Reducing the regional economic gap and better developing the currently underdeveloped small cities in Central and Western China are two challenges conforting many Chinese and international scholars. This thesis chooses Xixia City, a small mountainous city in the Central China region as a successful case in economic development to explore whether and how local entrepreneur networks function as social capital stocks to help these small cities overcome their common disadvantages (e.g., location, transportation, industry foundation and material capital) and catalyze the local economic development. By interviewing the members of the Xixia local entrepreneur network and the officials, this thesis seeks to understand the history and the structure of the Xixia local entrepreneur network and identify the social capital stocks in Xixia City. Based on these data, this thesis also summarizes the benefits of the local entrepreneur network, and uncovers the positive lessons we can learn from the Xixia's local network in order to encourage the local economic development and industry innovation throughout China's underdeveloped small cities.