Empirical Research Of Industrial Profitability Based On Complex Adaptive System Theory

The essential character of investment is to put money into something to make aprofit. Whether securities investment and venture investment, or equity investmentand project investment, to research industrial profitability and to estimate investmentopportunity of the industry in which well be invest is necessary for to gain profit. Andto research industrial profitability is an important and basal work, there is a realisticsignificance and a value in theory study. But ago researched in industrial profitabilityand investment opportunity based on thinking pattern of the reductionism. There is awarp between industrial study and realistic condition owing to thinking pattern of thereductionism. Guidance effect of the industrial study is feeble toward actualinvesting.To the question, based on complex adaptive system theory and paradigm ofevolutionary economics, an estimating mode of original creation has been put forwardin the thesis. And an empirical analysis over the PCB industry has been made by theestimating mode. Concrete study work as:Thinking Pattern ChangeThinking patterns of the reductionism which has been applied in an industrystudying root in the classical physics. The classical physics of which Newtonmechanics is a core consider rule of the real world can be explain by the simpletheory and the universal rule. Along with birth of the modern physics of whichRelativity of Einstein and Quantum Mechanics is a core, thinking pattern of physicalscience has been changing from the reductionism to the holism and the system theory.People begin pay attention to study the rule from the relation of whole and individual,and find that whole function of a system is big than the sum of individual. There is ahuge difference between individual character and whole character in many systems.While the scholars no longer look on nature by pure reductionism and balancedviewpoint the complexity is presented on the angle of view of the holism and thesystem theory. Complexity science and Thinking pattern of complexity emerge as the times require.Complex adaptive system theory and paradigm of evolutionary economicsComplex adaptive system theory and evolutionary economics are born as a newembranchment of complexity science and economics on the new thinking pattern.An element of an economy system is regarded as an adaptive agent in the CAStheory. The adaptive agent has nonlinear, self-organizational, self- adaptive, dynamicand non-balanced complexity characters. In the CAS theory, a model of multilayernetlike constrained generating procedure is founded based on the agent by studyingthe Emergence phenomenon of CAS, and put forward a way and a method ofunderstanding and analyzing CAS.In the economics paradigm of evolutionary economics put forward that economysystem is a complex system of evolutionary against the deficiency in paradigm ofbalance, and considerers that economic activity process is a dynamic andnon-balanced evolutionary process, and understand there are limited intellect andincomplete information, and has formed a dynamic and non-balanced paradigm ofevolutionary analysis based on limited intellect and incomplete information.An estimating mode of industrial profitability and investment opportunitybased on complex adaptive system theory and paradigm of evolutionaryeconomicsWe regard an industry system as an adaptive agent or a mechanism which has anagent character and the profitability of an industry as a state variable of the industrysystem on the basis of the viewpoint of complex adaptive system theory and themodel of multilayer netlike constrained generating procedure. On the basis, we foundan analysis frame of H type industrial network as an objective industry is regarded acore, and profitability of the objective industry is analyzed in an H-type industrialnetwork which make up of objective industry and upriver industries and downriverindustries directly connecting each other.In an H-type industrial network, an objective industry is connected with upriverand downriver industries by the factors as output, industry concentration, technicalinnovation and industry regulation. Profitability conditions of an objective industryare affected by conditions of the output, the industry concentration, the technical innovation and the industry regulation which are all industries in an H-type industrialnetwork.At the same time, we consider that it is decided by the relative level between anobjective industry and its upriver industries or downriver industries, namely thedifference between the industries, and not the absolute level of each industry, whichthe state variables have the influence upon the profitability of an objective industry,whether output, industry concentration, technical innovation or industry regulation. Atechnique of appraising and deducing industrial profitability is put forward base uponcomparing and analyzing the difference between an objective industry and its upriverindustries or downriver industries in the output, the industry concentration, thetechnical innovation and the industry regulation.Therefore, the estimating mode of industrial profitability and investmentopportunity based on CAS theory and paradigm of economics evolutionary may beboiled down to: "H type industrial network" + "four state variables of industrialprofitability" + "contradistinctive analysis of the state variables between an objectiveindustry and its upriver industries or downriver industries". The estimating mode is auseful and scientific technique of appraising and analyzing the profitability andinvestment opportunity of an objective industry.Analyzing and estimating to the profitability and investment opportunity ofPCB industryAs a mother of all electronic products, there is PCB in any electronic shell. PCBindustry has become a primary mainstay industry in the electronic componentsindustry and has the character of a youthful industry which has increased fleetly. NowChina has become the largest country in the global PCB output capacity. The PCBindustry has taken possession of an important position in the national economy ofChina. It has a very great practical meaning understanding and grasping theinvestment opportunity in China PCB industry by studying and exploring theevolutionary rule and the evolutionary character of China PCB industry.We have made a contradistinctive analysis between an objective industry and itsupriver industries or downriver industries in the output, the industry concentration,the technical innovation and the industry regulation by applying the estimating mode of profitability and investment opportunity, and results of the analysis is:â– Increasing Rate of Output: A majority of increasing rates of output ofdownriver industries are higher than PCB industry greatly and the difference ismore than double, But upriver industries are only a little more than PCB industry.So the increasing rate of output has a favorable influence upon profitability ofPCB industry, and it has a maximal tribute to profitability of PCB industry.â– Industry Concentration: Whether China PCB industry or global PCB industry,its industry concentration is lower than its upriver industries or downriverindustries. On industry concentration, PCB industry is at a disadvantage relativeto its upriver industries or downriver industries. The Industry Concentration hasa lowest tribute to profitabilitv of PCB industry.â– Fruit of Technical Innovation: On the sum of patent of which the first fivemanufacturers have gained in each industry, PCB industry has a little advantagethan its upriver industries, and has a obvious inferior position relative to itsdownriver industries. On the increasing rate of patent sum of each industry, theaverage of increasing rate between PCB industry and its downriver industries isnear, and is a steady high level. Only the increasing rate of patent sum of upriverCCL industry is low and negative. So the state variable of technical innovationfruit has a little tribute to profitability of PCB industry, and it is on a passive statein H type industrial network.â– Industry Regulation: On the society regulation, each industry needs reply to theregulation from environmental protection, and there is not a big difference eachother. There is a big difference on economy regulation of these industries. Thereare entrance regulations in mobile telephone and communications equipmentindustry. LCD and PDP industry can enjoy much more policies in industrialsustain and preferential duties. Part of the high level product of the rest only mayenjoy policies of industrial sustain and preferential duties. Export drawback rateof CCL industry is depressed greatly. PCB industry and DC industry have analike and simple condition of economy regulation.Based on above analysis results, we can have the Understanding and estimatingof underside to the profitability and investment opportunity of PCB industry: â– An opportunity of expanding scale and increasing profit owing to outputincreasing: while output of PCB industry and its downriver industries have allkept a good increasing tendency, there is a big difference of output increasingbetween PCB industry and its downriver industries. And the output increasingrate of downriver industries is much faster than PCB industry. This will beadvantageous to improve and raise profit level of PCB industry.â– An opportunity owing to fleetly growing and gaining in subdivision fields ofhigh level PCB: HDI board and FPC board and its downriver industries have ahigher increasing than the rest. And because technology of HDI board and FPCboard are very complex, stronger ability of technique sustaining and greaterinvestment sum of production equipment are request, these fields have a higherthreshold of entering industry. A higher threshold of entering industry isadvantageous to keep a higher profit level of HDI board and FPC boardmanufacturer.â– An opportunity owing to raising industry concentration: because the industryconcentration of PCB industry is low, it provides an opportunity of enteringindustry of low cost for manufacturers which do not enter PCB industry, andprovides a great space for manufacturers which have entered PCB industry. It isfavorable for finding opportunities which contain in annex and recompose ofPCB industry, if we look on the low industry concentration of PCB industrybased on a dynamic view.As above, an estimating mode of industrial profitability of original creation hasbeen put forward in the thesis by academic study. And we have obtained a practicalfruit by empirical analysis. Posterior study will focus on models of estimatingindustrial profitability and mechanism conversion function based on perfectingindustry data.