Does Excess Upstream Capacity Affect Downstream Corporate Performance?

Forty years of reform and opening up have made China's industrial downstream industry basically achieve free competition,and the dominant position of market mechanism in resource allocation has been highlighted.However,the corresponding upstream enterprises are faced with a large number of overcapacity,and the monopoly of state-owned enterprises is serious.Overcapacity in the upstream of the industrial sector and the economic downturn in the downstream are an important reason for China's economic downturn at this stage,but the study of the relationship between the two is rarely involved.Through the in-depth exploration of this issue,it has profound theoretical and practical significance for comprehensively managing overcapacity and further stimulating the operational vitality of downstream enterprises and the entire economy.This paper first proposes the theoretical framework of the relationship between the two,and further analyzes the role of upstream overcapacity on the performance of downstream enterprises.The study found that upstream overcapacity can affect the performance of downstream enterprises by aggravating upstream concentration or monopoly,and the two ways of stimulating the entry of downstream enterprises and intensifying the competition of downstream industries and then affecting the horizontal competition effect of performance.Further,considering that downstream companies have a choice of behaviors that counteract this adverse effect,research has found that downstream companies may choose to mitigate such effects.This paper uses the "China Industrial Enterprise Database" to build panel data at the enterprise level involving the occurrence of two large-scale overcapacity in China for six consecutive years and above.Combined with the Chinese input-output table,the capacity utilization rate,equipment utilization rate and technical efficiency measured by the data envelopment method in different years,sub-regions and sub-sectors,and correspondingly constructing upstream capacity utilization indicators for measuring upstream overcapacity.Through the panel fixed effect model test,it is found that the upstream overcapacity inhibits the performance of downstream enterprises,and this conclusion does not change with the measurement of the excess capacity overcapacity and the time period before and after the financial crisis.By distinguishing the heterogeneity of downstream enterprises,it is found that the overcapacity in the upstream mainly has a significant impact on the performance of downstream private enterprises and small and medium-sized enterprises,but not on state-owned enterprises,foreign-funded enterprises and large-scale enterprises.At the same time,upstream overcapacity has a significant inhibitory effect on the performance of downstream domestic and export companies.Furthermore,through the intermediary model,it is found that the vertical clamping effect of increasing the concentration or monopoly of the upstream industry and the horizontal competition effect inducing the intensified downstream competition are two possible inhibition mechanisms.At the same time,through the interaction effect of exports,it is also found that downstream enterprises can effectively alleviate this adverse impact through exports.