Cluster is not a new phenomenon, having existed in different forms for a long time. Although a large amount of work has been dedicated to cluster research (Marshall, 1920; Krugman, 1995; Schmitz 1997; Porter, 1998; Wilson and Popp, 2003), there is still a lack of convincing explanations as to how and why clusters are created. Reviewing the different definitions of ‘cluster’ from previous studies, produces the interesting finding that most of the cluster definitions neglect one key element – the ‘actor’ – that is, the individuals who are involved in the process of founding new businesses that give rise to cluster formation. \ud
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Recognising the values and shortcomings of the extant studies on clusters, this thesis aims to establish a conceptual framework and attempt to advance the understanding of the cluster formation process from an alternative view. The purpose is to answer the research questions of how and why cluster are formed, how different actors interact with key institutional factors relevant to cluster creation and how these actors themselves make sense of the cluster creation process, particularly in the Chinese context. \ud
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This research employs a qualitative approach comprising semi-structured in-depth interviews, which seek to uncover the depth and richness of the living experiences of different actors with the SME clusters. Fieldwork was completed in multi-phases involving a preliminary data collection in phase one, followed by a further data collection in the second and subsequent phases through re-interviewing the key informants. \ud
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The findings of the three empirical case studies echoed the claims that the very notion of a cluster is a dynamic, and for some a ‘Chaotic’ one (Martin and Sunley, 2003). This highlights the importance of a comprehensive framework to address the complex web of elements that are involved in cluster formation. The result of the thesis also indicates that individual (entrepreneurs & social relations), and the social interactions among individuals and their institutional context are the key ingredients for forming clusters. It is suggested that the established conceptual framework, based upon the theories of institutionalisation, social embeddedness and sensemaking, can help to fill the gap in the extant cluster research and pave the way for future research