XU Changsheng , WANG Jingjing , WANG Hai
Author information
School of Economics, Huazhong University of Science and Technology, Wuhan 430074, China
E-mail: wanghai_hust@126.com (WANG Hai)
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.
competition , market size , demand-oriented innovation
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