This paper analyzes the dynamic mechanism movement of industrial firms dominated by local government in China cities based on the composition of it with the firm relocation in the market economy.

The enterprise migration,which began from the 1990s,has become more and more frequent in the 21st century.

The motive for enterprise migration, factors affecting the decision-making process, business migration to regional policy, business growth performance, the impact of the regional economic development are all of great significance to China s industrial shift in the direction and specific strategies.

With the development of economy, enterprise migration appearred in USA in the 50 s.

With the State Council adjusting the policies of migrations and removing enterprises in Three-gorges reservoir area, the removing enterprises will implement the policy of bankruptcy and closing down at a large scale, but many existed law problems demand prompt solution.

In the research of firm migration, it is practically significant to study how the migrating firm can promote its performance and acquire sustainable competitive advantage by relocation.

This article takes Wenzhou lamp-making cluster in Zhejiang Province as an example to analyze mechanism of firm migration in clusters.