Effects Of Producer Services On Profit Capability Of Industries

Swelling capacity in traditional industries and an excess ofproduction result in the continuously falling profits of industrial[1].Profits of industries are few in west Chinacompared with other region. Known as professional and creative, whether the producer services will improveprofit capability of industries in west China?Could the impact of producer services spill perfectly within a province? What will influence the improvement that made by producer services.Answers of these questions are of certain significance.From perspectivesof “specialization and professionalization”,“value chain”, “interactive innovation” and “spatial spillover”, we investigate theatrically the impact and mechanism of producer services on profits of industries by bringing in policy environment and the ability of firms to management value chain. Then, we test the hypotheses basing on BatteseandCoelli(1995)SFA modeland 72 cities’ panel data of west China. According to the theoretical study and empirical research, we get the following results. Firstly, producer services did help promote the profits of industries in west China. Secondly,the impact of producer services spill perfectly over provincial area. Thirdly, the ability of firms to manage value chain and the market circumstances influence the promotion impact that caused by producer services.Finally, based onthe conclusion, combined with agglomeration theory and the theory about hierarchical division of the productive service industry,we putforward to policy suggestions of layout of the producer services. From the perspective of protecting the positive feedback mechanism between industries and producer services,we put recommendations onmaintenanceofthe institutional environment.