Market Segmentation And Regional Independent Innovation In China

Since "administrative decentralization" in the eighties of last century and the tax system reform in1994, the provinces in China owned relatively independent of the property rights. For local protection, financial motivation and rent-seeking motives, local governments intervene excessively in many ways, which give rise to the formation of trade barriers between the provinces and market segmentation. As the medium of the national innovation system and innovation system, dynamic regional innovation system will lead a two-way to improve national independent innovation capacity and independent innovation capability of enterprises. Therefore, building a regional innovation system and improve the regional independent innovation capacity is very important. The market segmentation has a profound influence. This paper is to study the regional innovation in this context. Whether market segmentation is a hotbed or obstacles for China’s regional innovation, which is the question this paper will answer.Through extensive literature research, this paper analyses what regional independent innovation capability really means and how it forms. Based on this analysis, we discuss how the segmentation of the three market affects regional independent innovation capability. Subsequently, we test it empirically. To some extent, the segmentation of the three markets is helpful to the improvement of regional independent innovation capability by now. In labor marker and capital good market, an inverse-u-shape has been founded between the segmentation and the innovation capability. That is to say, the segmentation will injure the innovation capability when it exceeds the inflection point. Nevertheless, the same inverse-u-shape has not been found in commodity market. For the different effect of the three markets to the regional independent innovation capability, the segmentation should be controlled in a limited extent, National market as a whole should be built gradually in commodity market and capital good market. The segmentation of labor market must exist now and even in the future for its irreplaceable positive impact on regional economy.