A Study On The Effect Of Vertical Specialization On Technological Advances Of Chinese Local Enterprises

Technological advances and technological innovation are the key strategy to optimize the industrial structure, change the economy growth mode, achieve the sustainable development and improve the international competitiveness, are the fundamental ways to build an innovative society. The wave of academic research on technological advances approach has not been diminished, especially in vertical specialization as an important feature of the present international division by importing from other countries as raw material or intermediate products to be used into domestic production and finally exporting these intermediate or final products. Because of its effect on technology spillover and technological advances, it is attracting a lot of wide attention of scholars.Previous research on the impact of vertical specialization on technological advances have focused on the whole Chinese industry, the study in the view of local enterprises is very limited. Actually, in the background of vertical specialization, our local enterprises should think how to compete with foreign investment enterprises technological intense, how to make better use of technology transfer and technology spillovers to improve their own technical level, it is the key issue to the development of the Chinese enterprises. Therefore, this essay just focuses on Chinese local enterprises to study the effect of vertical specialization on its technological advances.In this essay, we make theoretical and empirical analysis of the mechanism of vertical specialization affecting Chinese local enterprises on technological advances. Firstly, we try to define and conclude the relationship of vertical specialization and technological advances by reading and analyze relevant literature of vertical specialization and the approach of technology. Among them, the literature of vertical specialization includes the concept of vertical specialization, the motivation, the economic effect and the measurement. The literature of technological advances concludes its approach and the measurement. Secondly, we summarize the mechanism of vertical specialization how to affect local enterprises'technological advances by elaborating the characteristics of technological advances in the embedded mode and non-embedded mode. Finally, we make qualitative analysis from panel data and quantitative analysis from econometric analysis to describe and inspect the effect of vertical specialization on technological advances through. The main conclusions are as follows: (1) Chinese enterprises deepen the extent of vertical specialization by continuously participating in intermediate goods trade, attracting FDI, and engaging in processing trade.(2) The process of vertical specialization has a positive effect on local enterprises' technological advances.(3) In the two approaches of vertical specialization, the intermediate goods importing has greater positive effects on technological advances than FDI, and this influence is more significant.(4) The process of vertical specialization promote the technological advances is also affected by many factors including the technical control to prevent core technology, and the industry characteristics such as industry correlativeness degree, industry technological level and industry openness degree.In this paper, it's significant for local enterprises to implement strategic project and technology policy, some specific recommendations are present:first, Chinese enterprises should be encouraged to actively participate in international vertical specialization, promote the processing trade, and make more communication and collaboration with technology advanced countries. Second, it should increase high-tech intermediate goods imports to expand the physical technology spillovers. Furthermore, it should pay more attention to multinational countries'direct investment, and focus on capital intensive industries and technology intensive industries. Finally, we should make effort to improve the efficiency of conversion of domestic R&D, increase the R&D put, develop R&D talent, and consequently promote local enterprises'independent innovation capability and technical level.