The Research On The Relationship Of Horizontal Integration, Market Power And Technological Innovation

With the continuous development of the WTO and the reform and opening up,Chinese enterprises are facing the impact of economic globalization and marketfragmentation. Sustainable economic growth in China will mainly rely on the Chinesecompanies can actively participate in the integration of China and the world marketand industry, while improving the international competitiveness. This can helpChinese enterprises break market、resources and environmental constraints andstimulate the development of economic. Enterprises in many industries havecompleted the horizontal integration strategy in the domestic market. They highlyconcentrated the limited resources and got the advantages of scale and market power,and also have the formation of a world-class competitiveness in innovation.This paper reviews the industrial organization on horizontal integration strategyand innovation theory. The theory of industrial organization economists have beenworking on a horizontal integration strategy for the influence of market structure.From the perspective of the resource based view, the horizontal integration enableenterprises to occupy more market resources and enhance efforts to control themarkets and the supply chains of upstream and downstream, so as to form the marketpower. Research for technological innovation, mainly on the basis of innovationtheory of Schumpeter and other people, explore the market structure, firm size andother aspects of the relationship with technology innovation in the use of the SCPframework. Based on this, this paper presents preliminary research framework: followthe industrial organization paradigm of the dynamic framework of the SCP, through amicro perspective, to explore the transmission mechanism between the horizontalintegration strategy behavior, market structure, market power and the technologyinnovation.Based on the case study method, the object of this paper is four enterprises’horizontal integration behavior, changes in market power and its technologyinnovation ability during the decade of China automobile manufacturing industryfrom the "three big three small"(2000) to "four big four small"(2009).Through to theChinese car enterprise case studies, we analyze the horizontal integration mechanismsof enterprises’ innovation ability, trying to prove the proposition that in China throughdomestic horizontal integration can improve the international competitiveness. Thispaper first analyzes the market structure of China’s car industry, and then carries out curve estimation on the time-series data of the four enterprises with SPSS software inorder to discuss the relationship between horizontal integration behavior and marketpower, the enterprise market power and technology innovation. Finally, we do thecase study for four companies.The results indicate some conclusions. Firstly, China’s car industry is developedin a particular situation. Although four enterprise curve estimate results appearinconsistent, but with the case study of the context theorization explain method, wecan conclude that, enterprise which implemented the integration strategy can enhancethe its market power. Secondly, the strategic alliance relational capital is an importantadjustment factor of the market power of China’s car companies. The development ofChina’s car companies are driven by strategic alliances which form with the jointventures of multinational auto companies. Relational capital this kind of uniqueenterprise resources, on the one hand, through the coordination of resources andalliance partner activities, can make the alliance effectively integrate and utilize ofresources. On the other hand, by increasing the trust relationship between partners, thealliance has more smooth communication between partners, which helping alliancebenefit in cooperation and improving the core competitiveness of the allianceparties.Third, the development of China’s car enterprise verifies the proposition thatimproving the enterprise market power can improve its innovation ability. With thecharacteristics of the auto industry and China’s national conditions, China’s autoenterprises choose the joint venture cooperation pattern. The role of the Strategicalliance is closely related to the innovation ability of the enterprise. Fourth,inter-organizational learning in the strategic alliances is an important adjustmentfactor of enterprise technology innovation activities. Inter-organizational learning inthe strategic alliances is an important source of the competitive advantage andinnovation ability. There are two factors influence inter-organizational learning in thestrategic alliances: learning ability and absorption ability, which strengths andweaknesses can affect the technological innovation ability.In this paper, the research results provide a theoretical basis for enterprises toimprove the market power and innovation ability. It will promote the research on thestrategic behavior under the conditions of market fragmentation, and also provide animportant direction on corporate behavior guidance and the formulation ofgovernment policy.