Spatio‐temporal dynamics of technical efficiency in China’s specialized markets: A stochastic frontier analysis approach

China’s specialized markets as a special form of bottom‐up capital agglomeration have played a key role in fostering regional development. It once exhibited positive externalities with high efficiencies. However, given the rapid proliferation of specialized markets and the penetration of E‐commerce, their advantages may have shifted and the understanding of this shift is limited. The paper explores the spatio‐temporal dynamics of China’s specialized markets in terms of technical efficiency. Based on turnover data from Statistical Yearbooks of China Commodity Exchange Market from 2000 to 2016, technical efficiencies in specialized markets are measured by a Stochastic Frontier Analysis (SFA) approach using panel data. The results show that (a) the technical efficiencies in China’s specialized markets are significantly divergent in space over time; (b) labor input has notable effect on efficiency increase, while capital input has no significant effect; (c) informatization level, cluster size, and degree of market openness are identified to have a positive effect on specialized market’s technical efficiency. This paper argues that specialized markets should be taken seriously in the cluster evolution research. The role of proximity and the bounded links between specialized markets and their local clusters is the key to understanding their changing forms, performances, and trajectories.