Study On Influence Of Technology Integration Capabilities Of Core Firms On Vertical Boundary In Industry Chain

Since a new round of economic globalization from the1980s, international industrial division has taken on new features of vertical division and discrete division, which makes input-output relationship which is peculiar to this new division as the global industrial chain. Vertical boundary between upstream and downstream firms becomes an important foundation for microeconomic activities in global industrial division system, such as product division, production division, resource configuration, value capture and so on. Meanwhile, it also becomes an important influencing factor for implementation of new strategic models, such as strategic alliances, open innovation, integration of industry chain and so on. In the process of the formation of this new international division, technological advances have played a leading role. In detail, technological advances has changed the natural attributes of the product, which makes products more separability; improvement in transportation and communications technologies makes it more efficient; revolution in information technology promotes revers of industrial structure, in other words, design rules changed from centralized into decentralized modular and highly concentrated vertically integrated companies are increasingly showing the loosely vertical dispersion characteristics. Traditional industrial organization theory systematically analyze enterprise organization boundary from perspective of transaction cost, equity theory and so on. In the new competition pattern in the global industrial chain, however, vertical boundary between multinational companies in the developed countries which are at the core position are shrinking and the chain profit gradually expanded while it is not significant in developing countries about the shrinking of vertical boundary and the chain profit is meager. The traditional industrial organization theory is insufficient to explain vertical boundary in the dynamically technology-changing competitive environmental. This paper analyses the effect of technological change on the uncertainty of corporate transaction costs based on the enterprise capabilities theory, introduces technological change factors into enterprise vertical boundary decision model and redefine the concept of technology integration and technology integration capabilities, from which we construct a theoretical framework of influence of technology integration capabilities on vertical boundary. Combined transaction costs and corporate resources with equity theory, this paper theoretically explains how the technology integration capabilities of core firms in industry chain affect the direction and motivation of firm’s vertical boundary. On this basis, the paper further reveals the vertical boundary integration incentives and disintegrate incentives, proposes assumption that technology integration capabilities affect enterprise vertical boundary, and by a survey on equipment manufacturing and other complex products manufacturing industry, empirically analyses how the technology integration capabilities of core firms in industry chain affects vertical boundary. This paper helps to understand the theoretical knowledge of vertical boundary, extends theoretical research on organizational boundaries, enhances the explanatory power of enterprise organizational boundaries theory. The main contribution of this paper is that this paper provides a new perspective, firms’ capabilities perspective, to study vertical boundary of core firms in industrial train. This paper brings the incentive mechanism of vertical integration and vertical disintegration between core firms to the light and explains the influence mechanism of technology integration capabilities on vertical boundary. At the same time, this study provides theoretical guidance for the technology-following firms in developing countries to enhance the competitive position of the industry.The main contents in this paper include as follows.(1) Clear basic category of this paper and comb research basis of enterprise organizational boundaries. Define the basic connotation of core firms in industry chain, vertical boundary, Technology integration capabilities. Comb literatures on organization boundary and explore theoretical research on trends and motivation of vertical boundary to clear the theoretical basis and innovation directions. Give a contrast analysis the traditional explanation based on transaction cost, asset specificity and so on to point out the shortcomings in the explanation of vertical boundary in dynamically technology-changing environment. Overview literatures on technology advances and vertical boundary to clear the theoretical basis of the vertical boundary based on capabilities.(2) Redefine the concept of technology integration capabilities and analyze the relationship between integration capacity of core firms and vertical boundary and analysis of integrated features of technology integration capabilities. Put forward the concept of technology integration capabilities based on the features of integration and carry out survey study on complex manufacturing firms. Use factor analysis to study the factors influencing technology integration capabilities. Summarize the position and role of the core firms in the industry chain. Analyze functions of core firms in industry chain on resource integration, knowledge integration, benefits coordination and so on. Reveal the inherent consistencies between industry integration functions and their technology integration capabilities to lay the foundation for the model of influence of technology integration capabilities on vertical boundary.(3) Research on vertical boundary of core firms in industrial train based on firms’ capabilities perspective. This paper builds a theoretical model on influence of integration capabilities of core firms in industry chain on vertical boundary based on the basic theory framework of vertical boundary of core firms in industrial train in capabilities perspective. This paper builds the final product and intermediate goods industry chain system based on two-sector endogenous growth theory, sets production and agent relationship, and assumes that technology integration capabilities, like other technologies can be acquired through innovation and imitation, but it needs an agent’s work. For the agent’s energy is limited, intermediate products manufacturing enterprise in industry chain needs to select between integration and outsourcing. With the model, respectively solve the utility function under integration and outsourcing, and compare the utility of intermediate products manufacturing enterprise under integration and outsourcing with different technologies integration capability, then give theoretical explanation on how technology integration ability of intermediate products manufacturing enterprise affect the vertical boundary selection.(4) Empirical research on the influence of the integration capabilities of core firms in industry chain on vertical boundary. This paper divides innovation into incremental innovation, modular innovation, structure innovation and radical innovation, according to the effect of innovation on knowledge systems, studies how the technology integration capabilities of the core firms changes as transaction costs and contractual risk in different context of innovation characteristics, reveals the integration incentives and disintegration incentives between the core enterprise in industry chain and its upstream suppliers, analyses how the core firms in industry chain weigh the incentive mechanism and select vertical organizational boundary mechanism, proposes empirical study assumptions. Empirically study and test the influence of the integration capabilities of core firms in industry chain on vertical boundary based on survey on equipment manufacturing industries and other complex industries.