Title: Filling Gaps and Overstepping Boundaries: Institutional Logic of Industrial Chain Governance Under the Coordination of Development and Security

Speaker: Sun Rui, Assistant Researcher, School of Economics, Shandong University, Young Taishan Scholar of Shandong Province. Her research focuses on industrial organization, innovation economics, corporate innovation under U.S. tech decoupling, integration of industrial and innovation chains, and economic analysis of AI. Her papers are published in journals such as Economic Research Journal and Journal of Management Science, and she presides over Youth Projects of National and Shandong Natural Science Foundation.

Abstract: "Specialized, Refined, Unique & Innovative" SMEs and the Industrial Chain Chief System constitute two core policy pillars of China’s industrial chain governance. The former incentivizes deep specialization of small enterprises, while the latter safeguards the overall security of industrial chains. However, structural tension exists between the two: deep specialization boosts value creation of individual links yet raises systemic risks of full chain shutdown triggered by single-point failures. This paper builds a theoretical model with chain coordinators and multiple specialized SMEs to analyze the optimal allocation of innovation decision-making power under strongly complementary production structures. The decentralized equilibrium generates two distortions: enterprises fail to internalize spillover losses of other links when choosing innovation directions, leading to excessive deviation from universal technical standards; returns to specific investments are constrained by ex-post bargaining, resulting in insufficient specialization depth. To correct the dual distortions, credible revenue-sharing commitments from chain leaders are required. Such commitments can only be maintained as relational contracts due to non-verifiability, with an upper bound determined by the recovery prospect after industrial chain breakdown. This creates a fundamental dilemma: cutting-edge bottleneck sectors with complicated technology and hard recovery leave little room for private commitments and severe governance failures. This defines the proper role of government: "filling gaps" means using enforceable regulations and fiscal tools to strengthen chain leaders’ commitment capacity and improve post-breakdown recovery; "overstepping boundaries" refers to direct intervention in technical directions, which may generate worse outcomes due to information disadvantages of administrative authorities. The logic of gap-filling and the boundary of overstepping jointly form the theoretical foundation for coordination of the two sets of policies.

Date & time: 25 June 2026, 12:15 - 13:15

Venue: B321, Zhixin Building, Central Campus, SDU