Discussion On Technology Capital Allocation Of High-end Equipment Manufacturing Enterprises

At present, in order to follow the trend of times and economic development, somany countries pay more attention to invest on technology innovation, and they alsotake high-tech industries as the engine to promote social and economic development.Focus on fostering the high-end equipment manufacturing enterprises is a necessarychoice for China to seize the commanding heights of the economy in the future and torealize the transformation from a big manufacturing country to a powerful nation.Without doubt, technology has gradually become the strongest driving force todevelop economy and increase the enterprise value. But it is undeniable that as one ofmany factors of production, technology does not work in isolation. Thus, in the caseof the total amount of capital is given, it is important to allocate the factor capitalefficiently. The study case which we chosen, Shanghai Zhenhua Heavy Industries Co.,Ltd., is a world famous high-end equipment manufacturing enterprises in China. Itpossesses large-scale asset and industry-leading high-tech, but unfavorable situationof low profit or even huge losses has emerged in recent years. This paper attempts toexplore the causes behind this phenomenon, and then take the case as an example todiscussion how can China’s high-tech equipment manufacturing enterprises allocatethe factor capital efficiently based on the technology capital.This paper mainly adopts the research method of case analysis, combinesqualitative analysis and quantitative evaluation, measures the input and the proportionof various factor capitals of the case, analyses and assesses the enterprises’ factorcapital allocation structure, and then gives a little advice on how to select and build itscore capital. The basic point of this paper is that high-tech does not necessarily bringhigh profit for the enterprises. Only when the technology through the capitalizationprocess into the technology capital and reasonably allocate with other factor capitals,can it create the maximize value for the enterprise. An important reason which leadsto the low profit or even huge losses of Shanghai Zhenhua Heavy Industries is that theallocation ratio of its factor capitals is serious imbalanced, thus, the enterprise unableto highlight the advantages of its technology capital.This paper is divided into five parts. The first part is introduction, including the background of the topic, the content and purpose of the research, and also thetheoretical and practical significance. The second part is literature review, expoundingthe theoretical basis for writing. The third part is case description, which introducesthe enterprise’s background, technical innovation practice, financial and operatingconditions. And it also points out the surface problem of the case and then putsforward the basic ideas. The fourth part is the main-body of this paper, making a morein-depth analysis and exploration. It specifically includes the calculation of the inputsand allocation ratio of Zhenhua Heavy Industries’ factor capital, the discussion on thelack of technology capital formation mechanism of the enterprises, and the way tooptimize the allocation of factor capital. The last part is the conclusions andsuggestions. The study shows that: Firstly, the allocation ratio of Zhenhua HeavyIndustries’ factor capitals is serious imbalanced. Secondly, China’s high-techequipment manufacturing enterprises must allocate various factors reasonably whenthey build their factor capital structure based on the technology capital. Only in thisway can the enterprises create greater value. Thirdly, enterprises should do more topromote the transformation of technology to technology capital, making technologytruly become actual productivity of the enterprise.Based on the reclassification of enterprises’factor capital according to factor capitaltheory, this paper uses a new factor capital balance sheet to calculate the inputs ofvarious factor capitals. It’s not limited to the former capital structure analysis methodbased on traditional financial statements. But it’s inevitably that there are someshortcomings in this paper. For example, the contribution rate of technology capital tothe enterprise’s profit cannot be clearly confirmed by quantitative, and the optimalallocation ratio between technology capital and other factor capitals also needs furtherstudy.