Related firms that share the same geographic location often conglomerate to create an industrial cluster, which often grows to become a competitive organization. Special economic zones, on the other hand, are limited geographic regions where the government offers preferential policies and rebates on tariffs. This thesis examines the performance differences between special economic zones (SEZ) and industrial clusters. The study is based on both quantitative and qualitative analyses of the provinces under study in China. The results of the study are mixed. On one hand the results show that industrial clusters due to their lower wage rates than special economic zones, are able to produce more goods regardless of the benefits firms in SEZs get from government.
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