Purpose – The purpose of this paper is to study how local government policy influences the structure of Chinese pharmaceutical clusters during their industrial catch-up. Design/methodology/approach – This paper applies a case study method by targeting pharmaceutical clusters in Tonghua, Taizhou, and Tianjin. Findings – The varied structures of pharmaceutical clusters in China demonstrate local governments’ efforts to utilize local resources accordingly. While the local governments in China introduce different policies to firms with different ownership in the process of constructing different cluster composition, all the local governments emphasize motivating the development of small- and middle-sized enterprises for cluster dynamics. Practical implications – The local governments should try to reach a balance between short-term foundation and long-term competitiveness for industrial cluster development. Originality/value – This paper provides the detailed analysis of local governments’ influences on the formation of pharmaceutical clusters in China and helps to enrich the knowledge about how local government promotes industrial clusters to realize industrial catch-up through sectoral innovation system. © Emerald Group Publishing Limited.