information of market demand are two of the four basic requirements 8 for the establishment of
new enterprises. Market opportunities can be found everywhere; therefore, obtaining market
information is highly important. Numerous residents of Wenzhou left home and worked in other
places for long periods of time. While accumulating the human resources and social capital
required for setting up their own businesses, they were exposed to information on related markets
and hence quicker to grasp market opportunities and develop their own businesses in their own
market.
(iv) There are many notable points about the professional backgrounds of the newcomers.
First, out of all the newcomers’ backgrounds, the least prevalent profession was the farmer. That
has remained constant throughout the history of the market, whereas the newcomers who used to
be workers and salesmen have changed remarkably in proportion. Initially, the large majority of
the newcomers used to be workers, but that has gradually declined over time. On the contrary, the
proportion of former salespeople rose steadily from an initially low proportion. These findings are
similar to those of Sonobe, Hu and Otsuka (2004). In the early stage, relatively high operating
technologies and “know-how” constitute the main access barriers for early participants. As the
market matures, sales and development capacity become more crucial.
The early Wenzhou shoemaking industry lacked a specialized division of labor and
coordination because the participants in this period produced whole shoes and set up footwear
stalls and family workshops. Comparatively, the production of whole shoes requires high levels of
technology. Naturally, the participants were technicians who used to work in state-owned or
collective shoemaking enterprises. They used relatively small machines and manually produced
shoes. The industry was dominated by skilled workers because the technology barrier prohibited
peasants ignorant of shoemaking technologies to enter. Due to diffusion, some specific production
processes were separated and numerous specialized bases were formed as sub-clusters and
engaged in specific processing and production steps, intermediary or auxiliary products . With the
increasing divisions, the technology barrier gradually weakened and the production and supply
capacity rose sharply, causing the market to undergo a fundamental change. In this new context,
marketing capacity became crucial for new participants; only those who had customers and
marketing capacity could manage to exist and develop. This is the underlying reason for the
increasing proportion ofsalespeople joining the industry.
Secondly, while newcomers with a shoemaking background represented a large proportion
initially, this proportion then declined. Prior to 1985, most of the participants used to work in
related industries but afterwards the ratio dropped sharply, especially during the mid and late
1980s. Lured by the high profits of the industry, many individuals without any shoemaking
background entered. This led to the quality crisis of Wenzhou footwear products.9 Subsequently
the ratio of those with shoemaking backgrounds rose, but remained low.
Thirdly, the newcomers with shoemaking technologies were a large portion of the entrants in
the early years but declined over time. This process has been even, h owever, with some periods of
increases and the portion of newcomers with shoemaking technologies has remained relatively
high. This further demonstrates the high technological barrier of the shoemaking industry as well
as the overcoming of that barrier through rich workers with footwear-making technologies. That
overcoming of the technological barrier in Wenzhou has enabled the local industry to develop
8 The other two are having or raising the minimum funds and acquiring production technologies.
9 This was marked by the burning of Wenzhou shoes in Hangzhou Wul in Plaza in 1987. Wenzhou shoes became a
noun for substandard shoes in the 1980s.