R&D And Investment Behavior Of Manufacturing Enterprises Under The Change Of Market Size

Based on the contradiction between the long-term and significant changes of market size in the process of China’s economic development and the premise of the industrial organization theory,this paper introduces market size into the industrial organization theory,and believes that market size is the key factor to determine the market competition and market conduct.In a relatively stable market environment,market structure can reflect the degree of competition in the market,and then determine the behavior of R&D and investment.Once the market size changes,the market structure may no longer accurately reflect market competition.Under different market size,even if the market structure is the same,the firm’s choice of market behavior will be different.In view of the fact that the change of market size may bring about the market competition behavior completely different from that under the steady-state market condition,and then induce the recombination of industrial organization after breaking the steady state,this paper introduces the market size into the industrial organization theory,and explores the industrial organization characteristics of R&D and investment behavior of manufacturing enterprises under the background of market size change.In the process of research,it is found that due to the different incentives of the change of market size,this paper defines and measures the change of market size from the theoretical perspective of demand side and supply side respectively.On this basis,the market size is introduced into the competition model of R&D and investment behavior,and then exploring whether the determinants of investment and R&D behavior will change due to the change of market size.Based on the micro sample data of manufacturing industry listed companies,this paper empirically tests the rationality of theoretical analysis,and explores the industrial organization characteristics of R&D behavior and investment behavior of manufacturing enterprises under the change of market size.The main contents and conclusions are as follows.First of all,this paper finds that not only the demand change of consumers on the demand side can cause the change of market size,but also the change of competition degree on the supply side can cause the change of market size,which may have different effects on the research paradigm of market conduct.Therefore,the dynamic change process of market size caused by the change of consumer demand is defined as exogenous change of market size;the dynamic change process of market size caused by the change of market competition degree is endogenous change of market size.After distinguishing the of market capacity change,this paper introduces market size into industrial organization theory exploring whether the mechanism of endogenous change and exogenous change of market size on R&D and investment behavior is the same.It is found that the exogenous change of market size changes the way that industry organizes market behavior by market structure,the determinants of R&D behavior and investment behavior change from market structure to market size;while the endogenous change of market size is still within the framework of the existing industrial organization theory.The above conclusion proves the necessity of incorporating market size into industrial organization theory.The existing research paradigm of market conduct based on the assumption of stable market capacity in industrial organization theory is no longer applicable to the research of China’s industrial problems under the background of rapid economic growth and long-term significant fluctuations of market size.Only by incorporating market scale into the theory of industrial organization can we accurately analyze the law of R&D behavior and investment behavior of enterprises in the process of China’s economic development.It is of theoretical significance to explore the evolution of industrial organization theory under the background of China’s economy.This study will help to promote the process of supply-side structural reform and accelerate the construction of modern economic system.Secondly,this paper identifies the sample data of exogenous expansion and exogenous contraction of market size based on the sample data of manufacturing listed companies in 2006-2018,describing the evolution trend of market size change,R&D and investment behavior choice under different market size changes.According to the statistical analysis,it is found that the exogenous expansion and contraction of market size continue to be in a significant state of change in the long term.The trend of exogenous expansion of market size is consistent with that of enterprise investment growth rate and R&D growth rate,which is different from the situation of exogenous shrinkage market size.Some enterprises increase R&D and investment when market size shrinks,while others decrease R&D and investment,but the overall strength of increasing R&D and investment is greater than reducing R&D.Thirdly,empirical research tests the industrial organization characteristics of R&D behavior under the background of exogenous expansion of market size by choosing a sample-micro-data of listed companies in automotive industry from 2006 to 2018 based on the basis of the mathematical model.The results show that the recombination of industrial organization effect of R&D behavior is manifested in two aspects.On the one hand,the exogenous expansion of market size in automobile industry has changed the organizational mode of R&D behavior of firms with market structure as the dominant factor when market size is stable or endogenous expansion.The main determinant of R&D behavior of Listed Companies in automobile industry is changed from market structure to market size.On the other hand,under the background of exogenous expansion of market size in automobile industry,there are significant differences of the characteristics of R&D behavior among the firms of different size.Different from the situation that large-scale enterprises are the main R&D players in the market because of their capital and scale advantages under the background of stable market capacity,in automobile industry,the effect of exogenous expansion of market size on R&D investment of small-scale enterprises is greater than that of large-scale enterprises.Fourthly,the paper empirically demonstrates the R&D behavior of firms under the impact of the shrinkage of market demand using the micro sample data of manufacturing listed companies in 2016-2018.The results show that the exogenous contraction of market size makes the determinants of R&D behavior of firms change from market structure to market size,which causes the change of R&D competition behavior of enterprises,and then leads to the reconstruction of industrial organization;In the face of the exogenous contraction of market size,medium-sized and large enterprises will increase R&D,while small enterprises will reduce R&D.This is in sharp contrast to the phenomenon that small and medium-sized enterprises are the main body of R&D in the period of rapid expansion and slow growth of market size.Furthermore,we find that the change of market size has different effects on R&D behavior of different ownership enterprises through the dynamic panel GMM model.The exogenous contraction of market size has a strong inhibitory effect on the R&D behavior of state-owned enterprises,which makes the state-owned enterprises greatly reduce their R&D investment,while the exogenous expansion of market size has a strong promoting effect on the R&D behavior of non-state-owned enterprises.Fifthly,we empirically test the industrial organization characteristics of investment behavior under the background of market size change based on the basis of the mathematical model.A panel threshold model is constructed to test the characteristics of industrial organization investment behavior in the context of market size expansion and contraction using the sample data of manufacturing listed companies in 2006-2018.The empirical results also show that the change of market size leads to the change of investment behavior of industrial organization enterprises,and the influence of the change market size on the investment behavior of different scale enterprises is significantly different.The promotion effect of the expansion of market size on the small-scale enterprises is greater than that of large-scale enterprises,while the contraction of market size leads to the investment of enterprises exit or entry depends on the size of the enterprise.The exogenous contraction of market size promotes the larger enterprises in the manufacturing industry to increase their investment,and restrains the investment of the smaller enterprises to make their investment exit.Finally,we construct a panel threshold model to empirically test the industrial organization characteristics of R&D and investment behavior in the case of slow and rapid changes in market size further subdivide the change degree of market size,using the micro sample data of listed companies in China’s manufacturing industry from 2006 to 2018.The empirical results shows that when the change degree of market size is small,the market structure is still the factor that determines the R&D and investment behavior,which is within the framework of the existing industrial organization theory;when the change degree of market capacity is large,the market structure can no longer affect the R&D and investment behavior choice of enterprises,and the market size is the main factor that affects the R&D and investment behavior,breaking the existing industrial organization research paradigm of theoretical market conduct.This research result can explain that the research paradigm of industrial organization theory,which has always been based on the premise of market size stability,is applicable to the western developed countries.It is because the market size changes less in the process of economic stability and development of developed countries,while the market size fluctuates rapidly in the process of economic development of China.