Study On The Relationship Between Market Competition And R&D Investment Of China’s Manufacturing Industry

With the economic development of new China, economic strength enhancement is inseparable from the great contribution made by manufacturing industry on the road toward modernization, it has become an important support to the state’s economic development. The report "2013Global Manufacturing Competitiveness Index", which released by Deloitte shows that China will at the top of the list in the next five years. As the decision criteria of the country’s overall strength, manufacturing industry has been among the "World’s Manufacturing Center" with its strong production capacity, which has become a driving engine for China’s economic take-off. But now, low levels of labor productivity, inadequate R&D investment imprison the manufacturing industry in the low end of the value chain. More severe, due to the continued appreciation of RMB, raw material prices and the deterioration of the global domestic financing environment, China’s low-cost production advantage has ceased to exist. Although, called "World’s Manufacturing Center" by virtue of scale, we must recognize the reality, follow the trend of the times and enhance the awareness of technology introduction to realize green and sustainable development of manufacturing industry.Since the1940s, Schumpeter, Arrow and Mansfield have made a great contribution in the analysis of the microscopic R&D behavior of individual enterprises. From the initial "monopoly","competition" to the compromise "inverted-U" theory, even though the conclusion reached yet unified, however, research on this area has been mature. China’s manufacturing industry covers various industries, which has a big different among their skill levels. Each industry’s specific characteristics and different stages of growth will lead to different degree of market competition that benefits the R&D. Based on this, this paper summarized the manufacturing industry’s current situation of market competition and R&D, found that market competition’s polarization trend has been expanding. In the case of R&D investment increased year by year, there is still widespread lack of R&D intensity, uneven distribution of R&D resources among industries and areas. To further analyze the relationship between "competition and R&D", we introduce the life-cycle theory to classification analysis the mechanism that "competition to R&D" from the perspective of industry growth. In the empirical analysis, this paper classifies the28manufacturing industry based on the growth rate. We use the stochastic frontier production function method to measure R&D investment. In view of China’s special economic background, this paper also introduces institutional variable-administrative barriers to make the model closer to China’s national conditions. Finally, this paper selects panel data of manufacturing industry from2005to2012.By constructing nonlinear quadratic model, verifying the influence of competition to R&D. The empirical results show that the industries which in start-up and growth phase, monopoly structure is not conducive to R&D input. On the contrary, maintaining a certain degree of monopoly in the mature industry promotes an increase in R&D investment.This study is more suitable for China’s uneven development of manufacturing industry, which will help improve the R&D and technological progress level. At present, our government should use different support policies due to different development stages, which will be good to further promote and construct the market competition structure that in favor of the technological innovation. First, rationalize competitive structure of manufacturing industry, enhance R&D momentum. The government should increase R&D efforts to help the start-up and growth industries create a fair competitive environment. In the mature stage, countries need to develop different industrial policies to maintain a moderate degree of monopoly. Secondly, adjust and optimize the structure of R&D investment. Encourage R&D funding and manpower to vulnerable industries and regions, balancing their development. Meanwhile, we should fully recognize the importance of basic research. Finally, play a basic role of market regulation, limiting administrative intervention. Limit excessive concentration of state-owned enterprises in certain sectors, changing the rigid mode of competition within the industry. Reduce administrative barriers, encourage and support the enterprises which have R&D potential to enter and introduce the competition mechanism.