Market Power, Optimaze Governance Structure And The Upgrade Of Traditional Industry In Zhejiang

The cross-regional linkages are becoming more closely with the continued growth of international trade and the deepening of international division of labor and provide a material guarantee of economic globalization. Developed countries adjusted industrial structure constantly, transfer the lacing competitive advantage of industries or industry sectors to developing countries, still maintained the strategy sectors'comparative advantage which are capital-intensive and technology-intensive in order to stayed ahead in the competition and form a GVC. The GVC's governors are enterprises in developed countries. Subsequently, studies on GVC began enriched. Tradition industries in Zhejiang got lots of benefit in the process of embedding in the GVC, but it is at the end of the value chain which has a low value-added, the development's status is subordinate and passive. Lots of central and western regions of china and south-east Asian countries are gradually eroding the interests of space that is not high originally with their preponderant labor and resources. Upgrading tradition industries in Zhejiang is urgent to face these situations and the economic crisis. This paper wanted to use a new perspective, find a practical way to upgrade traditional industries through the mechanism analysis, model analysis and case analysis.Previous studies focused on analyzing enterprises'actuality in GVC, including the enterprises'status in GVC, the distribution of benefits, the value chain governance model or drive mode and so on. They realized further that the enterprises need to upgrade. Previous studies analyzed the different ways of upgrades and their difficulty too, highlighted the significance of function upgrades and think it is difficult to achieve. These studies do not answer the question that backward enterprises how to achieve feature upgrades and catch up Pioneer enterprise actually. This paper tries to answer the question.This paper attempts to find the conduction mechanism between market power, governance structure and upgrade industries, finds the reason of upgrade industries are that the enhancing of market power and the optimization of governance structure. They can be used to guide the study of Tradition industries'upgrade in Zhejiang. First, we find that the intermediate type of governance structure is best as opposed to market type and hierarchy in the present circumstances; enterprises which are generally lack of market power (atom-type enterprises) in market are not conducive to form the optimal governance structure; but the enterprises with strong market power (leading enterprises) are conducive to form the optimal governance structure and play a leading role in this process. Then, when we analyze the relation of governance structure and upgrade, we realize that the formation of intermediate governance structure helps leading enterprises achieve function upgrade, while helping atom-type enterprises achieve technology upgrade and product upgrade. Therefore, the enterprise market power'enhancing will help optimize the governance structure, thereby contributing to achieve upgrades. However, the enterprises of low market power are still unable to achieve the function upgrade in GVC which had formed the intermediate type of governance structure. In fact, these enterprise are becoming divided (according to different market power) in the long process of development, they also face the regional value chain except GVC which provides them possibility of upgrades. These enterprises with high market power correspondingly which is differentiated help form intermediate type of governance structure, help them achieve function upgrade in the region and encourage other enterprises to achieve technology upgrade and product upgrade constantly. When these enterprises'market power improve continuously after they finished function upgrade in the region, they will compete with pioneer enterprise in high-end part of GVC, finish the function upgrade in global markets finally.We can create a domestic value chain which is parallel with the GVC when we analyze traditional industries in Zhejiang. At the same time, enterprises in Zhejiang are divided into four types which were embedded in two different value chain. The way of traditional industries' upgrade in Zhejiang is that enterprises with strong market power (3rd 4th class) continue to increase market power, achieve function upgrade in domestic first, encourage other enterprises in domestic to achieve technology upgrade and product upgrade, achieve function upgrade in global markets finally.