Abstract: This paper first notes the status of the value chain of SMEs in Zhejiang Province in the global value chain, analyzes the cause of this state. Then it quotes the concept of the innovation network, summarizes the studies of the scholars at home and abroad on the integration of innovation network, and proposes with using the integration of innovation network to improve the value chain of SMEs in Zhejiang Province.
Key words: Value chain, Innovation Network, Integration
1 Introduction
In the earlier days of economic reform, Zhejiang was a middle economic province, now it has developed into a larger one, where the SMEs have played a major role in the economic development of Zhejiang Province. According to“ the Report of the development of SMEs in Zhejiang Province in 2005” issued by Zhejiang SME Board, by the end of 2005, the amount of SMEs had been to more than one million, accounting for 99.6% of the total amount; the assets amounted to 3.568381 trillion yuan, accounting for 82.6% of the total assets; and the number of workers in SMEs had been 11.3 million, accounting for 82.7% of the total amount. So the SMEs had become an important part of the national economy.
Nevertheless, now most of the SMEs in Zhejiang Province can be classified as labor-intensive enterprises, their modes of production are OEM or OAM processing, their major competitive advantage is low price, and only a few enterprises have independent brands. According to “smiling curve” theory on global value chain put forward by the chairman of Hongji Group in Taiwan, the value-added created by different segments of value chain is different, the segments which are near the two ends of smiling curve, such as R&D, design and brand, could create higher value-added in the GVC, the ones which are near the middle of smiling curve, such as OEM processing and assembly, could only create lower value-added in the GVC.
2 The status of SMEs in Zhejiang in the global value chain
According to the “low-end locking” theory on GVC put forward by Ge Weifen (2007), this paper analyzes the status of the SMEs in Zhejiang Province in the global value chain from low-end locking in market, low-end locking in industries and low-end locking in products.
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