Application of factor analysis and fuzzy c-means for classification of knowledge intensity in China's manufacturing industry

This paper introduces an application of factor analysis for illuminating the distinct dimensions of manufacturing's knowledge intensity which then gives help to industry classification with fuzzy c-means. With the world now coming into an age called “knowledge economy”, it is necessary to analyze the industry level and knowledge-intensity in different industries, furthermore, analyze how those reflect the industrial structure and ultimately the entire economy. With respect to knowledge-based innovation theory, principle component analysis is to be used, while a number of possibly correlated knowledge measures are transformed into a smaller number which can be used to identify different industries with different knowledge intensity. The data from China's manufacturing industries in recent 5 years shows the developing paths of those industries. The empirical results show that although knowledge-intensity-based classification of China's manufacturing industry is similar to those of foreign countries, many industries are much less developed and even lagged far behind. China's industrial structure still needs to be perfected.