Analysis on Vertical Squeeze in Industrial Clusters by the Buyer Power of Multinational Corporations

From the point of strategy, attracting foreign investments is one of the most important way to develop economy. However, the structure of upstream market made of local enterprises and that of downstream market made of multinational corporations is quite different, thus the local enterprises don´t enjoy the industry cluster effects, such as the low cost, knowledge spillover effects and so on. The upstream vertical squeeze makes the local enterprises go bankrupt. This paper established the basic model of vertical relation in the clusters based on the model of double marginalization, set example of IT industrial clusters in Suzhou, and gave advice for local suppliers from three aspects to avoid vertical squeeze.