The Electronics Hardware Innovation Cluster in Shenzhen, China: Contemporary and Future Dimensions from an Agglomeration, Institutional, and Built Environment Context

Being on the frontline of China’s ambition to internalize hi-tech supply chains (e.g., “Made in China 2025” campaign) and on the cusp of global tech competition (e.g., U.S.-China tensions), much strategic significance is given to the electronics hardware innovation cluster in Shenzhen, better known as “the world’s hardware capital”. This study investigates the latest dynamics of Shenzhen’s electronics cluster from the perspectives of agglomeration, institutions, and the built environment. The study found that despite different interpretations of the trade-off between agglomeration economies and diseconomies by both firms and analysts, increasingly diverse types of firms and intra-firm functions spillout from Shenzhen to surrounding areas, such as Dongguan and Huizhou in the Greater Bay Area. Institutionally the dissertation found that recent major external context changes, namely the pandemic, trade war, and financial and property economy fever, have not significantly changed the innovation culture in Shenzhen. As for the built environment dimension, in the context of policy thrusts, market forces, and stakeholder interests, gentrification of affordable rental housing in urban villages only happens in a modest way, without significant displacement of labor forces serving Shenzhen’s electronics industry. Policy implications include: (i) More administrative and planning co-operation should occur between Shenzhen and surrounding municipalities, given the increasingly diverse types of firms and intra-firm functions spilling out from Shenzhen; (ii) For local government, cultivating innovation culture in a cluster is a long-term task, which requires persistent building of a favorable policy environment for many years; (iii) In terms of built environment policy-making in innovation clusters (both living and working environments), more attention should be paid to implementation mechanisms; (iv) Areas surrounding Shenzhen, potentially the future spatial focus for Shenzhen’s future innovation, should be of higher policy significance. Theoretical insights include: (i) Better understanding of mechanisms underlying the spatial growth of clusters at the sub-regional scale; (ii) The importance of the long-term in the formation of cluster institutions and culture, even in the face of short-term strong context changes; (iii) The built environment is both a driver and product of industrial clustering; (iv) Integrated study of the agglomeration, institutional, and built environment dimensions of cluster dynamics will yield new insights.