A Study On The Development Of Strategic Emerging Industry Based On Home Market Scale

Strategic emerging industry is a unique concept put forward by China, which has the characteristics of high industrial correlation degree, low resource consumption, intensive knowledge and technology and high comprehensive efficiency, it is the emerging industry that has the ability to develop into a pillar industry. The development of strategic emerging industries is not only the requirement of seizing the commanding heights of future economic and technological development for China, but also a necessary process to achieve economic catch-up. Besides, it can help China get rid of the situation of resources and environmental deterioration, low labor cost advantage losing, low end of the global value chain locking and immiserizing growth. Therefore, how to develop strategic emerging industry of China has become an important task now. In order to solve the above problem, this paper argues that the China’s strategic emerging industry should be developed on the base of domestic market rather than the strategy of exchanging market for technology.However, heretofore, few articles have touched upon the relationship of domestic market scale and strategic emerging industry, let alone the empirical studies. Therefore, after explaining the concept of strategic emerging industry, this paper teases out the mechanisms of how home market scale can promote the development of strategic emerging industry on the base of the reviews of domestic and foreign related literatures from the aspects of home market effects, industrial agglomeration, industrial innovation and domestic market demand. Then, considering the differences between the laggard companies in developing countries and the leading companies in developed countries, this paper establishes a mathematical model by adding the variable of home market scale, which represented by the number of consumers, into the vertical product differentiation model of Choi and Shin (1992) and Li Changying (2011), and this model further validates the positive correlation of home market scale and strategic emerging industry.In the empirical research, this paper uses the data of2007Chinese regional input-output table to verify the existence of home market effects, and the result shows that there are12industries in19industries that have the home market effects, which also indicates the existence of home market effects in China’s strategic emerging industry. After verifying the existence of home market effects, the paper estimates the extent of impact and pathways of home market scale on strategic emerging industry by using the data of high-tech industry to represent the strategic emerging industry, while the data are collected from the panel data of China’s26provinces (except Tibet, Qinghai, Xinjiang, Inner Mongolia and Hainan) from1998to2011, and the results show that there exists positive relationship between domestic market scale and China’s strategic emerging industry, and the home market scale affects the strategic emerging industry mainly through the pathways of labor inputs, industrial agglomeration and industrial innovation performance.According to the results of theoretical analysis and empirical testing, some suggestions on how to use home market scale to develop China’s strategic emerging industry are put forward in the last chapter of this paper:the dominant influence of home market scale on strategic emerging industry is only significant on the condition of the home market scale has extended into a certain extent, as a result, it is important to guide and develop the greatest degree of home market demand, and also important to dredge the relevant mechanisms and pathways. In addition, the local government should develop more targeted industrial policy so as to make maximum use of government resources, and at the same time to foster a competitive market environment which is contribute to promote the industrial innovation. Besides, the enterprises themselves should also learn how to make full use of the advantages of the large domestic market to obtain core competitiveness.It is noteworthy that, not all strategic emerging industries are suitable for the strategy of developed on the base of home market, for these that exist no home market effects, it is more wise to take greater account of the distribution of factor endowments. Last but not the least, developing based on the home market does not mean seclusion, on the contrary, a certain degree of opening is beneficial to the development of strategic emerging industry.