ABSTRACT
Cluster analysis is increasingly used to analyse the interaction among knowledge flows between different agencies which constitute a part of the national innovation system. Most enterprises located in the two clusters are Small and Medium Enterprises (SME) which, through the focus on development, innovation and promotion of industrial clusters, in effect promote the development of the national innovation system. Industry clusters are the engine that promotes the interaction between companies and their production and innovation efforts. The chapter defines SME and national innovation systems, then takes industrial clusters as the research object and analyses two types: manufacturing industry clusters and innovation ones. Manufacturing is the core of China’s national economy and the driving force of industrialisation; it is fundamental to increasing China’s economic power and its comprehensive national strength. Economic development relies heavily on labour-intensive industries and the Pearl River Delta is one of the areas that attract mostly external labour force.
