Intra-product Specialisation and the Innovation Ability of the High-technology Industry in China

Abstract

The purpose of this paper is to analyse the influence of intra-product specialisation on the innovation ability of the high-technology industry in China. To achieve this research goal, we use the generalised method of moments (GMM) with a dynamic panel data model in our empirical research. Total factor productivity (TFP) and its decomposition variables are used to measure the innovation ability. The Malmquist index is employed to calculate TFP and its decomposition variables, namely, technology progress, technical efficiency and scale efficiency. Previous studies show that intra-product specialisation can raise TFP, but our empirical results reveal that the impact of the intra-product specialisation on the TFP is uncertain: it decreases TFP in the initial period but increases it in the lag period. Results also indicate that an increase in the proportion of state-owned property rights exerts a positive influence on TFP and the change in pure technical efficiency. Technical efficiency is greatly influenced by intra-product specialisation, whereas intra-product specialisation exerts a slight influence on technological progress. The capital investment in research and development (R&D) has a positive effect on TFP, and the contribution rate of R&D labour input to TFP is relatively low. The main conclusion is that China need to improve the degree of intra-product specialisation, accelerate the evolution of industry technical standards and reduce the coordination cost of intra-product specialisation to enhance the innovation ability of the high-technology industry.