Despite its utmost importance, the issue of industrial development has been largely neglected in the literature on development economics for the last few decades. Thus, the authors have conducted comparative case studies of the garment and motorcycle industries between China and Japan and the machinery and printed circuit board industries between China and Taiwan. The authors have found striking similarities in the pattern of industrial development across the eight cases. According to their observations, industrialization is initiated either by merchants or engineers, depending on the complexity of the production technology, which is followed by the quantity expansion phase characterized by the imitated production of low-quality products. Declining profits due to the increased supply of such products induces educated managers to carry out multifaceted innovations, while taking advantage of the increased availability of diverse human resources in the cluster.
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