Demand-oriented innovation of firms in China: An empirical study

XU Changsheng, WANG Jingjing, WANG Hai

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PDF(234 KB)
Front. Econ. China ›› 2008, Vol. 3 ›› Issue (4) : 548-559. DOI: 10.1007/s11459-008-0027-3
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Demand-oriented innovation of firms in China: An empirical study

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Abstract

This paper analyzes the interrelationship among competition, market size and innovation by using the data from total 37 industries in China within a simultaneous equations model. It finds that: (1) Competition and innovation are mutually-enhanced, and this is the consequence of the long-run Darwinian effect in competitive market; (2) Market size and innovation are also positively correlated, because firms’ innovation is essentially demand-oriented (market-oriented), and innovation impelling technological progress will finally increase market size; (3) Between competition and market size, the effect of competition on market size is ambiguous, while the reverse is significantly positive. The policy implication of this paper is as follows: under the condition that China has especially huge market size and market demand, the industry policy of intensifying competition can stimulate firms’ persistent demand-oriented innovation.

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competition / market size / demand-oriented innovation

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XU Changsheng, WANG Jingjing, WANG Hai. Demand-oriented innovation of firms in China: An empirical study. Front Econ Chin, 2008, 3(4): 548‒559 https://doi.org/10.1007/s11459-008-0027-3

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2014 Higher Education Press and Brill
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