Internet, Market Potential And Industrial Location In China

With the continuous innovation and application of the information and communication technologies (ICTS).the world economy is entering into the third industrial revolution era which is significantly characterized by informatization and digitization. The core power of this era is the innovation and application of the information and communication technology, especially the complex technologies that associated with the Internet, which is comprehensively subverting the behavior of market micro-economic subjects, is remolding the market relation forms that is associated with the demand and supply, and is tremendously impacting the spatial agglomeration state of the global industrial activities. The debate about agglomeration.dispersion or reconstruction of industrial activities that shown in the terms of space is the core issue of the study on the impact of technology by economic geographers and regional economists.Throughout China’s recent decades, the space change of industrial activities is also one of the most remarkable economic phenomenon. Especially in the last ten years, the industrial location in China exhibits the complex agglomeration state in various forms across different industries and in different spatial levels, and it is the decade that China’s Internet information technology is developing rapidly. It is the core content to explore the internal mechanism of the effects that ICTS brought to the industrial agglomeration and find out the theoretical foundation for explaining the influential mechanisms. New economic geography has made outstanding contribution to the research on how the change of the market behavior of the micro-economic bodies affect the spatial balance of industrial activities. This dissertation tries to look for the answers under the frame of the New Geography theory.Based on the former scholars’ regional thinking. Krugman explains the endogenous mechanism of the industrial spatial agglomeration with rigorous mathematical logic by added the "iceberg transportation cost" which reflects the spatial hindrance into the utility function of the market micro-economic bodies. The theory recognizes that the change of the market potential essentially reflects the change of the regional centripetal force and the centrifugal force, which is an important decisive factor to the industrial spatial agglomeration and dispersion, and the formation of the urban system. Harris market potential model also indicates that the market potential is not only related to the regional income level, but also related to the impact of real geographic distance among regions. Krugman replaces geographic distance with the "iceberg transport cost’to reflect the correlation degree among markets, which Krugman’s analysis has provided a solid micro-economic theoretical foundation for Harris" traditional market potential model. Both theories reveal the interrelationship between the market potential and the micro-economic subjects behavior, and the geographical obstacles, and the effects on the industrial agglomeration.Change is obvious, but the corresponding theoretical and empirical research is sorely lacking. A review of the literature from the classical location theory to the modern location analysis clearly shows that research on market associated costs, which is represented by transportation costs, is not only the revision of the hypothesis of new classical economics paradigm, but also has scientific economic significance on the space study. This article mainly starts from the theory of new economic geography, which focuses on how the ICTS that represented by Internet changes the market potential and further influences the industry spatial agglomeration through affecting the market related costs. This paper specifically answers the following three questions.1) The core indicator that measuring the market potential.’iceberg transportation cost’ and’geographical distance’, is affected by information and communication technology which is represented by the Internet, and how will we bring the impact into the modification of the market potential model? And what is the theoretical basis of the correction.2) What are the spatial characteristics of China’s industrial location in the recent decade’s rapid development stage of ICTS? What are the differences of location characteristics in different industries, during different time periods and among different regions.3) There are following three debates on the impact of ICTS on the spacial industrial location, which are industrial decentralization, further industrial agglomeration and complex industrial reconstruction. According to the research of the first and second questions,this paper provides the empirical results on the effect of Internet on spacial agglomeration of Chinese manufacturing and service industries with the Chinese data, to explore whether the Internet" influences on regional market potential in China is consistent or not. and to explore what are differences among different industries and different regions.Firstly, this paper provides a solid theoretical foundation for the theory model through the theoretical review and analysis. Secondly, it analyzes the comprehensive time-spatial features description of manufacturing and producer services from tradable and regional levels with the Exploratory Spatial Data Analysis (ESDA) method. Thirdly, it gives the hypothesis on the effect of Internet on spacial agglomeration of Chinese manufacturing and producer services based on the analysis of theories and the reality. Finally, it constructs a nonlinear panel regression model on the basis of the corrected market potential model with abundant data to conduct the empirical test. This paper gets the following conclusion through the theoretical analysis and empirical research.In the manufacturing industry, whether the current impact of the Internet on the market potential has played an vital role in spatial agglomeration of the manufacturing industry from the empirical results of provincial space, but the result is not significant. After adding the dummy variables of economic region, the results show that the Internet has spatial diffusion effects on the labor intensive industries in the eastern part, it has positive agglomeration effects on advanced technology industry in the eastern part, it has positive agglomeration effects on the central manufacturing industry, and it has no significant agglomeration effects on manufacturing industry in the west.In the producer service industry, the results show that the Internet information technology has no positive spatial agglomeration effects on producer service industry in the national regional level:it shows that the Internet communication technology has significant spacial agglomeration effects on the producer service industry in the big cities, but it has no significant effects in the general city level through the regression of the sample from different city scales. After adding the dummy regional variables, the results show that the Internet communication technology is positively related to the agglomeration effects of producer service industry in the eastern part, but it has no significant effects in the other three economic zones.The research results above can provide scientific and theoretical basis for government departments to formulate industrial policies and make space planning in the Internet information era. This paper puts forward some policy recommendations to promote the development of Internet communication technology and the regional industrial agglomeration in China, which is meaningful for promoting the industry’s transformation and upgrading, and the development of urbanization. Of course, there still exists some research limitations as my academic capability is limited. The final part puts forward some research improvements and the outlook of the future research.