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

Author

Listed:
  • XU Changsheng

    (School of Economics, Huazhong University of Science and Technology, Wuhan 430074, China)

  • WANG Jingjing

    (School of Economics, Huazhong University of Science and Technology, Wuhan 430074, China)

  • WANG Hai

    (School of Economics, Huazhong University of Science and Technology, Wuhan 430074, China)

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.

Suggested Citation

  • XU Changsheng & WANG Jingjing & WANG Hai, 2008. "Demand-oriented innovation of firms in China: An empirical study," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 3(4), pages 548-559, December.
    • Handle: RePEc:fec:journl:v:3:y:2008:i:4:p:548-559
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    File URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-008-0027-3
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    More about this item

    Keywords

    competition; market size; demand-oriented innovation;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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