Market Platforms, Industrial Clusters and Small Business Dynamics

Market Platforms, Industrial Clusters and Small Business Dynamics

Specialized Markets in China

Ding Ke

Specialized markets are a unique product of China’s economic transition. They are marketplaces located in industrial clusters, specializing in the wholesale of local commodities and related goods. Ding Ke reveals that, despite their seemingly primitive form, specialized markets appeared in many of the modern industrial sectors and were paradoxically upgraded and expanded as these clusters developed. He argues that specialized markets have also formed solid linkages with marketplaces in various cities in China and in other developing economies. A powerful, emerging market-oriented distribution system has thus appeared. Based on thorough fieldwork covering ten years, and using the novel theory of the platform, this book clarifies the unique development logic of specialized markets.

Chapter 2: Analytical Framework

Ding Ke

Subjects: asian studies, asian development, asian economics, development studies, asian development, development economics, economics and finance, asian economics, development economics, industrial economics, urban and regional studies, clusters

Extract

Source: Copyright © 2006, Huang Xiaochun. Figure 2.1 A leading sock company established by a former Yiwu Market booth-keeper 2.1 A FRAMEWORK FOR THE ANALYSIS OF THE SPECIALIZED MARKET: THE MARKET PLATFORM There is a large imbalance between the thriving development of the specialized market and the underestimations of the specialized market studies. In the author’s opinion, this has primarily resulted from a lack of an appropriate analytical framework. Hagiu (2007) was the first to combine the literature on market microstructure and intermediation 17 M2920 – DING 9781781006276 PRINT.indd 17 20/06/2012 13:15 18 Market platforms, industrial clusters and small business dynamics (Rubinstein and Wolinsky 1987; Stahl 1988; Biglaiser 1993; O’Hara 1995; Spulber 1996a, 1996b; Rust and Hall 2003), and the literature on two-sided markets, which is an important field of the platform studies (Schmalensee 2002; Caillaud and Jullien 2003; Rochet and Tirole 2003, 2006; Evans 2003; Armstrong 2006; Hagiu 2006a, 2006b). He pointed out that there are two polar strategies for market intermediation, namely the merchant mode and the two-sided platform mode.1 In order to understand specialized markets, we must first realize that their nature is nothing but a two-sided platform. The general differences between the merchant mode intermediary and the two-sided platform mode intermediary are as follows. In the merchant mode, sellers sell goods to the merchants and then the merchants sell goods to the buyers. In this process, the ownership of the goods changes hands from the sellers to the merchants, and then to the buyers. Wal-Mart can be...

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