This research examines the rationale of geographic co-location of entrepreneurs who do business on internet platforms. Prior research has shown that entrepreneurs gain valuable synergy benefits from being embedded in industrial networks. Nevertheless, the advantages of geographic clustering when business is conducted via the internet are still to be understood. This research aims to understand how internet-based economic activity interacts with local social relations and structures, thus seeking to explain the phenomenon of industrial clustering of internet-enabled entrepreneurial activity. Guided by theories of relational and institutional embeddedness, we examine the way social relations are formed online, trace the rationale of local social relations while business is conducted online, and study the role of major institutional actors that support the economic activities of the entrepreneurs. Empirically, this thesis examines two regional clusters of Chinese microentrepreneurs who conduct their business on an e-commerce platform and form dynamic interpersonal ties with business partners and customers both online and offline. The method of ethnographic case study is adopted to gain in depth understanding of the ways various internet networking tools have been appropriated in business practice in these two cases and the ways local microentrepreneurs build up collaborative networks in geographic place as well as cyberspace. The study of Chinese micro-entrepreneurs reveals and substantiates the formation of a hybrid sociality, whereby economic exchange via the internet and business conducted by electronic tools are complemented by local social relations and actively supported by local government and the IT service corporation. This research also contributes to development policy considerations; it shows that regions that are usually unattractive to capital and knowledge/talent flows can gain economic development momentum by entangling the conduct of business on web platforms with local social institutions