A Research On Mechanism Of Industrial Value Creation Based On Vertical Linkages

As the industries are divided more and more specialized, collaboration between upstream and downstream firms becomes very popular. The performance of a certain industry is most influenced by vertical related industries. So it is necessary to study industrial performance in the view of vertical linkages.In the dissertation the firm is considered as an entity of heterogeneous resources and capabilities. Value creation of an industry, which is the return of resources especially those heterogeneous ones, is then used as the criterion of industrial performance valuation. On one hand, value creation of an industry depends on both firm-creating values and finn variety, which are both determined by firms' capability in the industry. Vertical cooperation enables firms to learn from each other. In the way firms' capability is improved. On the other hand, value creation of an industry is always realized in the forms of customer value. Effective vertical coordination helps to optimize customer value driving structure. Therefore, value creation of an industry is evidently affected by industrial vertical linkages.Vertical linkages between upstream and downstream firms are the basis of those between the whole industries. Two kinds of linkages are included, structural linkages describing the dependence of resources and capability on each other, and behavioral linkages describing cooperation and contracts between them. In the short run, the vertical operation relations, including input-output relation, technical and knowledge-based relation, between upstream and downstream firms are fixed. This kind of structural characteristics determines the revenue and cost of vertical cooperation. A model based on game theory proves that there exits an optical vertical operation level between firms. Higher vertical operation level enables an industry to expand its boundary and get more heterogeneous resources. While the vertical operation level is lower, firms become more specialized, which generates option value. The former value creation mode is called network mode, and the latter modulization mode. So different vertical cooperation levels leads to different value creation paths.In the long run, the vertical operation relations are changed bY both external and internal factors. Cooperation revenue and cost can change through the process of cooperation, so optical vertical cooperation level varies. And when the industrial value is transferred to vertical related industries, firms will change there conducts, vertical intergration for example, to get new capability. In these kinds of situations vertical linkages are dramatically changed. The dissertation discusses in details changes of vertical linkages with the historical co-evolution of knowledge growth and work specialization. The benefits from specialization are unavailable if systematic knowledge is not effectively shared between vertical related firms. In the network mode, the systematic knowledge is shared via cooperation. In the modulization mode, tacit systematic knowledge is transformed into dominant knowledge which is easily to be shared. The two modes play a central role in turn during the growth of a certain industry.In the view of value creation, industrial regulation is to promotion competition between heterogeneous firms. The policies should reduce industrial growth barriers and improve firms in capability. Vertical cooperation between firms helps them improve their capabilities, which leads to more value creation of a certain industry. So it should be permitted by the government. The desertion also studies the reasons for less vertical cooperation in China. And some policies are suggested to change the situation.