Research On The Determinants And Performance Of Vertical Integration Of Chinese Automobile Enterprises

Vertical integration of enterprise is expanding along vertical industry chain based on theexisting products and technology. Its essence is making decisions by using internal deal ormarket trading in order to achieve the operational objectives. Whether or not the enterprisesimplement vertical integration strategy and the degree to which vertical integration isimplemented influences the operation of enterprises greatly. Automobile enterprises are evenmore so. Reviewing the history of the auto industry, we can find that the vertical integrationstrategy has played a pivotal role in the industry’s development process. But in China theautomobile enterprises passively walked out of a low-level vertically integrated road due tothe historical reason. So researching on the vertical integration theory and exploring theproblems of vertical integration strategy of Chinese automobile enterprises is very necessary.In this paper, firstly I summarized the theory study and empirical study of verticalintegration on the basis of clearing the concept. Then, I reviewed the evolution process andthe status quo of Chinese automobile industry’s vertical relations. After that, I proposed theresearch hypotheses about the determinants and performance of vertical integration ofChinese automobile enterprises. At last, I used statistical analysis software Eviews6.0toanalyze the data collected.The results show: first, asset specificity is the leading factor during the determinants ofvertical integration of Chinese automobile enterprises. The higher the degree of assetspecificity, the degree of vertical integration is higher. Secondly, vertical integrationnegatively affects the performance of automobile enterprises. Thirdly, the content ofintegration and the integration initiative plays the moderating effect between verticalintegration and performance.Based on the above findings, I propose four suggestions to Chinese automobile enterprises.I suggest that to promote vertical specialization and enhance core competitiveness, to speedup the reform of property rights of state-owned automobile enterprises and increase theenterprise autonomy, to select the reasonable integration model by using the experience ofother countries and to improve the ability of R&D on the core technology.