Upgrading Port-Originated Maritime Clusters Insights From Shanghai's Experience

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Upgrading port-originated maritime clusters: Insights from Shanghai's experience
Xin Shi, Haizhou Jiang, Huan Li, Ying Wang
PII: S0967-070X(18)30943-0
DOI: https://doi.org/10.1016/j.tranpol.2019.11.002
Reference: JTRP 2264
To appear in: Transport Policy
Received Date: 20 December 2018

Revised Date: 10 August 2019
Accepted Date: 6 November 2019
Please cite this article as: Shi, X., Jiang, H., Li, H., Wang, Y., Upgrading port-originated maritime
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Upgrading Port-Originated Maritime Clusters: Insights from
Shanghai’s Experience
Xin Shi*, Haizhou Jiang, Huan Li, Ying Wang
Xin Shi,
Add：
College of Transport & Communications
Shanghai Maritime University
1550 Haigang Avenue, Lingang New City, Pudong New Area Shanghai, 201306
Phone/Fax: 0086-21-58605519
E-mail: xinshi@shmtu.edu.cn
Haizhou Jiang,
Add：
Phone/Fax: 0086-21-58605519
E-mail: Jhzsldtly@163.com
Huan Li,
Add：
Phone/Fax: 0086-21-58605519
E-mail: tjlhuan@126.com
Ying Wang
Phone/Fax: 0086-21-58605519
E-mail: yingwang@shmtu.edu.cn
Biographical notes
Xin Shi,
Ph.D.
Professor of Shipping & Port management, Shanghai Maritime University
Research Interests: Maritime cluster, Shipping management, Port management,
Logistics management, Safety Science.
Haizhou Jiang and Huan Li,

Ph.D. Student
Ying Wang
Engineer of Transport & Communications, Shanghai Maritime University
Upgrading Port-Originated Maritime Clusters: Insights from
Shanghai’s Experience
Abstract: Continuous upgrading is critical to the sustainable development of

port-originated maritime clusters. This study explores the developmental trends of
traditional port-originated maritime clusters from two perspectives: that of a cluster’s
developmental objective and that of its developmental pathway. First, the case of the
Shanghai maritime cluster is selected. Its development history, competitive
advantages, existing problems, and critical challenges are discussed, and policies for
its upgrading and sustainable development are reviewed. Subsequently, several
benchmarks pertaining to the upgrading of port-originated maritime clusters are
developed. The results indicate that these clusters must be upgraded to feature
ecologically friendly ports, global supply-chain hubs, and maritime resource
allocation centers. Such upgrading can be achieved through both incremental and
radical innovation as well as the cultivation of a first-class business environment. In
the upgrade process, government plays the driving role, developing explicit cluster
strategies and effective policy tools, managing internal coordination based on an
effective organizational structure, and cultivating the environment by providing
infrastructure and soft promotion schemes.
Keywords: port-originated maritime cluster, Shanghai, upgrading
1. Introduction
Maritime clusters make distinct contributions to the development of national or

regional economies and provide strong support for innovation and technological
development in maritime industries (Doloreux and Shearmur, 2006; Monteiro et al.,
2013; Doloreux, 2017). Therefore, they have been adopted as an effective policy
initiative and key strategic tool in numerous countries, such as China, Singapore,
Canada, Portugal, and the United Kingdom (Huang and Miao, 2010; Menkhoff and
Evers, 2013; Salvador, 2014; Zhang and Lam, 2017; Doloreux and Shearmur, 2018).
Broadly speaking, a maritime cluster is defined as a group of industries that are
directly and indirectly related to shipping and situated within a certain geographic
area (Shinohara, 2010). Jakobsen et al. (2017) classified the scope of maritime
clusters into shipping; ports and logistics; maritime finance and law; and maritime
technology. Among these industry sectors, the port sector plays the most active role.
Most maritime clusters originated as ports with the core function of providing cargo
loading and discharging services. Today, the indispensable role of contemporary
port-originated maritime clusters in facilitating international trade and the global
supply chain is clearly embodied in their provision of integrated logistics services and
maritime services in addition to traditional cargo handling-related services (Zhang and
Lam, 2013; Pagano et al., 2016; Othman, et al., 2016).
Although port-originated maritime clusters have experienced tremendous changes
through their developmental history (Brett, 2007; Zhang and Lam, 2013), they still
encounter challenges regarding how to adapt to the increasingly competitive
environment and tackle such sustainability problems as ecological pollution and
traffic congestion; continually upgrading their functions, services, and operating
processes enables them to confront these challenges (Wijnolst, 2006). The critical
nature of upgrading is demonstrated in numerous cases of success and failure. For
instance, the operators of the Singapore maritime cluster successfully upgraded their
traditional cargo-focused function and achieved a transformation that maintained the
cluster’s relevancy. They achieved this through modernizing their capacity to
accommodate increasingly large ships and high cargo volumes and to perform
complex, highly specialized logistical services as well as integrating the provision of
maritime services with logistics services (Jakobsen et al., 2017). By contrast,
examples of some declining ports include San Francisco, Naples, Liverpool, and New
Orleans; these cases demonstrate that only focusing on cargo loading and discharging
may result in the decline of traditional port-originated maritime clusters because of
decreasing demand for traditional port services amid fierce competition (Merk, 2013).
Several relevant studies have touched upon the development trends of maritime
clusters. For instance, Salvador (2014) stated, “Clusters evolve over time in terms of
the composition of the services provided, reflecting different stages of economic and
social development.” Zhang and Lam (2017) concluded that in the evolution of
maritime clusters, both port and maritime services could benefit from each other.
The aforementioned literature implies that current research pertaining to the evolution
of maritime clusters is mainly focused on the transformation of functions and how to
achieve such transformation, and its focus is restricted to a specific cluster at a
specific time. Generally, upgrading is a continuous process that can be considered
from a broad perspective. Kaplinsky (2000) asserted that upgrading involves
improvements to producers’ capability to make superior products or provide more
skilled services. Humphrey and Schmitz (2002) categorized industrial upgrading into
product, process, functional, and intersectoral upgrading. Gereffi et al. (2005) defined
industrial upgrading as “the process by which economic actors—nations, firms, and
workers—move from low-value to relatively high-value activities.” Therefore, current
research, limited to the functional transformation of specific clusters and lacking
uniformed benchmarks, appears to have limited researchers’ knowledge of maritime
clusters’ transformative processes (Halse, 2017).
In addition, the aforementioned review reveals that empirical analyses, particularly
typical case studies characterized by descriptive analysis, have been employed as the
main research method in maritime cluster–related research. Lam and Van (2012)
argued that case studies are appropriate for studying the complicated, dynamic
relationships in the port industry because they provide rich qualitative information.
However, case studies regarding the evolution of maritime clusters seem to have
focused on general descriptive analysis; scant systematic empirical studies have been
conducted with the exception of Lam and Zhang (2011).
Given the importance of upgrading and the weakness of current research, this study
explored problems related to upgrading port-originated maritime clusters. Its two
main research objectives were: (1) to conduct a case study on the upgrading of the
Shanghai maritime cluster and (2) to develop a benchmark framework for the
upgrading of port-originated maritime clusters. In both case and conceptual analyses,
two basic research elements were of primary concern: (1) the developmental pathway
objective, which is the form into which the port-originated maritime cluster develops,
and (2) the pathway, which is how the cluster achieves its development objectives.
This study selected Shanghai as its case study, focusing on its upgrading as a
port-originated maritime cluster, because it is the largest container port in the world
and a critical hub in the global shipping network. Jakobsen et al. (2017) claimed
Shanghai as the world’s largest port in container throughput and the fifth most
influential maritime cluster in both maritime technology and maritime finance and law,
and further asserted that China’s rapidly growing maritime industry clearly pushed
Shanghai toward a path of developing itself into a top global maritime cluster.
However, Shanghai, as is common for port-originated maritime clusters to face, is
confronting three sets of problems in its development process. First, fierce
competition among global container hub ports and negative environmental effects
generated by a huge volume of cargo throughput call into question Shanghai’s ability
to maintain its leading position in the global port industry. Second, today’s maritime
industry being characterized by globalization, integration, urbanization, and
digitalization (Jakobsen et al., 2017) means that Shanghai must determine how to
implement further agglomeration of high-end maritime service resources to provide
integrated logistics services and high value-added maritime services. Third, given the
already established hierarchy of maritime clusters worldwide, Shanghai must
determine how to achieve leapfrog development in the same tight competitive
environment and increase its prominent influence on the global maritime industry.
In light of the aforementioned concerns, it is rational to study the case of Shanghai by
identifying its status, envisaging its problems, and learning its policy; additionally, it
is constructive to summarize some benchmarks on upgrading port-originated maritime
clusters. The main contributions of this research are as follows: (1) to construct
several benchmarks regarding the upgrading of port-originated maritime clusters in
terms of objectives and pathways and (2) to develop policy initiatives concerning how
to achieve the upgrading of port-originated maritime clusters. Our results can provide
scholars and practitioners with new insights into the sustainable development of
port-originated maritime clusters, particularly with respect to the benchmark
framework, which can help various stakeholders to upgrade clusters to be more
competitive.
The remainder of this paper is organized as follows. Section 2 explores the history,
status quo, problems and challenges, and policy pertaining to the Shanghai maritime
cluster; Section 3 constructs several benchmarks pertaining to the objective and
pathway of the upgrading of port-originated maritime clusters, and finally, Section 4
presents our conclusions.
2. Research Approach
By reviewing several case studies concerning the development of maritime clusters
(Elola et al., 2012; Monteiro et al., 2013; Gunther, 2014) and maritime cluster
strategy-related research (Othman, 2011; Stavroulakis and Papadimitriou, 2016), this
study determined that the analytical framework for a case study usually consists of
theoretical foundational, comprehensive empirical, and further extensive analyses.
Following such a framework, the research approach of the present study was
structured as follows:
Case Study Research Focus Benchmark Construction
History and status quo Categorization of

(What) Form which the cluster upgrading objectives
develops into
Challenges and problems Classification of

(Why) upgrading pathways
Pathway how developmental
Strategy and plan form achieved
Role of the government
(How)
Fig. 1. Analytical framework.
Based on Fig. 1, this study begins with a deep case study on the evolution of the
Shanghai maritime cluster, followed by a discussion on benchmarks regarding the
upgrading of port-originated maritime clusters. Upgrading objectives and pathways
are the focus of both the case study and benchmark analysis.
After a brief description of the Shanghai maritime cluster, the case study is presented
according to what–why–how analytical logic; that is, it starts with recognition (i.e.,
what the basic feature of the Shanghai maritime cluster is) through examining its
cargo handling and logistics services, contemporary maritime services, and regional
economic contribution. This is followed by an analysis of existing problems and
critical challenges (i.e., why upgrading should be initiated), and finally a review of the
policy tools to be adopted by the government (i.e., how to achieve upgrading).
After the case study, several benchmarks regarding the upgrading of port-originated
maritime clusters are conceptualized, combining what was learned from the case of
Shanghai with thoughts from the relevant and fruitful literature. The upgrading
objective is categorized according to the model of Humphrey and Schmitz (2002),
which classified the upgrading of an entity into process, product, functional, and
inter-sectoral/chain upgrading. Regarding the upgrading pathway, improvements to
both hard factors (e.g., advanced technology) and soft factors (e.g., business
environment) are explored (Koliousis et al., 2019). In particular, the critical role of the
government and the associated organizational structure are highlighted.
This study mainly adopted a descriptive approach, focusing on typical case studies
and descriptive statistical analysis. As supplements, quantitative empirical analyses
using the panel data model (see the Appendix) and Pearson correlation analysis were
employed.
The information and data used for the case study and statistical analysis were mainly
from the official websites of well-known maritime-related organizations and
institutions as well as specialized industry statistical year books. More detailed
descriptions of the data sources are provided in the relevant parts of the paper.
3. Case Study: Upgrading the Shanghai Maritime Cluster
3.1 Overview of historical development

The Shanghai maritime cluster originated from the Port of Shanghai, which has
enjoyed a long development history, an attractive geographic location, and a huge
hinterland with a booming economy. Shanghai’s development into a global maritime
cluster can be roughly divided into three stages (Fig. 2): pre-1990 (Stage 1), 1990 to
the early 21st century (Stage 2), and from the early 21st century to the present day
(Stage 3). During Stage 1, Shanghai mainly provided cargo loading and discharging
services for the hinterland; during Stage 2, it focused on upgrading itself into a
world-class container hub port; and throughout Stage 3, it has shifted its focus to the
development of the contemporary maritime service industry. Thus, Shanghai’s recent
arrival as a global maritime cluster can be characterized by three major features: a
dramatic improvement in port infrastructure, the continuous optimization of the inland
transportation system, and advances in maritime service industries.
According to the Shanghai municipal government’s strategic development plans,
Shanghai will be an international shipping center by 2020, with highly agglomerated
maritime resources, highly efficient logistics services, perfect maritime services, a
remarkable maritime business environment, and strong maritime resource allocation
capabilities.
Event • Continually ranked as the top • 2005: Yangshan deep-water • 2016: ranked 5th among top
port nationwide port put into operation maritime service centers worldwide
• 2010: developed into the
world’s largest container port
Cargo-related service Global transportation service Prominent influence over the global
Focus for the hinterland as the container hub port maritime resource allocation
18th century 1980s 2005-2010

Fig. 2. Development stages of Shanghai as a global maritime cluster.
3.2 Analysis of the status quo
3.2.1 Cargo handling and logistics services
Because Shanghai is a port-originated maritime cluster, cargo handling-related

services have always occupied the dominant position.
According to the 2018 annual report of Shanghai International Port (Group) Co., Ltd.,
Shanghai processed 561 million tons of cargo throughput in 2018, a yearly increase of
6.9%, as well as 42.01 million 20-foot equivalent units (TEUs) of container
throughput, a yearly increase of 4.4%. Table 1 illustrates the world and Shanghai’s
annual container throughput volume, Shanghai Port’s container throughput volume as
a proportion of the total of all ports worldwide, and Shanghai’s ranking among global
ports; furthermore, it demonstrates that Shanghai has remained the largest worldwide
container port for the past 9 years. From 2010 to 2017, the container throughput of
Shanghai Port steadily increased from 29.069 million to 40.233 million. In addition,
the proportion of Shanghai Port’s container throughput volume of the total of all ports
worldwide remained stable at more than 5%, exhibiting an overall upward trend,
rising to 5.35% in 2017. Additionally, the statistics presented in Table 2 on the global
container transportation network further highlight that Shanghai is among the most
frequent destinations along global container shipping routes; moreover, it offers the
most extensive coverage in China by operating the largest number of routes (48 global
shipping routes in 2019), possessing a leading fleet capacity (584,246 TEUs per
week), and maintaining an impressive frequency of calls (4.71 voyage per day).
Table 1: Container throughput in Shanghai Port compared with the world market.
Container Total container Proportion of Shanghai
Ranking in throughput of throughput of all Port’s container throughput
Year
theworld Shanghai port ports in the world volume to the total of all
(Million TEU) (Million TEU) ports in the world
2010 1 29.069 560.16 5.19%
2011 1 31.739 606.17 5.24%
2012 1 32.529 634.28 5.13%
2013 1 33.617 656.33 5.12%
2014 1 35.285 687.08 5.14%
2015 1 36.537 695.80 5.25%
2016 1 37.133 710.06 5.23%
2017 1 40.233 752.70 5.35%
Source: Generated by the authors based on container throughput data from the China Ports
Yearbook (2010–2017) and UNCTADstat (available at: https://unctadstat.unctad.org/EN/).
Table 2: World container trade routes in the first quarter of 2019.
Port Summary
Country Asia-Europe Asia-North American Europe- North American
Name of Global Routes
Ranking No. Fleet No. frequenc Fleet No. frequenc Fleet No. frequenc Fleet
by of capacity of y (per capacity of y (per capacity of y (per capacity
throughput routes per week routes day) per week routes day) per week routes day) per week
1 Shanghai China 48 584246 33 4.714285 460967 15 2.142857 123279 0 0 0
2 Singapore Singapore 46 534363 35 5 447740 11 1.571428 86623 0 0 0
3 Yantian China 38 485452 27 3.857142 392204 11 1.571428 93248 0 0 0
4 Ningbo China 48 607396 36 5.142857 512046 12 1.714285 95350 0 0 0
5 Hong Kong Hongkong 20 248226 12 1.714285 173030 8 1.142857 75196 0 0 0
6 Busan Republic of 31 333824 18 2.571428 228018 13 1.857142 105806 0 0 0
Korea
11 Rotterdam Netherlands 42 436379 26 3.714285 375470 1 0.055555 1009 15 1.844877 59900
12 Port Kelang Malaysia 13 146089 9 1.285714 115982 4 0.571428 30107 0 0 0
13 Antwerp Belgium 37 318459 17 2.428571 240439 1 0.055555 1009 19 2.468253 77011
17 Los United States 7 46410 0 0 0 4 0.571428 32038 3 0.428571 14372
Angeles
18 Hamburg Germany 25 108235.7 19 2.714285 81647.7 0 0 0 6 0.857142 26588
143
19 Tanjung Malaysia 17 224305 12 1.714285 181157 5 0.714285 43148 0 0 0
Pelepas
21 Long United States 4 40245 1 0.142857 12945 0 0 0 3 0.428571 27300
Beach
22 New York United States 35 257252 0 0 0 18 2.571428 160816 17 2.325396 96436
Source：Drewry Container Report 2019, Q1

Table 3 presents Shanghai’s high level of productivity compared with other leading
global ports (Shanghai’s Berth Productivity in 2017 reached 126.55 TEUs/h, ranking
no. 1 among container ports worldwide). This high level is supported by the port’s
advanced infrastructure and thorough implementation of advanced technology.
According to Xinhua News Agency, in 2017, the world’s largest automated container
terminal, Shanghai Yangshan Deep Water Port Phase IV, began operations. This
facility utilizes advanced technologies such as remote control double-trolley container
cranes, automatic guided truck (AGV) units, and automatic rail-mounted gantry
cranes and boasts 16 operating routes, 44 automatic container areas, and a daily
throughput of more than 10,000 containers. The initial design capacity was 4 million
TEUs per year, and the future planned capacity is 6.3 million TEUs.
Table 3: Comparison of container handling productivity among major global ports
according to 2017 data.
Throughput Berth Productivity
Rank Port
(million TEUs) (TEUs/h)
1 Shanghai 40.23 126.55
2 Singapore 33.67 160
3 Shenzhen 25.21 119.3
4 Ningbo-Zhoushan 24.61 115.07
5 Busan 21.40 105
6 Hongkong 20.76 86
7 Guangzhou 20.37 161
8 Qingdao 18.26 105
9 Dubai 15.44 119
10 Tianjin 15.21 110.19
Sources:
1) Container throughput data are from Ranking of Container Ports of the World, available at:
https://www.mardep.gov.hk/en/publication/pdf/portstat2yb5.pdf
2) Berth productivity data are from the 2017 China Ports Yearbook and Port Productivity,
available at: https://www.JOC.com
The aforementioned statistics indicate that Shanghai has taken a leading role in the
international container transport network and terminal handling capacity. However,
Jakobsen et al. (2017) ranked Singapore first for port and logistics services globally,
followed by Shanghai, Rotterdam, Hong Kong, and Hamburg. The researchers
favored Singapore because of “the ease of doing business in Singapore, excellent
connectivity, and long history as a trading hub, combined with the city’s highly
efficient port” (Jakobsen et al., 2017).
3.2.2 Contemporary maritime services
Contemporary maritime services are rooted in traditional in-port auxiliary vessel

operation services, covering such areas as ship transactions, shipping finance, and
maritime law (Fisher Associates, 2004; Jakobsen et al., 2017).
Table 4 illustrates the progress of the Shanghai maritime service industry from 2013
to 2017. Through comparison of relevant data of the maritime service industry in
Shanghai between 2013 and 2017, ship financing and cruise business can be seen to
have made great progress. In ship financing, the total amount of credit increased
greatly from 198.4 billion RMB in 2013 to 346 billion RMB in 2017, followed by the
balance of loans (95.5 billion RMB to 156.5 billion RMB), balance of financial
leasing (18.3 billion RMB to 42 billion RMB), and balance of operating leases (1.37
billion RMB to 41.8 billion RMB). In cruise business, arrivals of vessels at Shanghai
Port have increased by approximately 1.5 times, from 197 to 512. Furthermore,
arrivals of other passenger ships at Shanghai Port have increased approximately 2
times, from 167 to 482. The passenger flows of Shanghai Cruise Port and other
terminals of Shanghai Port have quadrupled, from 757 thousand and 69.8 thousand to
2.97 million and 2.9 million, respectively. Developments in other industries have not
changed much, such as maritime arbitration, vessel survey, vessel registration, ship
brokerage, maritime insurance, and shipping business. Notably, although the number
of shipping companies has not increased significantly overall, the number of
non-vessel operating common carriers (NVOCC) has doubled, from 1172 in 2013 to
2323 in 2017. In addition, there has been a decline in vessel sales and purchase, both
in terms of the number of transactions and transaction value.
Statistics from Xinhua News Agency Shanghai Bureau, China Banking Regulatory
Commission Shanghai Office, China Maritime Arbitration Commission Shanghai
Sub-Commission, Shanghai Arbitration Commission, and China Insurance Regulatory
Commission Shanghai Bureau further indicate that the world’s top 20 liner companies,
top four cruise companies, and nine major classification societies have set up
headquarters or branches in Shanghai. The number of maritime arbitration cases in
Shanghai as a proportion of China’s total was 90% in 2017, which indicates the
Shanghai Maritime Court’s strenuous efforts to build an international maritime justice
center. In 2017, shipping and freight insurance premiums in Shanghai accounted for
25.05% of the national total, 44.05% of which was shipping insurance income.
Table 4: Progress of Shanghai in the maritime service industry (2013–2017).
Scope Indicator Unit 2017 2016 2015 2014 2013
Cases instituted by China Maritime Arbitration Commission Shanghai Sub-Commission No. 85 69 101 99 104
Maritime Arbitration Cases instituted by Shanghai Arbitration Court of International Shipping No. 297 320 320 260 285
Value of Subject Matter of Dispute 100mil（RMB） 2.57 2.88 4.11 2.41 2.39
Number of transactions attested by Shanghai Shipping Exchange No. 112 123 129 275 198
Vessel S&P
Transaction value attested by Shanghai Shipping Exchange 100mil（RMB） 2.3 6.4 11.5 18.3 13.2
Vessel Survey Survey Services of China Classification Society Shanghai Branch No. 598 511 486 639 704
Vessel Registration Number of Registered ships No 2223 2552 2551 2290 2336
Registered Ship Brokers No. 138 138 136 136 130
Shipping agency
Brokerage Company No. 22 22 22 22 22
Shipping Insurance Company No. 59 56 55 49 46
Maritime Insurance Value of Total Ship Insurance 100mil（RMB） 21.13 22.87 24.49 24.01 23.71
Value of Total Cargo Insurance 100mil（RMB） 15.98 14.09 13.84 16.17 13.9
Total Amount of Credit 100mil（RMB） 3460.5 2359.92 2448.65 2216.34 1984
Balance of Loans 100mil（RMB） 1565.22 1453.74 1166.87 1055.93 955
Ship Financing Balance of Financial Leasing 100mil（RMB） 420.17 238.56 201.26 192.35 183
Balance of Operating Lease 100mil（RMB） 418.43 161.09 86.59 40.63 13.7
Balance of Other Financial Products 100mil（RMB） 134.07 177.23 211.84 282.6 206
Arrivals of cruises No. 512 509 341 272 197
Arrivals of other passenger ships No. 482 482 317 242 167
Passenger Transport
Passenger Flow of Shanghai Cruise Port 10,000 297.3 289.4 164.3 121.9 75.7
Passenger Flow of other Terminals of Shanghai Port 10,000 290.8 282.9 159.5 117.8 69.8
Shipping Company No. 59 69 65 72 71
Shipping Agency No. 148 99 111 151 142
Shipping Management Company No. 110 117 113 102 88
Shipping Business No.
NVOCC 2323 1864 1360 1469 1172
Wholly Foreign-Owned Enterprise No. 38 43 41 42 42
Marine Trading Services Company No. 1 1 1 1 1
Source: Compiled by the authors from the Blue Book on the Construction of Shanghai International Shipping Center (2014–2018), the Xinhua-Baltic International
Shipping Center Development Index Report (2015-2018), and the Annual Report on the Construction of Shanghai International Shipping Center (2015–2016).
The aforementioned statistical descriptive analysis clearly demonstrates that the
contemporary maritime services industry in Shanghai has grown substantially because
of strong government support, vast market potential, and an improving business
environment. Later in Section 3.3, its weaknesses are explored and compared with
other world leaders.
3.2.3 Characteristics of the Shanghai maritime cluster
Although several perspectives exist regarding the classification of maritime clusters,

they can generally be categorized into logistics-based, service-based (Fisher, 2004;
Wang and Cheng, 2010; Zhang and Lam, 2013), and comprehensive maritime clusters
(Jakobsen et al., 2017) according to the type of services they provide.
After analyzing Shanghai’s logistics and contemporary maritime service capacities,
this study discovered that although Shanghai remains a traditional maritime cluster
that mainly provides cargo handling and logistics services, it is in the process of
transitioning into a comprehensive maritime cluster by integrating logistics and
maritime services.
Such a conclusion was further confirmed using empirical evidence on the
contributions of maritime clusters to regional economic development. A panel data
model was established utilizing sample data from Shanghai, Hong Kong, Antwerp,
Hamburg, and London for 2004–2012 to estimate the level of each maritime cluster’s
local economic contributions. Table 5 presents the results.
Table 5: Model descriptions and their corresponding contributions to the local
economy.
Rate of
CITY Model description
Contributions
Shanghai[a] ln y SH ,t = 4.3311 + 0.021x 1,t + 0.889x 2,t + 0.7021x 3,t 2.1%
ln y HK ,t = 2.4521 + 0.026 x 1,t + 0.746 x 2,t + 0.7489x 3,t

Hong Kong [b] 2.6%
Antwerp[c] ln y AT ,t = 3.3217 + 0.031x 1,t + 0.592x 2,t + 0.584 x 3,t 3.1%
Hamburg[d] ln y HB ,t = 5.6152 + 0.029 x 1,t + 0.682x 2,t + 0.749 x 3,t 2.9%
London[e] ln y LD ,t = 7.6995 + 0.027x 1,t + 0.659x 2,t + 0.892x 3,t 2.7%
Notes:
1) Where yit denotes the gross domestic product of port city i in year t, x1,it denotes the maritime
industry output value of port city i in year t, x2,it denotes the secondary industry output value
of port city i in year t, and x3,it denotes the tertiary industry output value of port city i in year
t.
2) The models in the table were estimated based on data from the following sources: [a] Report
of Shanghai shipping service industry; [b] Summary statistics on shipping industry of Hong
Kong; [c] Economic importance of the Belgian ports; [d] The Competitiveness of Global
Port-Cities: The Case of Hamburg, Germany; and [e] The economic impact of the UK
maritime services sector: shipping.
Table 5 demonstrates that the contribution of Shanghai’s maritime industry to its local
economy is 2.1%, which is lower than that of Hong Kong, Antwerp, Hamburg, and
London. Several research studies have concluded that the more complex and
integrated a maritime cluster’s industry form is, the more it contributes to its local
economy (Jung, 2011). In other words, the contribution of logistics-based maritime
clusters appears to be lower than that of service-based ones, and that of service-based
maritime clusters appears to be lower than that of comprehensive ones. Thus, the
result concerning the Shanghai maritime cluster’s contribution further indicates that
its main functions are still focused on cargo handling- and logistics-related areas.
Therefore, the scope of its maritime services should be further extended.
3.3 Identification of problems and challenges
Along with emerging as a leading player in global container transportation and having
the highest container throughput for 9 consecutive years, Shanghai has seen highly
concentrated traffic flows of incoming and outgoing vessels, large-scale highway
traffic, and extensive port operations. These effects have resulted in an increasingly
noticeable burden on Shanghai’s ecological environment, traffic system, and land
resources. Table 6 illustrates that the growth in the Port of Shanghai’s container
throughput is positively correlated with the length of backups caused by arterial road
congestion during peak hours of the day (r = 0.755) and night (r = 0.606), as well as
emissions of nitrogen dioxide (r = 0.823), particulate matter (r = 0.550), and sulfur
dioxide (r = 0.624) in Shanghai. This study observed an inverse proportional
relationship between the proportion of water–water transit and pollution indices
(Table 6). These results indicate that whether Shanghai can maintain its status as the
world’s largest container port is closely related to its ability to manage the negative
environmental effects caused by large volumes of cargo flow.
In addition to the aforementioned environmental problems, another concern for the
sustainable development of the Port of Shanghai is whether it can retain the world’s
largest container throughput amid gradually declining growth among the top
international ports (Table 7). This decline is caused by global economic uncertainty
and the reindustrialization of developed countries. Referring to a critical review on the
drivers of port competitiveness (Parola et al., 2017), effective countermeasures should
construct a highly efficient port by building a first-class infrastructure and
implementing advanced technology, as well as by establishing a global supply chain
hub to provide high value-added services that integrate traditional cargo handling and
logistics services with contemporary maritime services.
Statistics demonstrate the rapid development of contemporary maritime services in
Shanghai (Table 4); however, these services remain relatively immature compared
with those in London and Hong Kong (Table 8), particularly in the relative shortage
of high-end maritime service-related firms and qualified professionals. Hammervoll et
al. (2014) argued that the critical requirement for constructing a global supply chain
value network is the involvement of the whole range of chain-related actors. These
include suppliers, manufacturers, customers, and in particular, maritime-specific
service providers such as shipping companies, logistics firms, insurance companies,
shipping agencies, and arbitral institutions. Thus, the status quo of maritime services
in Shanghai prioritizes the need for further agglomeration of contemporary maritime
service resources. As highlighted in a relevant study, a first-class business
environment characterized by an open administration system, highly efficient
supervision mode, and sound legal system has a substantial influence on the
development of contemporary maritime service industries (Jakobsen et al., 2017),
reflected not only in attracting more actors to be involved but also in rationalizing
their business relations. In light of this benchmark, Table 9 presents an assessment of
the present business environment of Shanghai’s maritime services industry, indicating
that the ease of business and cultural deposits are the most affective factors required
for improvements.
Table 6: Correlation coefficients between container transport activity and environmental measurements.
Congestion mileage Congestion mileage in NO2 PM SO2 Container Percentage of Waterway

in the morning peak the afternoon peak 10 throughput -Waterway transit Throughput
Growth rate
Congestion mileage Pearson Correlation 1 .964** .499 .490 .419 -.739 -.751 .755
in the morning peak Sig. (2-tailed) .008 .392 .402 .483 .154 .143 .140
N 5 5 5 5 5 5 5 5
Congestion mileage Pearson Correlation .964** 1 .286 .424 .169 -.554 -.569 .606
in the afternoon Sig. (2-tailed) .008 .641 .477 .786 .333 .317 .279
peak N 5 5 5 5 5 5 5 5
NO2 Pearson Correlation .499 .286 1 .714 .816 -.688 -.668 .823
Sig. (2-tailed) .392 .641 .175 .092 .199 .218` .087
N 5 5 5 5 5 5 5 5
PM 10 Pearson Correlation .490 .424 .714 1 .379 -.355 -.231 .450
Sig. (2-tailed) .402 .477 .175 .529 .558 .709 .447
N 5 5 5 5 5 5 5 5
SO2 Pearson Correlation .419 .169 .816 .379 1 -.894* -.850 .624
Sig. (2-tailed) .483 .786 .092 .529 .041 .068 .260
N 5 5 5 5 5 5 5 5
Container Pearson Correlation -.739 -.554 -.688 -.355 -.894 1 .973** -.700
throughput *
Sig. (2-tailed) .154 .333 .199 .558 .041 .005 .188
N 5 5 5 5 5 5 5 5
Percentage of Pearson Correlation -.751 -.569 -.668 -.231 -.850 .973** 1 -.787
Waterway-Waterwa Sig. (2-tailed) .143 .317 .218 .709 .068 .005 .114
y transit N 5 5 5 5 5 5 5 5
Throughput growth Pearson Correlation .755 .606 .823 .550 .624 -.700 -.787 1
rate Sig. (2-tailed) .140 .279 .087 .447 .260 .188 .114
Source: Generated by the authors based on data from Annual Reports of Shanghai Comprehensive Transportation (2010–2015).
Table 7: Growth rate of container throughput among the world’s top six container
ports.
Shanghai Singapor Shenzhen Ningbo-zhoushan Hongkong Busan
e
2005 24.23% 8.87% 18.61% 30.04% 2.26% 3.83%
2006 20.05% 6.90% 14.02% 35.71% 3.60% 1.60%
2007 20.46% 12.50% 14.25% 33.42% 3.29% 10.22%
2008 6.99% 7.23% 1.49% 15.95% 1.04% 1.24%
2009 -10.64% -13.54% -14.77% -3.94% -13.23% -10.95%
2010 16.27% 9.91% 23.34% 25.15% 11.84% 18.42%
2011 9.19% 5.30% 0.27% 11.98% 3.69% 14.08%
2012 2.49% 5.72% 1.64% 9.89% -5.34% 5.55%
2013 3.34% 2.94% 1.47% 7.27% -3.23% 3.75%
2014 4.98% 3.96% 2.93% 12.10% -0.37% 5.61%
2015 3.53% -8.70% 1.04% 6.06% -9.68% 4.03%
Average 9.17% 3.73% 5.84% 16.69% -0.56% 5.22%
Source: Generated by the authors based on data from the China Ports Yearbook (2005–2016).
Table 8: Comparison of maritime services industries in Shanghai, Hong Kong, and

London (2015).
Shanghai Hong London
Kong
Ports & logistics Cargo handling Cargo throughput 717.40 256.6 45.4
(MILLION tonnage) [a][b][c]
Foreign trade cargo throughput 46.4 65 94.1
proportion (%) [a][b][c]
Container throughput 36.6 20.1 2.2
(MILLION TEU) [a][b][c]
International transit container 6.9` 69 3**
throughput proportion (%) [a][b][d]
Cruise business Cruise passenger throughput 1642.6 30275 100
(thousand passengers) [e][h][c]
Maritime service Shipping agencies The number of companies [e][h][i] 250 253 300*
Transaction value of second-hand ship 0.45 0.62** 17.75**
(billion USD) [d]
Ship registration Registered ships 18.50 102.29 0.02**
(million gross tonnage) [h][b][d]
Maritime law & arbitration Number of trail court cases [g][h][m] 4211 1780** 1290*
Number of arbitral cases [g][h][m] 320 94 3492*
Maritime insurance Premium income 491.5 315.7 110.072
(million USD) [k][l][i]
Shipping finance Ship financing value involved 35.5 12.9 40
(billion USD) [k][n][m]
Transaction value of financial products 8.1 15.2** ffa1.15
(billion USD) [k][n][m]
Others Maritime organizations Intergovernmental organization 0 0 5
non-governmental organization 0 0 37
Maritime manpower the number of maritime professionals 354 191 4200*
(1000) [d][i][m]
The number of certified shipbrokers 101** 13.8 82**
[k][i][m]
*2014; **2013
Sources: [a] China Port Yearbook, 2016; [b] Port of Hong Kong in Figures, 2016; [c] Port of
London Authority; [d] Shanghai Shipping Exchange; [e] Shanghai Statistics Yearbook, 2016; [f]
Shanghai Maritime Safety Administration; [g] Shanghai Maritime Court; [h] Hong Kong
International Arbitration Centre; [i] Hong Kong Transport and Housing Bureau; [j] The London
P&I Club; [k] NCNA & China Financial Information Center; [l] Hong Kong Trade Development
Council; [m] The City UK; and [n] authors.
Table 9: Assessment of the Shanghai maritime services industry business

environment.
Institutional Sectors
Components
Port Auxiliary Shipping Finance Transaction Law Research & Education Functional
Service Development Institutions
Industry Entry — — ● ●● ● ●● ● ● ●●
Favorable Policy — — ● ● ● ● ● ● ●
Business ease — — ●● ●● ●● ●● ●● ●● ●●
Cultural Deposit — — ●●● ●●● ●●● ●●● ●● ●● ●●●
Human Resource — — ● ●● ●● ●● ●● ● ●●
Source: Compiled by the authors.
Note: The number of ● denotes the degree of improvement required.
The third concern for the Shanghai maritime cluster’s sustainable development is how
to increase its influence on the global maritime industry. Scholars have revealed that
the influence of maritime clusters, usually represented by their capacity for maritime
resource allocation on a global scale, heavily depends on the development level of
their contemporary maritime services (Jakobsen et al., 2017; Zhang and Lam, 2013,
2017). The Xinhua–Baltic International Maritime Cluster Development Index Report
(2015–2019) has ranked Singapore, London, and Hong Kong as the top three leading
maritime clusters since 2015, with Shanghai ranked fourth from 2018. In addition,
Jakobsen et al. (2017) ranked London as the world’s leading maritime finance city,
followed by New York, Singapore, and Hong Kong, whereas Shanghai ranked fifth.
Thus, although Shanghai is striving to boost its contemporary maritime services
through various measures, such as cultivating its business environment, it has always
faced difficulties in agglomerating contemporary maritime service resources because
the global hierarchy of maritime clusters specializing in shipping, maritime finance
and legal services, and maritime technology is already stable. Jakobsen et al. (2017)
further explained that the current hierarchy is a consequence of both path dependency
and the interconnection of factors such as talent, capital, infrastructure, business
friendliness, and living conditions. Therefore, for Shanghai to continue to improve its
maritime resource allocation capability and raise its influence in the world maritime
industry is a large task.
In sum, this section provided a comprehensive view of the status of the Shanghai
maritime cluster, which is characterized by competitive advantages in ports and
logistics activities, high pressure from environmental pollution, immature
contemporary maritime services, and difficulties improving its maritime resource
allocation capability. Accordingly, this study devised a future upgrading objectives for
the Shanghai maritime cluster, which involves becoming an ecologically friendly port,
global supply chain hub, and influential maritime cluster with a strong influence on
world maritime resource allocation.
3.4 Review of policies
3.4.1 Policy framework and the government’s role
Figure 3 depicts the organizational structure governing the development of the

Shanghai maritime cluster. It shows that the Shanghai municipal government plays a
driving role in the growth of the maritime cluster; it is responsible for devising the
strategy and plan for its development into a renowned maritime cluster, cultivating the
environment by providing infrastructure and soft promotion schemes, and normalizing
the routine operation of maritime clusters. Under the authorization of the municipal
government, internal coordination among the key stakeholders such as ports, shipping
and logistics-related firms, administration for port control and government
organizations, maritime derivative service institutions are managed by the Shanghai
Transport Committee. The aforementioned governmental activities can be realized by
designing and implementing various policies. Table 10 summarizes the set of policy
tools implemented by the Shanghai government that aim to upgrade the Shanghai
maritime cluster into an ecologically friendly port, global supply chain hub, and
resource allocation center. This is further elaborated in the following sections.
Shanghai Municipal Government
Promotion Office for the Construction of Shanghai Municipal Transportation Commission

Shanghai International Shipping Center (Port Authority)
(Coordinating)
General Administrations for Port Control Other Government Organizations

• Administration of Customs • Shanghai Municipal Financial Regulatory Bureau
• Administration of Quality Supervision, • Shanghai Municipal Finance Bureau
Inspection and Quarantine • Shanghai Municipal Development & Reform Commission
… …
(Planning-----Promoting-----Normalizing)
Ports, Shipping and Logistics-related Firms Maritime Derivative Service Institutions
• China Railway Shanghai (Group) Co., Ltd. • Shanghai International Shipping Research Institution
• Shanghai Airport (Group) Co., Ltd. • Shanghai Shipping Exchange
• Shanghai International Port (Group) Co., Ltd. …
• Tongsheng Investment (Group) Co., Ltd.
…
Fig. 3. Organizational structure of the Shanghai maritime cluster.

Source: Compiled by the authors based on information from the website of the
Shanghai International Shipping Center Construction Work Promotion Group Office.
Table 10: Policy framework for upgrading the Shanghai maritime cluster.
Upgrading objective Critical challenges policy tool

Ecologically friendly port Increasing environmental Optimizing distribution
concerns network
Adopting new technology
Establishing carbon emission
standards
Global supply chain hub Limited competitiveness in Cultivating a first-class
contemporary maritime business environment
services
Resource allocation center Low influence over global Developing a leading
maritime resources allocation e-commerce model and
centralizing functional
organizations
Source: Compiled by the authors.
3.4.2 Policy scheme 1: Controlling environmental pollution to become an
ecologically friendly port
First, a highly advanced inland waterway network and sea–rail multimodal transport
system is being continually improved. For transit between waterways, remarkable
progress has been made in the construction of container wharves for water–water
transshipment, high-class inland waterway networks, the standardization of
specialized vessels for inland waterway transportation, and vessels that can transport
goods directly via rivers and sea (Shi and Li, 2016). In terms of sea–rail multimodal
transport, in-port railway container transshipment stations that incorporate the railway
system into the port area have achieved seamless connectivity between railroad
transport and port terminal operations. In 2017, the proportion of container
water–water transit reached 46.7%, of which 10.588 million TEUs were completed on
the Yangtze River, accounting for 56.4% of the total water–water transit volume and
26.3% of the territory’s overall throughput (Shanghai municipal government, 2018).
Second, following the guidance of the Organization for Economic Co-operation and
Development (OECD, 2011), Shanghai is accelerating its wide application of onshore
power supply, photovoltaic power generation, and clean energy for off-road transport
machinery to effectively reduce emissions of particulate matter, CO2, NOx, and SO2
from ships’ main and auxiliary engines.
Third, to comply with a series of International Maritime Organization resolutions on
the reduction of CO2 emissions from ships, Shanghai has initiated the establishment of
an emissions control area that uses only low-sulfur fuel.
3.4.3 Policy scheme 2: Cultivating a first-class business environment for the

maritime service industry
To ensure that maritime services boom, the Shanghai maritime cluster prioritizes the
cultivation of a first-class business environment—characterized by market
mechanisms that conform to international practices—through implementing strongly
supportive policies. Table 11 presents possible policy instruments that have been
adopted in the Shanghai free trade zone.
Table 11: Pilot policies adopted in the Shanghai Free Trade Zone to promote
maritime services.
Policy scope Content Anticipated effect
On international Formulate trial administrative measures to To encourage major
shipping freight relax restrictions on the proportion of international shipping
shareholding of foreign investors in companies to set up regional
Sino–foreign joint and contractual joint headquarters or regional
ventures engaged in international maritime operation centers in
transportation and agency services. Shanghai.
On coastal side Allow non-five-star flag vessels owned or To enhance the cargo
business controlled by Chinese companies to engage transfer capacity of the
in import and export container coastal side Shanghai International
business between domestic coastal ports and Shipping Center.
Shanghai Port.
On international Lower the entry threshold for independent To encourage first-class
ship management shipowners and ship management enterprises foreign international shipping
and allow wholly foreign-owned companies companies to set up branches
to operate independently. in Shanghai to enhance its
service levels as an
international shipping center.
Source: Compiled by the authors referring to the “Overall Plan of China (Shanghai) Pilot Free
Trade Zone published by the State Council of China,” “Implementation Opinions of the Ministry
of Transport of China and Shanghai Municipal People’s Government on Implementing the
‘Overall Plan for China (Shanghai) Pilot Free Trade Zone published by the State Council’ to
Accelerate the Construction of Shanghai International Shipping Center.”
Shanghai, with the support of several policies that aim to cultivate a first-class
business environment, is advancing its maritime services industry. However, because
this industry covers a wide range of sectors and each demonstrates different features
in Shanghai, Shanghai is advised to select a reasonable development sequence
strategy in line with its port-originated feature. That is, considering the strong
vessel-related service demand generated from the extremely high cargo throughput
and concentrated vessel traffic flow, the development of ship registration, financing,
and transaction services should be prioritized. Subsequently, other contemporary
maritime services such as maritime legal services, insurance, and technology could be
further facilitated through the development of initial businesses.
3.4.4 Policy scheme 3: Exploring the potential of new information technology in

upgrading to a global maritime resource allocation center
To ultimately assist its efforts to strengthen its international influence in the allocation
of global maritime resources, the Shanghai maritime cluster is striving to develop its
contemporary maritime service industry, particularly by attracting more functional
institutions, such as ship-owners associations and freight forwarders associations, to
set up global or regional headquarters in Shanghai.
However, relevant research reveals that historical and cultural embeddedness are
crucial factors in concentrating such organizations geographically, and in this regard,
service-based maritime clusters retain their dominated position because of the effect
of path dependence (Gunther, 2014). Such difficulties would induce Shanghai to
consider a new manner of adopting new information technology, which it would use
as an effective method for establishing a global maritime resource allocation
mechanism similar to the role of functional institutions. The envisioned measurements
include developing a world-leading e-commerce model to achieve a preemptive
advantage in shipping e-commerce, as well as taking the lead in forming related
standards, rules, and mechanisms; establishing comprehensive information platforms
to improve operational efficiency; and promoting e-commerce in the shipping
industry.
4 Benchmarks for upgrading port-originated maritime clusters

The case study of the Shanghai maritime cluster elucidates the orientations for
upgrading port-originated maritime clusters, and several benchmarks have been
generated regarding the developmental objective and pathway.
4.1Upgrading objective of port-originated maritime clusters
The evolution of the Shanghai maritime cluster demonstrates that port-originated
maritime clusters have experienced tremendous changes late in their developmental
history. Initially, the Port of Shanghai served as a cargo entrepôt that mainly provided
services related to cargo loading and discharging as well as auxiliary in-port vessel
operations. Subsequently, it followed the trend of providing “door-to-door”
transportation and value-added logistics services rather than only in-port cargo
services. For more than 10 years, Shanghai has extended the scope of its traditional
cargo handling and logistics services to include contemporary maritime services. Such
an evolution process has also been documented by other scholars (Fisher Associates,
2004; Wang and Cheng, 2010; Zhang and Lam, 2013). They have concluded that
some port-originated clusters upgrade themselves into logistics-based maritime
clusters through providing integrated value-added logistics services, whereas others
transform themselves into service-based maritime clusters by emphasizing higher-end
maritime services. A few maritime clusters are able to integrate both types of logistics
services as well as contemporary maritime services (Jakobsen et al., 2017), thereby
developing into comprehensive maritime clusters.
The aforementioned evolution process highlights various upgrading objectives.
According to the classification of Humphrey and Schmitz (2002) regarding the
upgrading of an entity, this study envisioned three types of objectives for upgrading a
port-originated maritime cluster.
(1) “Process-related” upgrading to high-efficiency and low-carbon port operations.
“Process-related” upgrading refers to increasing the efficiency of production either
through enhanced organization of the production process or the use of improved
technology (Kohpaiboon and Jongwanich, 2013). As in the case of Shanghai, the
ever-increasing size of cargo ships and world trade volumes have increased pressure
on ports to become larger and more efficient (Jakobsen et al., 2017). In particular,
environmental pollution, energy depletion, and heavily concentrated traffic flows have
received increased attention. Thus, the need to optimize overall operating processes
pertaining to cargo flow to achieve highly efficient and ecologically friendly ports has
been recognized and accepted by the maritime industry and the overall port
community. Such upgrading can not only be observed in Shanghai but also in other
port-originated maritime clusters. For instance, Rotterdam, the largest port in Europe,
is now regarded as being among the world’s most advanced ports in terms of terminal
automation (Jakobsen et al. 2017). Singapore’s Green Port Programme, announced on
July 1, 2011, has promoted abatement and scrubber technology as well as burning
clean, low-sulfur fuels through the adoption of a 15% concession in port dues and
grants of up to 50% of total qualifying costs (Acciaro et al., 2014).
In sum, “process-related” upgrading focuses on adopting new technology and
redevising the cargo-flow process to enable upgrading into an ecologically friendly
port that is highly efficient and generates low carbon emissions.
(2) “Product and chain-related” upgrading to achieve global supply chain hub status.
The purpose of product upgrading is to increase value for consumers (Zhu and He,
2018). Chain upgrading is another type of high-end product upgrading, the critical
element of which is the integration of key business processes (Halse, 2017).
Traditionally, the cargo handling-related services offered by ports are individually
separated. In the context of today’s maritime industry, however, high demand exists
for an integrated supply chain service. Shanghai strives to upgrade its traditional
cargo handling services to include high value-added services such as door-to-door
transport services, a trade–finance–logistics integrated service, as well as
contemporary maritime services in areas such as ship transactions, shipping finance,
and maritime law. Such initiatives are also observed in Hong Kong; a study indicated
that Hong Kong would abandon building new seaport terminals in the near future and
emphasize advanced maritime service sectors such as insurance and brokering to
develop the city into an international maritime hub (Zhang and Lam, 2017).
In sum, in accordance with the widely-accepted notion that the port is the hub of
capital, cargo, and information flows as well as the first link of the global supply
chain (Fisher Associates, 2004; Wang and Cheng, 2010; Zhang and Lam, 2013), the
second objective for upgrading port-originated maritime clusters is for a cluster to
evolve into a global supply chain hub. A port is able to do so because of its ideal
location linking different business flows and channels (Bichou and Gray, 2004).
(3) “Function-related” upgrading to resource allocation centers.
Functional upgrading is defined as “the entry of a firm into a new, higher value-added
function or level in the value chain” (Dunn et al., 2006).
Historically, the main function of port-originated maritime clusters is to provide cargo
handling-related services. Exporting maritime services, and thus influencing global
maritime resource allocation, have typically been the sole function of service-based
maritime clusters. London is proud and confident of “providing professional and
high-quality services that are second to none” (Fisher Associates, 2004). Supporting
London’s leadership position are more than 1,750 companies and organizations
located there that participate in maritime activities and play active roles in the
formulation of business standards and information dissemination (Fisher Associates,
2004). However, cost pressures may increasingly cause the geographical
agglomeration of the traditional service-based maritime cluster to break apart by
reforming existing business models (Fisher Associates, 2004; Jakobsen et al., 2017).
Toh et al. (2010) argued, with reference to Nijkamp (2008), that in “an age of
advanced telecommunications, contact intensity and business may not be dependent
upon physical proximity of people and firms and virtual connectivity can be achieved
without geographic proximity.” Thus, with the strong support of modern information
technology, port-originated maritime clusters such as Shanghai demonstrate strong
potential for building up their resource allocation capacity in the global maritime
industry.
4.2Upgrading pathway for port-originated maritime clusters
Regarding effective methods of supporting port-originated maritime clusters to

achieve their upgrading objectives, numerous studies have indicated that such
sustainable development and unprecedented transformation are influenced by some
exogenous rather than endogenous factors (Curry et al., 2008;Doloreux and Melançon,
2008; Nijdam, 2010; Kasalis et al., 2011; Stavroulakis and Papadimitriou, 2016).
Menzel and Fornahl (2010) highlighted the heterogeneity of knowledge as a key
driving force in this process. Monteiro et al. (2013) further explained that the increase
of heterogeneity can be incremental or radical, respectively adapting to a changing
environment or resulting in renewal or even transformation into completely new fields.
Suire and Vicente (2014) stated that clusters with sustainable success are those that
continue evolving toward a more advanced level by disconnecting their old lifecycles
and exhibiting a continuous trend of growth. Given these concerns, perspectives such
as the implementation of technical innovation and the cultivation of business
environments could be employed to plot a pathway for upgrading port-originated
maritime clusters.
First, incremental technical innovation could be adopted to upgrade traditional
port-originated maritime clusters into highly efficient and ecologically friendly ports.
According to the theory of path dependency (Karlsen, 2005), port-originated maritime
clusters are typically in an advantageous position in this type of technical upgrading
because of their long-developed competitiveness; such competitiveness is rooted in
their advanced logistics infrastructure, high quality of logistics services, and strong
capacity to adapt to new technologies. Several studies (Rodrigue, 2010; Merk, 2013;
Shenoi, 2015; Jakobsen et al., 2017) have revealed that such technical innovation in
energy conservation, carbon reduction, automation, and smart solutions can be used to
facilitate the upgrading of existing port-originated maritime clusters under the
principles of efficiency, ecological friendliness, and intelligence (Fig. 4). The case of
Shanghai strongly supports the aforementioned assertions. The measures adopted in
Shanghai, such as the continuous optimization of the inland transportation network,
application of advanced automated and environmentally friendly technologies, and
implementation of strict institutional regulations, have been demonstrated to be
effective in improving the Port of Shanghai’s operations, as well as enabling it to
develop as an ecologically friendly port.
Efficient
Fig. 4. Technological innovation for logistics-based maritime clusters
Second, a first-class business environment for contemporary maritime services is

critical to the aim of upgrading port-originated maritime clusters into global supply
chain hubs.
Numerous studies on the maritime service industry have prioritized constructing a
first-class business environment (Rodrigue, 2010; Kocsis,2011; Laaksonen and
Mäkinen, 2013). The business environment covers a wide scope, and its cultivation
should be supported by diverse policies depending on the specific situation. The case
of Shanghai involves a package of policies for accumulating the elements of
contemporary maritime services, which also matches the evolution of maritime
clusters such as London, Singapore, and Hong Kong (Fisher Associates, 2004; Zhang
and Lam, 2013, 2017). Figure 5 depicts the framework of possible policy instruments
for cultivating a first-class business environment at the request of the development of
the maritime service industry.
By Object
Towards Community- Effective Internal Improving Infrastructure,

Fiscal Subsidies
based technology hubs Governance Deepening Cultural Deposits
Inter-Firm Cooperation
Towards Interactions Knowledge Exchange
and Networks
Preferred Tax, Cultivation of First-class Knowledge Capital,

Towards Enterprises
Providing Subsidies Business Environment Manpower
Fiscal &Financial Regulations Public Endorsement By Area

Source: Compiled by the authors based on Martin and Sunley (2003), Elola et al. (2016), and
Doloreux and Shearmur (2009).
Fig. 5. Framework of possible policy instruments for cultivating a first-class

business environment.
Third, new and radical information technology should be used to build up

port-originated maritime clusters’ resource allocation capacity. Despite service-based
maritime clusters gradually increasing their influence over global maritime resource
allocation, port-originated maritime clusters seem to be less competitive in
contemporary maritime services because of the effect of path dependence.
Furthermore, relevant studies (Monteiro et al., 2013; Makkonen et al., 2013; De
Martino et al., 2013) have revealed that because the hierarchy of global maritime
clusters is already established and relatively stable, the path dependency mode is not
particularly useful for existing port-originated maritime clusters seeking influence
over resource allocation, which is historically the main function of service-based
maritime clusters. Instead, competitiveness theory places greater importance on
guiding port-originated maritime clusters to achieve such an objective (Doloreux and
Shearmur, 2009; Stavroulakis and Papadimitriou, 2016). Jakobsen et al. (2017) stated
that radical innovation such as digitalization exerts a disruptive effect on the industry
by both challenging existing business models and creating new opportunities. Toh et
al. (2010) concluded after a literature review that technology related to e-business and
e-government can support a large-scale, collaborative business architecture in port
cluster communities. Overall, new information technology is critical for traditional
port-originated maritime clusters to acquire influence over maritime resources. The
case of Shanghai indicates that establishing comprehensive information platforms and
developing a world-leading e-commerce model could ultimately assist Shanghai’s
efforts to strengthen its international influence in the allocation of global maritime
resources.
4.3Role of the government
The case of Shanghai highlights the significance of the government in driving the
development of the maritime cluster. Basically, numerous stakeholders are involved in
the running of port-originated maritime clusters. Kocsis (2011) listed the possible
actors of port clusters as being port authorities, other municipal authorities, public and
regional organizations, companies related to port activities, educational and research
institutions, and financial organizations. The mix of stakeholders and the employment
of various coordination mechanisms among them are regarded by scholars as one of
the critical factors in the evolution of maritime clusters. Van der Lugt and De Langen
(2007) concluded that port-originated maritime clusters are dynamic business
networks that are highly influenced by the joint effort of the entire cluster community.
Generally, maritime cluster organization can be classified into two basic mechanisms,
namely the government-induced mechanism (top-down) and the business
leader–induced mechanism (bottom-up). The top-down mode is strongly
recommended for upgrading maritime clusters on the basis of several successful cases
in addition to that of Shanghai. These include the Irish government successfully
stimulating shipping operations and associated value-added and technology-based
maritime services through the introduction of a range of policies (Morrissey and
O’Donoghue, 2013) and the Québec government pushing a supercluster strategy
through which it promoted innovation and economic development. The main reason
for the top-down mechanism being highly recommended is that the development of
maritime clusters is a complex process involving numerous complicated activities,
such as strategy decisions, resource allocation, internal coordination, and
environmental cultivation (Doloreux, 2018); thus, handling these activities requires
the strong power of the government. By contrast, the bottom-up mechanism easily
incurs the ignorance of long-term growth of the cluster as a whole (Viederyte, 2013).
Additionally, the relationships among business-related stakeholders must be
considered from the perspective of value co-creation. Gereffi and Lee (2016)
differentiated such relationships from the aforementioned cluster organizational
structure. Hammervoll et al. (2014) strongly advocated that contracting is an effective
mechanism for rationalizing such relationships in the process of value co-creation.
To sum up, the benchmark discussion presented in 4.1, 4.2 and 4.3 resulted in a
conceptual model regarding the upgrading of port-originated maritime clusters, which
is depicted in Fig. 6.
Promoting Technical Innovation

Ecologically Friendly Port
+
Port-Oriented
Government-induced Mechanism Global Supply Chain Hub
Maritime Cluster
+
Maritime Resource Allocation Center
Cultivating Business Environment
Fig. 6. Conceptual model for upgrading a port-originated maritime cluster.
5 Conclusion
The case study of the Shanghai maritime cluster revealed that although Shanghai is
currently a traditional maritime cluster that mainly provides cargo handling and
logistics services, it is gradually transitioning into a comprehensive maritime cluster
that integrates logistics and maritime services. In addition, the case study revealed the
gradually declining growth in Shanghai’s container throughput, the increasingly
noticeable burden on the city’s environment and traffic system, and the difficulties in
further agglomerating contemporary maritime service resources and improving the
cluster’s influence on world maritime resource allocation. The strategy and policy
tools for upgrading the Shanghai maritime cluster include the following: develop an
ecologically friendly port by optimizing the inland transportation network, apply
advanced green technologies, strengthen the capacity of high-value maritime services
by cultivating a first-class business environment, and improve Shanghai’s global
influence in maritime resource allocation through formation of an e-business model
by implementing new information technology.
Having investigated the evolution and upgrading of the Shanghai maritime cluster,
several benchmarks regarding the developmental objectives and pathways of
port-originated maritime clusters were formulated. First, developing a maritime
cluster is a dynamic process in which core functions and the industry form constantly
evolve. The future developmental objective of traditional port-originated maritime
clusters is to upgrade into maritime clusters that feature ecologically friendly ports,
global supply chain hubs, and maritime resource allocation centers.
Considering the currently stable global hierarchy of maritime clusters,
innovation—including incremental and radical innovation—may be an effective
approach for traditional port-originated maritime clusters to upgrade themselves into
next-generation maritime clusters. An emphasis on cultivating a first-class business
environment through the support of various policies should also be a key factor.
Additionally, because upgrading is a complicated topic that involves numerous
stakeholders and calls for cooperation, adopting the top-down organizational structure
is essential for leveraging the government’s control of long-term development.
Although several benchmarks were conceptualized through a deep case study, the
upgrading of port-originated maritime clusters is a complex process depending on the
various features of specific maritime clusters at different development phases. Thus,
several noteworthy topics that were initiated from the case study and benchmark
discussion warrant further investigation both from academic and practical
perspectives, such as the embodiment form of maritime cluster organization,
cluster-specific development sequence, and new types of innovation for business
architecture restructuring.
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Appendix
A panel model can be categorized as a mixed data model, variable intercept

model, and variable coefficient model. The following hypotheses were established to
verify the employed panel data model.
H1 : β1 = β 2 = ⋯ = β N
H 2 : α1 = α 2 = ⋯ = α N , β1 = β 2 = ⋯ = β N
The F2 test statistic can be expressed as
(S3 − S1 ) /[( N −1)(k + 1)]
F2 = ~ F[( N −1)(k + 1), N (T − k −1)]
S1 /( NT − N (k + 1))
where S1 denotes the residual sum of squares of a variable coefficient model, S3
denotes the residual sum of squares of a mixed data model, N denotes the number of
cross-sectional data observations, T denotes the total number of years, and k denotes
the number of arguments in the model.
When the F2 value is lower than the corresponding critical value at the given
confidence level, H2 is accepted. Thus, a mixed data model is selected. Otherwise, H2
is rejected, and the calculation of the F1 test statistic continues.
The F1 test statistic is expressed as
(S2 − S1 ) /[( N −1)k ]
F1 = ~ F[( N −1)k , N (T − k −1)]
S1 /( NT − N (k + 1))
where S2 denotes the residual sum of squares of a variable intercept model.
confidence level, H1 is accepted. When both H1 and H2 are rejected, then the sample
data are applied to a variable coefficient model.
Appendix
A panel model can be categorized as a mixed data model, variable intercept

model, and variable coefficient model. The following hypotheses were established to
verify the employed panel data model.
H1 : β1 = β 2 = ⋯ = β N
H 2 : α1 = α 2 = ⋯ = α N , β1 = β 2 = ⋯ = β N
The F2 test statistic can be expressed as
(S3 − S1 ) /[( N −1)(k + 1)]
F2 = ~ F[( N −1)(k + 1), N (T − k −1)]
S1 /( NT − N (k + 1))
where S1 denotes the residual sum of squares of a variable coefficient model, S3
denotes the residual sum of squares of a mixed data model, N denotes the number of
cross-sectional data observations, T denotes the total number of years, and k denotes
the number of arguments in the model.
confidence level, H2 is accepted. Thus, a mixed data model is selected. Otherwise, H2
is rejected, and the calculation of the F1 test statistic continues.
The F1 test statistic is expressed as
(S2 − S1 ) /[( N −1)k ]
F1 = ~ F[( N −1)k , N (T − k −1)]
S1 /( NT − N (k + 1))
where S2 denotes the residual sum of squares of a variable intercept model.
confidence level, H1 is accepted. When both H1 and H2 are rejected, then the sample
data are applied to a variable coefficient model.
Several benchmarks regarding the upgrading of port-originated maritime clusters are
conceptualized through a deep case study on the evolution of the Shanghai maritime
cluster.
These clusters must be upgraded to feature ecologically friendly ports, global

supply-chain hubs, and maritime resource allocation centers.
Such upgrading can be achieved through both incremental and radical innovation as
well as the cultivation of a first-class business environment.

Upgrading Port-Originated Maritime Clusters Insights From Shanghai's Experience

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Upgrading port-originated maritime clusters: Insights from Shanghai's experience

Xin Shi, Haizhou Jiang, Huan Li, Ying Wang

To appear in: Transport Policy

Received Date: 20 December 2018

© 2019 Published by Elsevier Ltd.

Haizhou Jiang and Huan Li,

Abstract: Continuous upgrading is critical to the sustainable development of

Maritime clusters make distinct contributions to the development of national or

History and status quo Categorization of

Challenges and problems Classification of

Fig. 1. Analytical framework.

3. Case Study: Upgrading the Shanghai Maritime Cluster

3.1 Overview of historical development

18th century 1980s 2005-2010

3.2 Analysis of the status quo

3.2.1 Cargo handling and logistics services

Because Shanghai is a port-originated maritime cluster, cargo handling-related

Source：Drewry Container Report 2019, Q1

3.2.2 Contemporary maritime services

Contemporary maritime services are rooted in traditional in-port auxiliary vessel

3.2.3 Characteristics of the Shanghai maritime cluster

Although several perspectives exist regarding the classification of maritime clusters,

Shanghai[a] ln y SH ,t = 4.3311 + 0.021x 1,t + 0.889x 2,t + 0.7021x 3,t 2.1%

ln y HK ,t = 2.4521 + 0.026 x 1,t + 0.746 x 2,t + 0.7489x 3,t

Antwerp[c] ln y AT ,t = 3.3217 + 0.031x 1,t + 0.592x 2,t + 0.584 x 3,t 3.1%

Hamburg[d] ln y HB ,t = 5.6152 + 0.029 x 1,t + 0.682x 2,t + 0.749 x 3,t 2.9%

London[e] ln y LD ,t = 7.6995 + 0.027x 1,t + 0.659x 2,t + 0.892x 3,t 2.7%

3.3 Identification of problems and challenges

Congestion mileage Congestion mileage in NO2 PM SO2 Container Percentage of Waterway

Table 8: Comparison of maritime services industries in Shanghai, Hong Kong, and

Table 9: Assessment of the Shanghai maritime services industry business

3.4 Review of policies

3.4.1 Policy framework and the government’s role

Figure 3 depicts the organizational structure governing the development of the

Promotion Office for the Construction of Shanghai Municipal Transportation Commission

General Administrations for Port Control Other Government Organizations

Ports, Shipping and Logistics-related Firms Maritime Derivative Service Institutions

Fig. 3. Organizational structure of the Shanghai maritime cluster.

Upgrading objective Critical challenges policy tool

3.4.3 Policy scheme 2: Cultivating a first-class business environment for the

3.4.4 Policy scheme 3: Exploring the potential of new information technology in

4 Benchmarks for upgrading port-originated maritime clusters

4.2Upgrading pathway for port-originated maritime clusters

Regarding effective methods of supporting port-originated maritime clusters to

Fig. 4. Technological innovation for logistics-based maritime clusters

Second, a first-class business environment for contemporary maritime services is

Towards Community- Effective Internal Improving Infrastructure,

Preferred Tax, Cultivation of First-class Knowledge Capital,

Fiscal &Financial Regulations Public Endorsement By Area

Fig. 5. Framework of possible policy instruments for cultivating a first-class

Third, new and radical information technology should be used to build up

4.3Role of the government

Promoting Technical Innovation

Fig. 6. Conceptual model for upgrading a port-originated maritime cluster.

A panel model can be categorized as a mixed data model, variable intercept

A panel model can be categorized as a mixed data model, variable intercept

These clusters must be upgraded to feature ecologically friendly ports, global

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