The Formation of Wenzhou Footwear Clusters: How Were the Entry Barriers Overcome?

Whereas it is generally recognized that specialized divisions can improve production
efficiency (Smith, 1776; Yang Xiaokai, Huang Youguang, 1996), its role in breaking through
industry access barriers is often neglected. Our investigation shows that the specialized division of
labor simplified complicated production which not only lowered technological and access capital
barriers ¹¹ but also took full advantage of the entrepreneurs’ capacities.

First, the specialized division initially decomposes very complicated footwear products into
numerous intermediary products, thereby providing opportunities for households without
shoemaking backgrounds or access to technology required for shoemaking. Table 5 shows the 7
categories and over 20 varieties of intermediary products into which the process of producing a
pair of shoes can be divided, from which newcomers can choose according to their technological
capacity.

Secondly, the specialized division of labor decomposes the initially rather complicated
shoemaking process into relatively simple steps; hence, remarkably reducing the technical
difficulty. Some auxiliary production steps in the production process can even accommodate the
elderly, the weak, the disabled and the young. Our investigations in the rural Yongjia County of
Wenzhou have found that women used simple tools to assemble small metal components like shoe
accessories and shoe buckles during slack farming season.

Finally, specialized divisions can also make better use of entrepreneurs. Entrepreneurs of the
enterprises have different capacities ; competent entrepreneurs can accommodate more working
steps into the enterprise or expand their enterprises through vertical integration, whereas less
competent entrepreneurs may engage one or several steps at the appropriate scale. Therefore,
specialized divisions can adequately exploit the potential of rural entrepreneurship (Hayami,
Kikuchi and Marciano, 1998) that is abundant in villages and local towns in Wenzhou. This also
accommodates entrepreneurs with different capacities into the production chain and transforms
these capacities into real profit.

¹¹ Division of labor can remarkably lower its access capital threshold, i.e. decompose the shoemaking chain into
numerous steps requiring variable investments. Different households may choose different steps according to their
fund, financing capacity, and risk-bearing capacity, thus even the households with scanty capital can be
accommodated into the process and take up some labor-required work. We will dedicate another paper to analysis
on how to lower access capital threshold.

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