Research on industrial organization and industrial performance in China's construction industry?

I. Research on industrial performance under the theory of industrial organization

Different scholars have different definitions of the connotation of industrial performance, and we believe that industrial performance is the economic effect produced by the market structure and corporate behavior *** with the same role in a specific economic environment. The Harvard School, represented by Mason and Bain, believes that there is a unidirectional causal link between market structure, market behavior and market performance, i.e., the "structure-behavior-performance" (SCP) analysis paradigm. The Chicago School, represented by Stigler and DeSmetz, points out that the increase in industry concentration stems from the market demand and the progress of technical management level, and that the efficiency of enterprises determines the market structure and industrial performance. Some other scholars emphasize the role of other factors from different perspectives: Tang Yaojia (2004), Xu Zhilin (2005), Wang Jiping (2005), etc., focus on the influence of institutional factors; Gao Hui (2004), Zhang Wei ((2004), etc., study industrial performance by examining industry size and capital structure. In fact, industrial performance is affected by many factors, and the own characteristics of different industries make various factors, such as industrial structure, corporate behavior and property rights structure, play different roles in the process of determining industrial performance.

The market structure and performance analysis of China's construction industry

(I) Market structure

1. Market concentration analysis

The indicators reflecting market concentration include Lerner index, concentration of the top N enterprises in the market (CRn), Hephaus Index (HI Index), etc. Considering the simplicity of data acquisition and processing as well as the scope of practical application, this paper chooses the CRn indicator to analyze the market concentration of China's construction industry. This paper selects CRn index to analyze the market concentration of China's construction industry. According to the U.S. "Engineering News Record Data" (ENR) statistics, the domestic turnover of China's top ten construction contractors is 40.323 billion U.S. dollars, which is converted into 333.713 billion yuan at the exchange rate of 8.276 yuan per U.S. dollar. Based on the gross construction output value of 277.454 billion yuan in 2005, the top ten accounted for 12.02%. In Bain's market structure classification, CR4<30 or CR8<40 industry structure is competitive market structure, so China's construction industry belongs to the typical competitive market structure. And from the number of enterprises, the Ministry of Construction statistics show that as of 2 plus 3 years, China *** there are 48,688 construction enterprises, with a qualification of more than 309 enterprises. Very low market concentration in the degree and many enterprises. Has brought about intense competition in China's construction industry, resulting in the overall industry gross profit level continues to be low. The low concentration of China's construction industry is mainly caused by three reasons:First, the long-standing planning system has resulted in the similarity of scale and nature of construction enterprises in different sectors, which seriously limits the development of the construction industry. Secondly, the structure of large-scale construction enterprises is similar and weakly complementary, and it is difficult to bring into play the scale effect generated by mergers and unions. Thirdly, the restriction of qualification management on comprehensive general contracting and the prevalence of local protectionism have greatly hindered the reorganization and unification of cross-industry and cross-sector construction enterprises.

2. Product and Service Differences and Barriers to Entry

Providing differentiated products and services is an important means for enterprises to improve their market position and set up barriers to entry in the industry. In the construction industry, the differences in products and services are mainly reflected in the financial strength, management capacity, project quality, staff quality, service level, technical strength, etc. Therefore, construction enterprises at different levels can meet the diversified needs in the market. By expanding the degree of product differentiation, China's construction enterprises can construct an invisible non-price barriers to effectively combat fierce competition in the market. However, at this stage, the product and service differences in China's construction industry are not obvious. Although some large-scale construction enterprises try to consolidate and improve their market position through product and service innovation, and repositioning of the target market, but there are still many construction enterprises are bound by the traditional business ideas and management concepts, ignoring the differentiation of products and services, and lack of technological innovation capabilities and motivation. Barriers to entry in the construction industry include market barriers and policy barriers. In the market barriers, first of all, the characteristics of labor-intensive industries determine the technical content and added value of China's construction industry is very low, the lack of necessary capital and technology barriers; secondly, China's construction enterprises are small in scale, scattered, there is almost no economies of scale due to the natural formation of barriers to entry. In the policy barriers, the long-term irrational industrial management system caused by the fragmentation and local protection, the formation of the construction industry between regions and sectors of the high policy barriers and intra-regional and intra-departmental low policy barriers coexist in the situation.

(II) Corporate Behavior

Corporate behavior, as an intermediate link from market structure to industrial performance, is affected or constrained by market structure, but it directly affects the overall industrial performance. Market concentration is too low, the degree of product differentiation is not high, the market structure of low barriers to entry, resulting in China's construction industry, the total supply of a serious surplus, enterprises are often trapped in a vicious circle of price wars, leading to disorderly competition within the industry and over-competition, hindering technological progress as well as the improvement of industrial performance. Therefore, according to the theory of industrial organization, in order to improve the industrial performance of China's construction industry, it is necessary to adjust the market relationship and organizational form of construction enterprises, and to enhance the technological progress and technological innovation ability of enterprises.

(III) Institutional factors

The operation of industrial economy must depend on a specific economic environment, which plays a crucial role in industrial performance. However, the traditional SCP research paradigm is based on the market economy as the research background, ignoring the impact of the planned economy and the transition economic system from the planned to the market economic system on industrial performance. Therefore, many scholars try to make up for the shortcomings of the traditional SCP model by adding more institutional constraints, such as Liu Xiaoxuan (2003) in his study of China's industrial performance with the background of transition economy . He highlighted the important role of property rights factors in determining industrial performance. He pointed out that any research on performance must be placed within the framework of the corresponding market structure, otherwise it will lead to difficult-to-interpret results that differ from the assumptions of the property rights structure theory, and similarly, any research on market performance that leaves the important factor of property rights structure will produce a great deal of error that deviates from the general market structure theory.

China's economic transformation is a process of expanding the field of market competition and deepening the degree of competition. The most important change in this process is the planned economy with the state ownership from the industrial sector gradually withdrawn, on behalf of the market economy Hugh system of non-state ownership of the entry and rapid growth. In China's construction industry, although the non-state economy has gradually entered, but the state-owned economic components still occupy an absolute proportion. According to the relevant data in the 2004 China Statistical Yearbook, in 2003, the total assets of state-owned construction enterprises in China were equivalent to 2.58 times that of collective enterprises and 25.66 times that of foreign-invested enterprises. State-owned construction enterprises lack efficiency due to unclear property rights and other reasons, there is an irrational allocation of resources, which is not conducive to the improvement of industrial performance. Therefore, if the profit margin of output value is used as a measurement index, the industrial performance of China's construction industry is far lower than other industrial enterprises.

(D) industrial performance

1. Measurement of industrial performance

Industrial performance of the study of the differences in an important reason is the selection of different metrics, because the industrial performance includes both profit, earnings and other factors that can be directly measured, but also product quality, technological progress, and other difficult to quantify the factors. The main indicators for measuring industrial performance are financial indicators and market power indicators. Some scholars, represented by Bain, advocate the use of financial indicators; while Lerner and other scholars favor market power indicators. Considering the many difficulties in data collection, this paper uses the profitability of output value in financial indicators to measure the industrial performance of China's construction industry.

2. Assumptions, construction and regression results of the model

The model of industrial performance of China's construction industry established by this paper using the theory of industrial organization is based on the premise of one of the most basic hypotheses of the theory, that is, the relationship between price, marginal cost and economic profit depends on the market structure.

In order to test the relationship between industrial organization and industrial performance in China's construction industry, this paper adopts the model:π=a0+ al*CR+ a2*EF+ a3*PR+ψ, in which π denotes the industrial performance, CR stands for the market concentration, EF reflects the behavior of the enterprise, PR explains the institutional factors mainly based on property rights, and ψ is a random error including the size of the enterprise and the risk, the change of market demand and so on. ψ is a random error term including many uncertainties. In this paper, we use the relevant data for 9 years from 1995 to 2003 for regression analysis, in which the industrial performance of the construction industry π is represented by the profit rate of output value; the market concentration is illustrated by the concentration CR10 of the top ten construction enterprises; the profit per capita is used to represent the operational efficiency of the construction enterprises, which in turn reflects the behavior of the enterprise EF; and PR represents the proportion of China's state-owned economy in the construction industry, which is used for the measurement of property rights structure of the industry. . The regression analysis was carried out using the eviews software, and the results were π=4.285 +11.392*CR+ 3.577*EF-3.366*PR+ψ,R2= 0.96,F=129.64 After the statistical test, the parameter estimation of CR,EF,PR were all significant, and the model was well-fitted.

3.Analysis of empirical results

This empirical study shows that market structure, vendor efficiency and property rights are three important factors affecting industrial performance in the context of the basic establishment of market economy. First of all, the market structure, represented by market concentration, is significantly and positively correlated with industrial performance, indicating that the current market structure of China's construction industry, which is over-concentrated, has seriously impeded the improvement of industrial profits and industrial performance. The fundamental reason for this phenomenon is that China's construction industry is a labor-intensive industry, and the construction technology and production process of traditional construction products are relatively simple, with low starting capital requirements for enterprises. Therefore, the lack of moderate barriers to entry into the industry makes it difficult to provide personalized products and services, resulting in a large number of decentralized small and medium-sized enterprises flooding the market, low market concentration, and vicious competition leading to low industrial performance. Secondly, the significant positive correlation between enterprise efficiency and industrial performance verifies the applicability of the Chicago school's view of efficiency in China's construction industry. This indicates that relative to achieving economies of scale, China's construction enterprises pay more attention to winning a larger market share and achieving better industrial performance through efficiency improvement. However, in reality, many construction enterprises in China tend to reduce the number of workers and increase the intensity of labor dynamics, rather than through technological innovation and improved management in order to achieve the goal of improving efficiency and controlling costs. Therefore, although the empirical analysis can be seen in China's construction industry performance improvement, to a large extent attributable to the improvement of efficiency, however, this still belongs to a kind of crude growth mode, only actively realize the innovation as the core of the growth model change, in order to achieve a qualitative leap in the construction industry industrial performance. Thirdly, the significant negative correlation between the proportion of the state-owned economy, which measures the property rights factor, and the industrial performance of China's construction industry indicates the important role of institutional factors in the determination of industrial performance. The purpose of property rights clarification is to make the costs and risks of the enterprise as symmetrical as possible between the bearers, so that the cost-benefit internalization, and maximize the solution to the problem of intrinsic incentives to improve the efficiency of the enterprise. However, the lack of ownership in China's state-owned construction enterprises, has not been properly resolved, the operating efficiency of state-owned enterprises is lower than that of private enterprises and joint-stock enterprises. Therefore increase efforts to implement property rights reform, for improving the industrial performance of the entire construction industry, has a far-reaching impact.

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Three, countermeasures and suggestions

(a) Organization creation is an effective way and means to improve the performance of China's construction industry industry

1. Establish a technological innovation system and strengthen the Incentive mechanism

There are two main types of technological innovation in the construction industry: one is the enterprise's own R & D-based approach, represented by Japan; the other is commonly used in Europe and the United States, the combination of research and development of enterprises and social research institutions. China can learn from Japan and Europe and the United States model, combined with special national conditions, the formation of market-oriented, the government macro-control of the construction industry under the coordination of industry, academia and research division of labor innovation system. Under the innovation system, the interests of each innovation body are different, therefore, the key to technological innovation is to coordinate the interests of the main body of innovation contradictions, to solve the problem of incentive mechanism of innovation. Strengthen the incentive mechanism of technological innovation in China's construction enterprises, first of all, should establish a government fund to subsidize the system, to encourage the relevant institutions to obtain market advantages through technological innovation; secondly, design the rules and measures to protect the technological innovation of enterprises, to protect the corresponding rights and interests of technological innovation enterprises.

2. Implement management innovation, improve the quality of personnel

Organizational innovation needs to be supported by the corresponding organizational management changes. The essence of management innovation is to improve the allocation of resources to achieve the Pareto optimal, to achieve organizational goals. Research shows that the quality of enterprise employees, especially the innovation consciousness and innovation ability, has an important role in the innovation of the enterprise. Therefore, to strengthen organizational innovation and improve industrial performance, it is necessary to implement management innovation, and the focus of management innovation is to improve the quality of personnel. China's construction industry employees in a large proportion of surplus labor from rural areas, their uneven cultural quality, greatly hindering the construction industry's management innovation. Improve the quality of personnel, the need for construction enterprises to increase the scientific and cultural and professional and technical training of employees, but also need the government in terms of taxes and fees to be the necessary support.

(2) institutional innovation is to improve the performance of China's construction industry is a necessary prerequisite for the industrial performance and the guarantee

1. To realize the transformation of government functions, to create a good external environment

The government should change the management function of the construction industry, first of all, we must formulate the relevant policies to guide, adjust the benign development of the market, and to promote the formation of hierarchical and orderly competitive situation. The government should focus on macro-regulation, and further strengthen the management of the construction market, so that the construction law, the bidding law and other implementation in place. Secondly, the government should also try to create good conditions to speed up the pace of the establishment of a modern enterprise system, through the development of practical guidance to guide enterprises through various methods of asset restructuring, optimize the structure of assets and liabilities, and constantly improve the competitiveness of enterprises.

2. Adjust the ownership structure of the construction industry, and vigorously develop private enterprises

The trend of the construction industry reform is to develop from a single form of state-owned enterprises to a coordinated development of state-owned capital as the main source of state-owned capital, private capital, foreign capital or mixed capital. The orderly withdrawal of state-owned capital is in line with the inevitable trend of China's industrial structure adjustment goals. Only by adapting to the market economic mechanism of the pluralistic ownership structure, can we make the coordinated development of construction enterprises at all levels and lay the foundation for the enterprise structural adjustment. Enterprise restructuring of the construction industry, inseparable from the private capital intermediary. Large enterprises to change the ownership structure, the establishment of a modern enterprise system, the need to inject private capital; small enterprises need to be transformed through reorganization, restructuring, transfer and other ways, more inseparable from the participation of private capital.

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