Effect of innovation capacity, production capacity and vertical specialization on innovation performance in China's electronic manufacturing: Analysis from the supply and demand sides

Abstract

Manufacturing in China has developed rapidly with the widening and deepening of globalization, but only innovation can industry keep upgrading and enhancing its international competitiveness. This paper combines Global Value Chains (GVCs) and National Value Chains (NVCs) in a unified theory framework, uses Structural Decomposition Analysis (SDA) to explore how innovation capacity, production capacity, and vertical specialization affect innovation performance from the supply and demand sides by examining the case of Electronic Manufacturing of China. We observe that innovation inputs and outputs present strong regional heterogeneity between coastal and inland regions. Although most regions continue to engage in processing trade or assembly manufacturing in GVCs, NVCs are gradually established and led by coastal regions. The results indicate a good chance for cultivating innovation capacity in coastal regions. After assessing the influence of determinants on innovation performance, we observe that from supply-side, innovation capacity has a positive effect on innovation performance, production capacity in coastal regions is improving, and domestic demand for domestic products is increasingly important. From the demand side, innovation capacity continues to have a positive effect on innovation performance, production capacity improves rapidly, and imported intermediate inputs enhance innovation performance more effectively than domestic intermediate inputs.

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Influencing factors and improvement paths of manufacturing innovation performance: Configuration analysis based on TOE framework

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The Effect of Innovation on Performance in Micro, Small, and Medium Enterprises

“…Zhao T et al also conducted a study entitled The Effect of Innovation Capacity, Production Capacity, and Vertical Specialization on Innovation Performance in Chinese Electronics Manufacturing: Analysis of Supply and Demand Sides. The results of the study were that after assessing the influence of determinants on performance innovation, we observe that on the supply side, innovation capacity has a positive effect on innovation performance, production capacity in coastal areas increases and domestic demand for domestic products is increasingly important [7]. Heurich M and Vignali C in 2015 also conducted research with the title innovation and its impact on the performance of acute care hospitals in Germany -an investigation containing empirical research and software development.…”