Vertical Integration And Vertical Disintegration Of Chinese Automobile Industry

Vertical integration is one of the most important modes of vertical economic organization, which expresses the tight relations of the successive phases in the process of production and sale of one product. It is no doubt that whether and how enterprises (or production steps) execute vertical integration strategy will affect the performance of enterprise as well as the industry it situates. Vertical disintegration is an increasing development trend in many industries in recent years. The writer firstly identifies the conception of vertical integration, then puts forward two fundamental decisive factors for vertical integration, which are production technology and asset specificity. On one hand, scale economics decides the scale boundary of enterprise from the angle of production technology; on the other hand, transaction cost decides the transaction boundary of the enterprise from the angle of asset specificity. This part also explains the trend of vertical disintegration and the decisive factors of it.The Chinese automobile industry is considered in the following two parts of the thesis. The writer observes that the automobile industry of China have much higher vertical integration degree than that of foreign countries. The Chinese automobile enterprises show obvious features called "large and comprehensive" and "small and comprehensive" and fall far behind the automobile enterprise of foreign countries in performance. We can find the answer through the application of the theory of vertical integration. The statistics shows that the degree of vertical integration appears significant positive correction to enterprise scale and assert specificity, but insignificant correction to enterprise performance. It is concluded that the vertical integration of Chinese automobile industry lies in not only the production factor and transaction factor, but also the system factor.At last, the writer compares the different vertical organization modes of automobile industry in Europe, America and Japan, and then analyses the current relationship situation between automobile manufactures and supplies in China. The writer raises the suggestions, which are to loosen government control, to accelerate open degree, and to push on industrial reconstruction, to emphasize system innovation and production specification.