The Interaction Mechanism Of Manufacturing Enterprises R&D Behavior Affect On The Market Structure And Performance

In the history of the development of the world economy, industrialization has become animportant stage in the development of economic modernization in most countries insurmountable.The manufacturing industry has become a pillar industry to promote economic growth. It can notonly attract foreign investment, but also to improve the balance of payments, improve its ownknowledge and technology capital and technological innovation ability. In recent years, thecompetition in the area of the world economy will gradually shift the focus to manufacturingresearch and development and technological innovation capability Competition. Manufacturing notonly has made great contributions to vigorously promote the country’s economic development andindustrial progress on meeting the needs of life of the people, promoting research and developmentand technological progress, but also is the foundation of the national economy. The research anddevelopment of manufacturing play a vital role both in the development of countries andenterprises. Either the process innovation or the production efficiency will continue to promote theproductivity gains of the industry. With the rapid economic growth of the reform and opening up30years, manufacturing industry of China has become the world’s manufacturing plants. Thecontribution in terms of production scale, fiscal revenue, and technological innovation can not beignored.In the theory of industrial organization, Schumpeter’s innovation theory II emphasizes theimportance of large-scale enterprises in technological innovation. He believes that the monopolymarket structure is more conducive to innovation. After the view of (Arrow1962) competitivemarket structure is more favorable to technological innovation, the relationship between marketstructure and technological innovation has gradually become the focus of research in the theory ofindustrial organization, although had no result. As the industry and institutional environment isdifferent, the conducive choice of market structure and technological innovation is also not thesame. Empirical research on the impact of technological innovation on market structure is notmuch, and domestic research in this area is even more limited. Thus combining the characteristicsof China’s manufacturing industry and institutional environment for China’s economic developmentto analyze the relationship between market structure and technological innovation is a necessarycomplement to related fields. In the past30years of rapid development in China, the quality andspeed of economic development largely depends on the status of the manufacturing sector. China’seconomic development model is still extensive growth model which relies on a large number offinancial and human capital, therefore technological progress has become the only way to improvethe quality of economic development. Regardless of the industry or a micro-to the individual enterprises, the R&D strategy is a necessary means to achieve technological progress. Therefore,both strengthening the manufacturing’s R&D investment and improving the technologicalinnovation capability of enterprises are important guarantees for enhancing the marketcompetitiveness of enterprises in China. In this paper, the research on the effect of manufacturing R&D in China of the industry structure and performance, has important practical significance. Basedon the data of sub-sectors of28China’s manufacturing industry in the period of1996-2009, thispaper analysis the mechanism of China’s manufacturing industry R&D behavior impact on marketstructure and performance. The methods and results of empirical research are as follows:A. In this chapter, it measures the change rate of total factor productivity of every industry andits three constituent parts with the stochastic frontier production function. The growth rate of thetechnical efficiency of the manufacturing industry gradually decreased, and at the same time thereare decreasing returns to scale. FTP constitutes the main part of the total factor productivitygrowth，so it is the main source of growth in total factor productivity of China’s manufacturingindustry. From1996to2009, the ways to improve industry total factor productivity growth variesfrom each other in China’s manufacturing industry, so we should also focus on economies of scalewhile focus on the technological progress in some of the industries.B. This chapter employs PCM (Price-Cost Margin Model) to measure the trend of the marketstructure changes in different industry sectors. The majority of the market structure of the industryhas relatively small fluctuations but overall tends upward trend. And China’s manufacturingindustry concentration is still at a low level. It employs the unit on assets to measure Marketperformance. According to estimates results，we found that the level of profitability of China’smanufacturing industry as a whole more balanced, with the annual average profit margins remainabove4%. Among them, such as the beverage manufacturing and tobacco industry, the level ofprofit ability lead other industries; On the contrary, such as agro-food processing industry andtextile industry, the annual average profit margin is lower than the average of the industry.C. The analysis of how Market structure affects corporate R&D behavior is based on thedifferent views of the "degree of monopoly for the R&D behavior, using1996-2009panel data ofChina’s28manufacturing industry, dividing them into four categories by industry growth rate, atlast, establish an quadratic regression model and make an empirical analysis. The results show thatthe effect of China’s manufacturing market monopoly on R&D behavior, the four different type ofChina’s manufacturing market varies. The entire course of development, the relation of the marketstructure and R&D behavior may show the "M" type curve.D. The analysis of China’s manufacturing industry technological progress on the role ofmarket structures is based on the data of sub-sectors of28China’s manufacturing industry in theperiod of1996-2009.This chapter employs PCM (Price-Cost Margin Model) to measure the trendof the market structure changes in different industry sectors. Then, it measures the change rate oftotal factor productivity of every industry and its three constituent parts with the stochastic frontierproduction function. After that, Panel data model is employed to study their impacts on marketstructure during the sample period.The major findings indicate that technological changes brought about by R&D behavior have led to the change of market structure with the improvement ofsocialist market economy institution in China and the influence of technical barriers and industrialpolicies in the manufacturing industries in China. The following are the three aspects under thefunction of market mechanism:Firstly, when market entry barrier was lower, technological changes led the market structure in15sectors (such as food industry) to be competitive. It is indicated that the big enterprise in theindustry can’t dominate the market when the capital barriers or the technology barriers are low. Inthis situation, the occurrence of technological progress will lead the small business enterprise todevelop into strong one, which makes the industry more and more competitive.Secondly, whenmarket entry barrier was higher, technological changes made the market structure in both thepetroleum processing and coking industry and nuclear fuel processing industry tend to monopoly.The indication is when the market entry barrier is high, the occurrence of technological progresswill make the business enterprise stronger while the technical property rights protection improvesthe degree of market concentration.Thirdly, when the industry was affected by policy, technologychanges had no obvious impact on the market structure in11sectors, such as tobacco industry,which indicates that the degree of influence of policies and technologies on these industries isgreater. The result shows that it is difficult for the market mechanism to play a role, and thetechnological advances brought about by the R&D behaviors have different impact on the marketstructure of different sub-sectors of different industries, which proves the theoretical hypothesis ofthis paper.E. This chapter studies the impact of corporate R&D behavior on the performance of theindustry by Threshold regression model. We found that there are two significant critical value of0.09and0.17in China’s manufacturing industry market structure. There is a big difference in bothsides of the threshold on the impact of R&D behavior for performance.It shows that there exists alinear relationship in China’s manufacturing industry from1996to2009between the R&Dbehavior and performance. The technological advances of high monopoly market will consolidatemonopoly, but lead to a decline in industry performance; low-monopoly industry’s technologicalprogress causes the industry profit margins close to zero, and performance improvement; Thedegree of monopoly in the middle of the two, with an uncertainty degree. Therefore, theGovernment should be based on the existing market structure characteristics differentiated toencourage research and development of enterprises. For the strong competitive and low marginindustry, it should be given financial support while some protection should be adopted to maintainthe enthusiasm of its R&D and innovation have taken; For the higher degree of monopolymanufacturers should adopt policies to encourage research and development of enthusiasm. At thesame time to prevent further expansion of the degree of monopoly.This study analysis the impact of R&D behavior on the market structure and performance inChina’s manufacturing industry. Therefore different incentive systems should be adopted by thegovernment in different sectors. If the R&D behavior can bring higher technical progress of theindustry, R&D behavior should be encouraged; if the degree of monopoly is higher and the economies of scale is weaker, we should prevent the expansion of the degree of monopoly. Finally,in the context of industrial upgrading, this study has a crucial importance to grasp the industrystatus quo, develop the rational industrial policy and maintenance of industrial safety in China.