Entrepreneurship and industrial clusters: evidence from China industrial census

This article studies the synergy effect of entrepreneurship on China's industrial cluster. We propose an extension to Duranton and Overman's (The Review of Economic Studies, 72(4), 1077-1106. 10.1111/0034-6527.00362, 2005) method which enables us to delimit industrial cluster in space. A cross-sectional model is identified with historical measures of local entrepreneur potential in the spirit of Chinitz (The American Economic Review, 51(2), 279-289, 1961). Alternatively, we use lagged cluster and entrepreneurship variables to mitigate the endogeneity problem. We find that measures of entrepreneurship contribute significantly to the cluster formation, the cluster size, and the cluster strength. The causality remains strong even when we control for lagged cluster variables. Out of the factors proposed by the NEG theory, access to sea ports, light industry, localization economies, urban population density, and market potential are generally found to benefit cluster. Most of the results are robust to alternative measures of entrepreneurship and instrumental variable.