China’s Manufacturing Industrial Agglomeration And Industrial Upgrading

Along with step-by-step progress of China’s reform and opening up, China’smanufacturing industry gradually integrates into global production networks.Especially after China’s accession to the WTO, owing to China’s abundant laborresources, higher levels of education, low costs of production, China’s manufacturingindustry has strong international competitiveness. So China rapidly improved thelevel of participating in international division of labor. However, with the rapiddevelopment of China’s manufacturing industry, China’s manufacturing enterprises arelocked in the lowest end of global value chain. Due to over-reliance on the productiontechnology and the global market of foreign multinational companies, it is difficult torise to the high level of global value chain. At the same time, a large number of exportenterprises choose the form of agglomeration, which is a significant phenomenonaccompanied by the "first wave" of economic globalization and China’s enterprises toparticipate in global value chains. Therefore, it is of great significance to research howindustrial agglomeration affects manufacturing enterprises in order to break throughthe lock of low end of value chain.Firstly, based on existed articles, this paper research the important role thatindustrial agglomeration can influence industrial upgrading under the circumstance ofglobal value chains. Based on technology spillover theory and independent innovationtheory of industrial agglomeration, low level technology companies can absorbknowledge from high technology companies to improve skills of innovation throughindustrial agglomeration. At the same time, the companies can effectively promote theindependent innovation by competition and cooperation. So, industrial agglomerationcan effectively promote innovation. On the basis of global value chain theory, theinnovation can help the companies transform from the processing and assembly partsto research and development parts with high level value-added. So innovation canpromote industrial upgrading. Therefore, combining with the existing research, thispaper puts forward the hypothesis of industrial agglomeration promoting industrialupgrading and the hypothesis that innovation may has important mediating effect.Then, this paper researches the significant effect that industrial agglomerationcan promote industrial upgrading in terms of empirical analysis, and confirms that theinnovation has an important role. So, based on the data of29provincial unitsnationwide, this paper uses spatial agglomeration index method to measure theagglomeration level of manufacturing industry in our country. Then, according to panel data of all national manufacturing industries from2003to2010and panel dataof manufacturing industry based on factors’ industry, this paper confirms theimportant role of industrial agglomeration promoting industrial upgrading. At thesame time, combining with the mediation effect of analysis methods, this papermeasures the mediating effect of innovation.Through the research of this paper, we can conclude that in terms of the wholemanufacturing industries, raising the level of agglomeration of China’s manufacturingindustry is helpful to industrial upgrading. Namely, it can help the companies rise inthe global value chains. In terms of different manufacturing industries based on factorintensity, technology-intensive manufacturing industrial agglomeration is moreadvantageous to improve innovation, to promote industrial upgrading, and get rid ofthe low-end lock, so it can provides the reference to our companies. At the same time,this paper determines that the goal of manufacturing enterprise agglomeration in ourcountry is to promote innovation by agglomeration instead of simple "accumulation".This way can effectively promote the industrial upgrading of enterprise.