Large Enterprises And Economic Growth

The experiences of economic development of all countries in the world show that large enterprises have played an increasingly dominant role in a country's economic development and modernization process. With 21 new technological revolution's advent and development, the economic structure dominated by large enterprises in 20th century industrial economy is undergoing great changes. Groups of small and medium-sized enterprise are flourishing, and playing a greater role in a country's economy growth. So how to treat the large enterprises in the future's economic growth? This paper is to discuss the relationship between the large enterprises and economic growth theoretically, and do the research about the large enterprises of some typical countries.1. The main issues discussed in this paperThe paper deals with the relationship between the large enterprise and economic growth from the following 2 aspects:①Explains the driving force of large enterprises for a country's economic growth theoretically.②Summarizes some common experiences and lessons through studying the development of the large enterprises in the three typical countries—the United States, Japan, South Korea and tries to guide the development of China's large enterprise by this research.Focus on these two core issues, this paper is divided into three parts for further research. The first part is to discuss the relationship between the large enterprises and economic growth in theory. The second part is to summarize some common experiences and lessons through studying the development of the large enterprises in the three typical countries—the United States, Japan, South Korea. Based upon the research above, the last part is to analyze the development situation of China's large enterprises and give some policy recommendations.2. The main conclusions of the relationship between the large enterprises and economic growth in this paper①Innovation is the main source of corporate profits and the core motivation of economic growth.②With the deepening development of the market economy, innovation is not just an intermittent and fortuitous event, but it has been a routine action in the large oligopolistic enterprises because of the intense competition in the market economic system.③The core strength in the contemporary market economy is the large oligopolistic enterprises. The competition among large enterprises forces them to make the innovation as a routine action. Such routine innovation has become the main source strength in the economic growth. Large enterprises innovation expenditure can be maintained at a high level and continue to grow due to the fierce market competition. This routine innovation makes the economic growth stable in the long term and raises the living standard of people.④As only large enterprise can provide a stable routine innovation, it is the core strength in the economic growth . It is thus the most important and central economic organization.⑤Under the market economic system, large enterprises are the product of the evolution of the enterprises institution and organizational structure. The enterprises'institutional and organizational structure adjustments adapt to the needs of the routine technological innovation.⑥The institutional arrangement in the market economic system is the foundation of economic growth. It is the market economy that guarantees innovation and provides the driving force to the innovation. Only in the market economy system can the enterprises have the real driving force for the innovation, and then the economy can be driven by the innovation and achieve long-term growth.3. The main conclusions drawn from the comparative international experience researchThrough the comparative research of the large enterprises development in the United States, Japan, Korea, the paper gets common experience or lessons:①A sound system environment is the basis for the development of large enterprises in a country.Seen from the development experience of the large enterprise in the United States, Japan, Korea, the United States has a relatively perfect system of market economy, and thus its development of large enterprises has the highest vigor, vitality, dynamic and capacity among the three countries. However, the competitive environment in Japan and South Korea is not good as that in US because of their relatively weak economic basis and the government-led economic policy for their catching up economic goal. Although the two countries'governments have adopted some policies to encourage competition, their starting point and focus are still not on the establishment of a competitive system environment. Therefore, the system environment construction has lagged far behind the development of the economy and the large enterprises. This situation leads to that the large enterprises in these two countries are lack of innovative vitality and that the economic development lags behind the United States.②The role of the government in the large enterprise developmentSeen from the development experience of the large enterprise in the United States, Japan and Korea, the government has played an important role in guiding and supporting the development of large enterprises. With the highest degree market economy among the three countries, the United States government mainly guides and assists the large enterprises by some market-based measures (such as providing the large enterprises with the relevant preferential taxation policy, credit policy, etc.). The US government does not directly intervene in the large enterprises'internal operation and management. As the economic backward countries, Japan and South Korea has a relatively low level market. During the economic catching up process of the two countries, the governments recognized the importance of the large enterprises. The governments combined the large enterprises development strategy and industrial policy, selected some large enterprises in the key development industries to support, and then they achieved a rapid escalation of their key industries and the rapid growth of the large enterprises. The two countries'experiences have proven that the government's supporting action is obviously effective in a country's rapid economic take-off stage for both the economic strength and the industrial power. However, after the key industrial upgrading period, the two countries (especially Korea) remains to intervene the operation of the large enterprises through administrative means which results in the large enterprises'excessive relying on the government. This situation makes the large enterprises lack of cost and risk awareness, lack of innovation dynamic, and finally leads to the failure of some large enterprises.③The development of the large enterprises needs strong financial supportSeen from the development experience of the large enterprise in the three countries, their rapid expansion needs strong financial support. The United States has the world's most sophisticated capital markets, which greatly promotes the development of the large enterprises. As the capital markets are less-developed, Japan and Korea formed their respective indirect financial system which mainly consists of banks. Looking into the results, it seems that the direct financial system in the United States is more favorable than the indirect financial system in the Japan and South Korea. However, by further research we can find the root is that the financial system in Japan and Korea is not running under a perfect market system. This results in that the financial capital is not allocated in a rational way in a distorted institutional environment. The facts have proved that such imperfect system can easily lead to the financial crisis.④It is an inevitable choice for large enterprise development to do the merger and integration and large overseas expansion.Seen from the development experience of the large enterprise in the world, almost all the world-class large enterprises achieved their external expansion and development by capital operation. Many large enterprises'successful cases also prove that expanding overseas plays an irreplaceable role for the growth of the large enterprises. The overseas expansion can open up a new market space, help to circumvent the trade barriers, achieve the scale and scope economy globally and share all the global high-quality resources. Only by overseas expansion can the large enterprises establish their own brand strength and improve their own competitiveness and value.⑤The development of the large enterprise needs the formation of an entrepreneurs groupHistory has proved that for all countries in the world, the development of the large enterprise needs the formation of an entrepreneurs group. The formation of an entrepreneurs group depends on a formation mechanism which relies on a country's institutional basis. Such institutional basis should include: a sound market competitive system, an established legal system, and the modern enterprise institution which most importantly consists of clear property rights. Only through setting up a clear property rights system and protecting it by institution, can the entrepreneurs become the real leader of the enterprises'operation and can the entrepreneurs group be formed in the real sense.⑥The relationship between the development of the large enterprises and the technology innovationThe world's successful large enterprises'have proved that every year they invest both financial and human resources tremendously to the technology innovation activities in order to win more market share in the competition. Experience shows that technology innovation is the main driving force of the continued development of the world-class enterprises. It is also the main means for the large enterprises gaining competitive advantages. The technology innovation has become the fundamental for the large enterprises. The large enterprises will be surely backward or even defeat if they have no enough R&D investment and senior R&D team.4. The research on China's large enterprises development and the policy recommendationsBased on the theoretical explanation and international experience comparative research, this paper analyzes the situation of China's large enterprises.There are two main problems in the development of China's large enterprises. First, there is a big gap between China's large enterprises and the world-class enterprises in the scale, especially in the most intense international competition industry. The big scale which makes some China's enterprises the world top 500 is mainly because some enterprises have the special economic recourses and thus enjoy the monopoly power. Second, the core competence is not strong. The main reasons are that the large enterprises are lack of innovation dynamic and weak in innovation capacity. Within in these two issues, the second one is particularly influential for the Chinese economy. Looking into the reasons, we believe that it is mainly resulting from the imperfections in system of China's market economy. The enterprises can enjoy market advantage through not innovation but occupying unique resources due to some factors such as imperfect system, market segmentation and market entry permission. However, in the meanwhile, some other capable enterprises cannot enter the market through their normal innovation. All these factors lead to the lack of innovation dynamic. Property rights reforms'lagging behind in China makes it fail to form an outstanding team of entrepreneurs and thus inhibit the innovative vitality of the enterprise.Against the problem, the paper pointed out that in order to be greatly strengthened; China first of all need to improve the market economic system, to enable large enterprises to truly participate in the competition, to give large enterprises development pressure and innovative dynamic. At the same time, we should pay more attention to the formation of entrepreneurs and R&D team, to the introduction and absorption of technology, to the integration of production, study and research in the innovation and to the development of capital market. Only in this way can China own world-class enterprises with core competence. During this process, the government should play an important role in guiding and supporting, referring to the painful lessons in the development of large enterprises from Japan and Korea.5. The main innovation and weakness in this paperBased on the review of previous theory, this paper demonstrates the relationship between the large enterprises and economic growth, explains the mechanism that a large enterprises play in the economic growth of a country.This paper points out that large enterprises play the most important role in the promotion of routine innovation which leads to the economic growth, and stresses that the future of mankind in the development of economic growth is more dependent on the stability of this routine innovation activities. It should be said that these theoretical explorations contribute a lot both to economic growth theory and to the development of large enterprises.The development of large enterprises is an extremely large and complex process. The large enterprises itself as a very large economic organization, its features are also in constant changes. Due to the limit of the author's theoretical and practical basis, it is impossible to complete the explanation of the development of large enterprises perfectly in a paper. Upon completion of this paper, the author deeply feels there are still a lot of issues which should be covered. For example, it should be further dealt with the relationship between the development of large enterprises and SME; the government's function in theory, etc. The author hopes that in the future it will be more researches in this field which can be the guidance of China's development and practice of large enterprises.