In the past few decades, global investment promotion agencies (IPAs) have regarded industrial cluster promotion as a key lever for attracting foreign investment. However, most promotion strategies remain stuck in the traditional narrative of "preferential policies + factor costs," overlooking the endogenous growth drivers of industrial networks themselves. A recent study published in Humanities and Social Sciences Communications, based on a three-year follow-up survey of 12 ancient-village routes in Fuyang District, Hangzhou, China, proposed an endogenous development model centered on industrial linkages. Although focused on rural development, this study offers a underlying logic worth learning from for industrial cluster promotion: truly attractive clusters are not the product of policy stacking, but the result of industrial co-evolution.
The Predicament of Traditional Industrial Cluster Promotion
The traditional path of industrial cluster promotion often revolves around a single advantageous industry: local governments designate parks, provide tax breaks, subsidize infrastructure construction, and then attract investment externally. This "point-based investment attraction" model played a role in the early stages of industrialization, but today, as global industrial chains undergo deep restructuring, its effectiveness is diminishing.
The core problem lies in three misconceptions.
First, emphasizing external resources over internal linkages. Many promotion agencies are accustomed to seeking incremental enterprises from the outside, while neglecting the technology spillovers, supply-demand relationships, and collaboration networks among existing firms. A cluster without internal linkages is no more than a geographical grouping of enterprises, making it difficult to form a positive feedback loop.
Second, emphasizing a single industry over cross-sector synergy. Equating a cluster with one specific industry causes policy resources to be overly concentrated on a single point, while related services, R&D, and supporting industries are neglected. When the external environment changes, the cluster lacks buffer capacity and is prone to decline.
Third, emphasizing investment attraction actions over ecosystem building. Promotion efforts often use "number of signed projects" and "capital in place" as performance metrics, ignoring the survival rate, growth potential, and embeddedness of enterprises after landing. The result is "attracted in, but not retained, and unable to grow."
These problems are universal across the globe. The study of ancient-village routes in China, however, reveals an overlooked variable — industrial linkage.
The Global Shift from "External Drivers" to "Endogenous Growth"
Globally, economic development agencies' understanding of clusters is undergoing profound change. Traditional "industrial location theory" emphasized costs and transportation, while modern "industrial ecosystem theory" emphasizes complementarity, knowledge flows, and collective efficiency among participants. Technical assistance projects by institutions such as the World Bank and the United Nations Industrial Development Organization (UNIDO) in recent years have transformed "cluster development" from a mere investment attraction activity into "industrial upgrading and organizational network building."The aforementioned Chinese study offers a micro-level paradigm. It divides rural industries into core industries, related industries, and radiating industries. Core industries form the economic foundation of the region, related industries provide technical and service support, and radiating industries spread the benefits to the broader community. The study finds that cooperation among these three types of industries can create "industrial synergy effects" and promote endogenous growth through local employment. The researchers further argue that cross-village and cross-industry linkages are more resilient than the isolated development of a single village.
This finding resonates with globally renowned industrial cluster practices. Italy's Emilia-Romagna region is known for its clusters of small and medium-sized enterprises; its competitiveness comes not from a single large company, but from an industrial network formed by hundreds of interrelated family businesses. Germany's Baden-Württemberg, through its "industrial cluster policy," brings together suppliers, research institutions, and training organizations from sectors such as machinery, electronics, and automobiles within a single innovation system. Japan's "regional revitalization" strategy likewise emphasizes nurturing a self-sustaining industrial ecosystem by using the region's "related industries" as a link.
The common thread across these cases is that the focus of cluster promotion is not to sell a "place," but to build a "relationship." Investors care not only about costs and policies, but also about whether they can quickly integrate into the local collaboration network after settling in, and whether they can gain access to upstream and downstream partners, talent pools, and innovation support.
A Reusable Three-Stage Framework
Drawing on the international experience and the insights from rural research above, we propose a "three-stage model for industrial cluster promotion" applicable to investment promotion agencies.
Stage 1: Industrial Linkage Diagnosis. The promotion agency must first identify the region's core industries and systematically map their linkages with related and radiating industries. This requires going beyond traditional industry classifications to reinterpret the local economic structure from the perspectives of value chains, supply chains, and innovation chains. Key questions include: What are the transactional relationships among core enterprises? Do knowledge and technology flow locally? Which supporting segments have gaps? Which related industries have not yet been incorporated into the cluster narrative?
The "cross-village linkage" in the research reminds us that the subjects of industrial linkage are not necessarily enterprises within the same geographic unit. Cross-administrative-region industrial collaboration can be achieved through sharing infrastructure, joint talent development, and joint market development.
Stage 2: Collaborative Platform Construction. After the diagnosis, the promotion agency should proactively build platforms that facilitate linkages. This includes: establishing industrial collaboration committees that bring entrepreneurs, research institutions, and intermediary organizations into cluster governance; setting up data-sharing mechanisms to reduce information asymmetry among enterprises; and developing regional public services such as shared testing centers, training centers, and innovation laboratories. Most critically, policy resources should be shifted from "point-by-point subsidies" to "linkage incentives"—for example, by providing additional support for joint R&D projects and supply chain localization projects.The difficulty at this stage lies in coordinating interests. Promotion agencies need to play the role of "institutional entrepreneurs," guiding all parties to participate and ensuring that small businesses can also gain the benefits of collaboration, rather than being monopolized by large enterprises or local governments.
Stage Three: Overall Narrative Communication. Industrial cluster promotion must ultimately translate into investment promotion communication. Traditional communication tools are investment brochures and promotional conferences, but the new stage requires designing a "cluster story." It is not a list of company names, but a dynamic story about how the industrial ecosystem operates and creates value. Key narrative points include: how the various links within the cluster achieve synergy; how the local workforce and innovation resources support enterprise development; and how cross-regional cooperation expands market scale.
The concept of "radiating industries" from research on ancient-road villages in China is worth borrowing—in communication, not only should the strength of core industries be showcased, but also the positive impact of the cluster on communities, the environment, and the regional economy. This helps attract long-term investors who value ESG.
When implementing this model, two risks require special attention.
First, avoid "one-size-fits-all" replication. Industrial foundations and cultural backgrounds vary greatly across regions; the three-stage framework is only meant to provide a thinking path, not a ready-made menu.
Second, avoid "over-design." Government-led industrial cluster planning may detach from market realities. Promotion agencies should remain open and allow industrial linkages to evolve spontaneously, rather than through forced planning.
The Logic of Endogenous Growth in the Digital Age
New technological tools are transforming the way industrial clusters are promoted. AI-driven industrial mapping analysis can identify industrial linkages and investment dynamics globally in real time, helping IPAs locate potential investors more precisely. Data platforms can quantify the "network density" of clusters, shifting promotion decisions from experience-driven to data-driven.
At the same time, global value chains are undergoing restructuring. Geopolitical risks are prompting multinational corporations to pursue supply chain diversification, and resilience has become an important factor in location choices. A cluster with endogenous linkage capabilities can provide more stable supply assurance, which in itself is a powerful selling point for attracting investment.
For developing countries and regions, the endogenous growth model is particularly important. Peripheral areas that lack large investment projects can build attractiveness to external capital by cultivating local industrial linkages, developing distinctive resources, and promoting collaboration between villages and between towns. The experience of China's ancient-road villages shows that industrial linkages can enhance a region's capacity for self-development in the absence of external intervention, a point worthy of deeper research and reference by more IPAs.
Conclusion
Industrial cluster promotion is moving from "spatial marketing" into an era of "ecosystem building." The era of relying solely on land and tax incentives is over; future competitiveness comes from the self-organizing capacity of industrial networks. The greatest inspiration from research on China's ancient-road villages is not the specific industry choices, but the perspective on development: when genuine linkages are formed among enterprises, industries, and regions, economic growth acquires an internal engine.Investment promotion practitioners need to update their skill sets, transforming from "policy explainers" into "ecosystem architects." This demands more solid industry research, sharper network thinking, and the steadfastness to patiently cultivate long-term relationships rather than pursue short-term political achievements. The next leap in global industrial cluster promotion is not better advertising, but more authentic linkage.