A Study On The Factors Of Industry Consolidation

Currently, the global has entered the sixth merger wave. Countries like China, will inevitably become the target of foreign capital after joined the WTO. Moreover, China's economic development has entered the gathering phase, and the implementation phase of industry consolidation in China will carry on in the next few years. However, in the aspect of actual situation of current domestic and international industrial integration, the domestic industrial integration studies focus on the approaches and measures of integration in specific industry, while foreign studies pay more attention on research of merger wave and motivation of takeover activities. There is no fully formed theoretical basis to industry integration in China. As the industry consolidation implement in different environment, the current results cannot be simply imitated, so it's very important to study the affecting factors in China's industry consolidation.Reviewed classical interpretation on industry consolidation theory and theories of new classical interpretation on merger waves, and based on our country's industry integration situation, put forward analysis framework of factors in our industry integration, which includes the entry and exit barriers, excessive competition, technological innovation, economic impact, regulatory factors. And accordingly put forward a hypothesis of this study. Then, these five factors were variable substitution, enterprises to enter the rate, industry supply growth, R&D share of total revenues, government regulation dummy variables and industry revenue growth. Regress the five variables, the results is that R&D share of total revenues, and government control dummy variable for the impact of industry consolidation are not statistically significant. Enterprises to enter the industry and supply growth rate are 10% confidence interval significantly, industry revenue growth rate factor in the 5% confidence interval significantly. This study found that economic shocks, barriers to entry and retreat, and competition intensity have a significant effect on industry consolidation.Economic shocks impact industry structure, whose change lead to business decisions to make merger integration, therefore, when such a significant impact effects the industry turnover, companies in the industry need to pay more attention to the possible industry consolidation. Take the growth rate as the measure of the intensity of competition, the results show that the supply increase in the industry makes the competitive pressures increase and excess capacity, and all of these led to industry consolidation. Industry barriers to entry are too low will result in overall low of enterprises and high industry competitions, all of these make companies have a strong desire of integration, which can enhance the barriers to entry, and improve the industry efficiency.In the real world, the economic impact is an uncontrollable variable, while barriers to entry and retreat, and competition intensity are considered two controllable variables which can be change by government industrial policy and enterprise's own efforts. Therefore, to accelerate integration process in our country, government and business need to work together.This paper aims to promote Chinese industrial restructuring and upgrading of the industry, and provide an integration theoretical and behavior guidance, which make good bedding to consolidation study.