teochews in specialized markets and join in a transregional collective learning process, which is important to enhance regional openness and innovation.
Initiating Start-Ups
Existing social ties with specialized markets help people in Chaoshan set up manufacturing firms in corresponding industries. Bresnahan, Gambardella, and Saxenian (2001) argue that the success of entrepreneurs largely depends on their ability to access major markets outside the cluster in their early stages; thus, the openness of cluster relations and the active search for large, external markets is crucial in understanding the rise of successful clusters.
As for the Chaoshan region, this openness is achieved through transregional communities. In my interviews, almost one-third of the local toy and ceramic entrepreneurs were corresponding distributors in specialized markets before they established manufacturing firms in Chaoshan. More than a quarter (27.8%) of Teochew distributors I interviewed set up corresponding factories in Chaoshan after they became distributors (which were normally operated by their family members). In addition, within specialized markets, dense social networks and frequent interactions within Teochew communities also create “buzz” to stimulate Teochew start-ups (Table 1).
This reveals a deep-seated and culturally embedded desire for self[1]ownership and the autonomy of Chinese entrepreneurship (Redding, 1990). Previous working experience in specialized markets helps these Teochews establish new firms in Chaoshan and gives them access to domestic markets. Existing social ties with specialized markets motivate people in Chaoshan to set up manufacturing firms in corresponding industries because they have access to markets. Therefore, local assets alone fail to explain the growth of local private firms in Chaoshan since 2000. These empirical findings indicate that transregional Teochew ties also cultivate the growth of local firms.
In short, with transregional Teochew communities, Chaoshan firms establish relational proximity with distant specialized markets and access nonlocal assets. Therefore, the Chaoshan region benefits from competitive nonlocal business partners, additional information channels, flexible and effective transregional cooperation, information sharing and knowledge creation, and enhanced entrepreneurships.
Conclusion
The empirical case of Chaoshan reveals that communities facilitate regional economies transregionally rather than at a local/global level only. Based on data gathered from transregional communities, I find that a region benefits from nonlocal assets, including distant but connected clusters promoting local firms’ marketing abilities; additional channels for information exchange, knowledge sharing, and collective learning; flexible forms of transregional business corporation; and enhanced transregional entrepreneurships that in turn promote regional openness. With the help of transregional Teochew communities, Chaoshan SMEs can compete at national and global scales because they are not constrained by limited local resources.
In this era of globalization, the key issues for many developing regions are how to attract foreign investment (Oman, 2000) and how to enhance exports (Scott & Garofoli, 2007). My findings from this study indicate another regional development trajectory: the cultivation of transregional economic interactions. For regions endowed with a large domestic market, it is particularly important for local firms to pay attention to resources within their own country and for local governments to promote domestic sales and interregional collaboration to enter global markets. The case of Chaoshan shows how Teochew distributors facilitate Chaoshan firms’ domestic sales. More important, the relational proximity with specialized markets allows Chaoshan SMEs to gain information at not only a national but also a global scale because global buyers often cluster in these specialized markets, and their information flows to Chaoshan rapidly through transregional Teochew communities as well.
Chaoshan is not a wholly unique case within transregional communities in a social and cultural sense. For example, Wenzhou, another region in China, also has developed this type of transregional subethnic communities. Fewsmith (2008) examines the Wenzhou trade associations’ rapid geographical expansion throughout China, and shows that these trade associations collaborate to protect the interests of Wenzhou manufacturing firms in global markets. Moreover, alumni networks can serve as another kind of transregional community that helps a region with well-established educational institutions to access nonlocal assets. Saxenian (2002) finds that alumni associations from the Indian Institutes of Technology help establish the links between Silicon Valley and Bangalore, which are important for upgrading the Indian information technology (IT) sector. Similar stories could happen within national boundaries.
Chaoshan is not a wholly unique case within transregional communities in a social and cultural sense. For example, Wenzhou, another region in China, also has developed this type of transregional subethnic communities. Fewsmith (2008) examines the Wenzhou trade associations’ rapid geographical expansion throughout China, and shows that these trade associations collaborate to protect the interests of Wenzhou manufacturing firms in global markets. Moreover, alumni networks can serve as another kind of transregional community that helps a region with well-established educational institutions to access nonlocal assets. Saxenian (2002) finds that alumni associations from the Indian Institutes of Technology help establish the links between Silicon Valley and Bangalore, which are important for upgrading the Indian information technology (IT) sector. Similar stories could happen within national boundaries.
In this study I draw on my research on Chaoshan’s toy and ceramic industries to demonstrate that the positive role of communities in regional development goes beyond the local/global dichotomy. Within particular historical and institutional contexts, transregional communities may play a significant role in helping developing regions achieve economic success by offering opportunities to access nonlocal resources. However, further research is required to unravel the complex mechanisms of transregional communities in regional development. Studies on the dark side of Teochew communities, including the lock-in effect of relying on Teochews for domestic marketing and the negative impact of some flexible transitional forms (e.g., “product exchange”) on regional product branding, would provide more comprehensive understanding of this topic. More important, it is necessary to generalize the finding of this study through comparison research between different subethnic groups (e.g., Teochew versus Wenzhou), various types of communities (e.g., ethnic groups versus technology communities), and diverse industries (e.g., low value-added manufacturing versus high-tech sectors). In sum, regional development is dependent on both economic and sociocultural as well as local and nonlocal assets, and understanding this process requires not only a local/ global angle but also a transregional perspective.
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