Co-evolution Process in a Regional Business Ecosystem. --A Case Study of Zhejiang Province in China

Abstract

With the business ecosystem concept showing its potential in regional studies, the developmental process of Zhejiang Province provides possibilities for expanding existing theories. Practically, the development path of Zhejiang Province in the past three decades proves its uniqueness in four main features: 1) significant amount of GDP with high annual growth rate, with 2) multiple industries surging at the same time and successful industrial upgrading processes, but 3) a lack of certain natural resources, and thus higher costs of running businesses, and 4) mainly relies on market mechanisms with little central governmental support in early times. However, existing theoretical explanations cannot properly understand the development of this region. Regional growth-related literature – including Industrial Upgrading, Regional Innovation System and Cluster Theory – focuses on a single-direction casual-relationship of the success within an industry of a region, but leaves blank the bi-directional effect of co-development. Similarly, Co-evolution Theory, oriented from the Evolutionary Approach, lacks an inter-industrial level, regional-specific features and, more importantly, its process research to independently explain this phenomenon. Though Business Ecosystem Theory has the potential to conduct cross-industrial, regional-level research, needs to be better understood with its core function of co-evolution. Therefore, the main research question is: “How can a regional business ecosystem enable the co-evolution of two local industries?” In order to answer the research question, not only a regional business ecosystem construct is carried out in this thesis, but also three sub-questions are to be understood at different system levels: -at the intra-industrial level, to understand the evolutionary path of the two localindustries; -at the inter-industrial level, to understand their co-evolution process; -at the regional level, to understand the regional business mechanisms. In order to answer the aforementioned research questions, a single-case design is conducted on a pair of co-evolution populations-- the Garment and ICT industry in Zhejiang Province, with 20 embedded cases of organisations meaningful to the development of the two industries. Following detailed single- and cross-case analyses with visual mapping strategy, four main conclusions are drawn in this thesis. Firstly, at the intra-industry level, the variation-selection-retention-struggle (VSRS) model is proven to be effective to describe the development process of co-evolution populations individually and new mechanisms of this theoretical model are founded. Secondly, at the inter-industry level, interactions of co-evolutionary populations can be classified into four types according to the strength of the level of change, namely exploration, reinforcement, disruption and breakthrough. Thirdly, based on these previous two results, a five-phase process model of co-evolutionary industries from emerging to penetrating, embedding, reconfiguring and finally fusing describes the general co-evolution process. Finally, at the regional level, it is found that the regional business ecosystem model should include both the co-evolution mechanism and other five regional specific mechanisms, namely the path dependence, resource allocation, resource attraction, goal convergence and exit mechanism. The thesis contributes to the theoretical world with an advanced understanding of co-evolution process, regional business ecosystem and VSRS model in an evolutionary approach and provides guidance for governmental and firm efforts in terms of region-related decisions with the successful case of Zhejiang Province.