Vertical specialization result from the rapid development of multinational companies to choose non-equity forms of international production. The theory to explain them should integrate multinational theory and the theory of value chain. In this paper, the empirical research using the data of input-output tables shows that the Chinese industrial sector FDI and free trade has a strong complementary to vertical specialization. The important driving forces are industry economies of scale factors and the improvement of the level of IPR protecti...
