The Embedded Competition: The Embedded Competitive Potential Theory And Its Empirical Research

Under the background of economic globalization, the Global Value Chains (GVC) isthe important solution of world economic resource allocation, and it is becoming one ofnew model of industrial development. The GVC controlling power has become the newstrategic focus in the world industry competition; as well it is the new expression form forenterprise’s international competitiveness. This thesis made the valuable hot spot researchregarding the formation mechanism of manufacturing GVC controlling power, researchedthe possible paths includes that the GVC manufacturing embedded enterprises continue toimprove their GVC controlling power and influence in whole chain. Helping the embeddedmanufactures to build up their share right of GVC controlling power, this research not onlybenefits to the perfection of GVC governance structure, but also make it is feasible to ironthe so-called "Smile Curve" more smooth, which will bring much important practicalsignificance for “Made in China”.It is one of preconditions of building up GVC manufacturing controlling power thatthe manufacturing enterprises embed into GVC. The "Embedded Competition" is the firstbasic concept in this thesis. After the wide literature review of existing research related, thethesis starts with the analysis of the market structure and competition structure under thecondition of GVC embedding. The result of analysis shows, the embedded competitionenterprises have to face a "Cross-shaped" two-dimensional market structure: theenterprises have to implement the competition in order to obtain the embeddedopportunities in horizontal direction, and the embedded enterprises have to implement thecompetition in order to maximize the rent distribution in vertical direction. The marketstructure of embedded competition includes the horizontal direction as "Face to Face"effective competition and the vertical direction integrated with vertical restraintsmanagement. The final structure is constrained with such dual directions superposition andspecialized. This analysis output will be the base research starting point for building"Embedded Competitive Potential Model". Due to the complexity of competitive motivation, competition mechanism and itsbehavior and strategy, the embedded competition couldn’t be explained by single theory.Base on the theoretical comprehensive from comparative advantage, competitiveadvantage, controlling of resources and competitive priorities, this thesis first timeproposes and claims the "Embedded Competitive Potential Model" with the equivalent rentcurve surfaces and GVC rent distribution capacity models in a three-dimensional spaceincludes technical, manufacturing and sales. As the basic feature of “EmbeddedCompetitive Potential Model", the manufacturing enterprises create their potential energyin GVC through obtain the "Competition Energy" in horizontal direction and “PositionEnergy" in vertical direction base on the precondition of specialized embeddingmanufacturing capability. This GVC potential energy is the basic guarantee that themanufacturing enterprises can transform their roles from GVC embedding to GVCcontrolling power structure embedding. Realizing the upgrading from GVC embeddedcompetition strategy to GVC controlling power structure embedded competition strategy isnot only the important additional theory for the transformation and upgrade propositionalof manufacturing enterprises in our country, but also is the main target of this research andit’s main theory shining point.The GVC controlling power embedded competition strategy is the basic content ofembedded competitive potential model. Therefore, after the economics deductive analysisof embedded competition potential model, this thesis makes a quantitative and synthesizedempirical study for main influencing factors and mechanisms between embeddedcompetition potential and GVC controlling power. In order to facilitate the empiricalanalysis, the thesis breaks the controlling power into2induced variables as "RentDistribution Capacity" and "GVC Governance Power". And the thesis clusters17measurable variables into five main potential energy argument factors which are describedas "Manufacturing Location Advantages","Embedded Manufacturing Capacity","Relationship Development Capacity","Alternative Degrees" and "Process ReputationAssets". The thesis obtained the measurement data via questionnaire, and both of SPSSstatistical analysis software and AMOS structural equation analysis software are used forthe questionnaire data selection, validation and analysis. In order to verify the rationality ofembedded competitive potential effect the GVC controlling power model. This empiricalresearch and test is the key theoretical principle which will help to propose the main embedded competition strategies.Since the main focus of this thesis is the solution of embedding into GVC controllingpower structure instead of embedding into GVC, therefore, the acquirement of "RentDistribution Capacity" and "GVC Governance Power" became the benchmark of theeffectiveness of embedded competition strategies. Around this benchmark, the mainstrategies are recommended as bellows: the proposed the priority sequence of embeddedcompetition enforcement, which is called as "First win in the horizontal competition, andthen occupy the advantage in the vertical competition”. In the horizontal competition, the"Competing-cooperating" strategies and pricing and non-pricing competitive prioritystrategies are recommended. In vertical direction, the intertemporal concept andsustainability complementary strategy against the "Hold-up" should be applied in verticalcompetition, and also proposed the modular technologies and components " Packed", thesestrategies will promote the GVC controlling power improvement very much and benefitthe upgrade within GVC. The analysis of embedded competition strategy is also one of keycomponent of the theory of embedded competitive potential.In order to verify the practicability of the main embedded competition strategieswhich is obtained by theoretical analysis, this thesis proceeds a multi-case empirical studywith6embedded enterprises which belong to3different GVC-driven styles. These casestudies with multi-industry enterprises make the research results of study more in line withthe actual situation, further enhance the preciseness and scientific of research results. Atthe end of thesis, the author summarizes the main research results and some prospectiveresearch thinking’s for next step research trend.