A Study On The Interaction Of Firms' Market Power And Innovation In Global Competition

In current global competition, Chinese enterprises faces disadvantages such as low end locking, benefit distortion and technology dependence on vertical specialization. The paper put forward that this situation could be reversed if domestic companies could form virtuous interaction between market power and innovation. Market power was enterprises' dominative ability to influence and control the price of product. It could drive enterprises to innovate, avoiding the innovation being simulated soon and ensuring innovation profit being realized. At the same time, the innovation was indispensable for acquiring the market power. It was undoubted that the innovation of integrating the global economic factors was the main instrument to acquire and maintain market power for enterprises. So those successful enterprises' trick was realizing the virtuous interaction between market power and innovation. On the basis of the above backgrounds, this paper discussed the theory of interaction between market power and innovation, uncovering that market power had innovation efficiency. And on the background of global vertical specialization, analyze market power forming mechanism based on innovation. From the ICT industry, the empirical study reflected the fact of the character of domestic ICT companies' market power. And on the basis of above theoretic study, this dissertation brought forward general idea and methods to realize the interaction between domestic ICT companies' market power and innovation.Firstly, based on reviewing home and abroad existing relevant study on market power, this paper pointed out that domestic existing study almost stop on the analysis of static competitive theory, let alone systematic analyzing interaction between market power and innovation. And then, comparing the static and dynamic visual angle of marker power analysis, explain out market power's innovation efficiency and its materialization. Moreover, though mathematical analysis, research on market power's advantage conditions which can drive to innovate. The paper's analysis on market power' innovation efficiency uncovered the positive function and urgency of cultivating companies' market power in global competition. This dissertation selected domestic ICT industry as the object to review and make an empirical analysis of actuality of domestic ICT companies' market power. Study uncovered the fact that domestic ICT companies were be severely lack of market power from several angles such as market concentration, import and export price, etc. The dissertation applied Goldberg & Knetter's surplus demand elasticity model (1999) to examine domestic SITC (Rev.3)76222 products' global market power. The result indicated that our export corporations did not gain trade benefit and price-plus ability relevant to the international market share of this product.Aiming at the absence of domestic ICT companies' market power in global competition, the paper analyzed "the market power forming mechanism based on innovation" from vertical and horizontal dimension by holding the character of ICT industry's vertical specialization system. on the vertical dimension, the paper expanded the concept of "Vertical Foreclosure" in the theory of industrial organization, pointing out that MNCs shaped strong market power depending on vertical foreclosure in the key taches of value chain' up-stream and down-stream. And then, though mathematically analyzing, this paper testified the forming mechanism of developing countries' vertical market power based on innovation, that is, "anti-vertical foreclosure". Taking channel integration as the breakthrough, they should extend to both up-stream and down-stream, depending on the realization of innovation value in down-stream to upgrade the innovation ability in up-stream in reverse, and upgrading the innovation ability in up-stream to ensure the realization of innovation value in down-stream. On the horizontal dimension, the dissertation divided the forming mechanism into "Cost-leading mechanism by process innovation", "Differentiation mechanism by product and market innovation" and "Network mechanism by organization innovation" based on the difference of innovative type. And then, the paper studied the relation between the combination of vertical-horizontal market power and the status where the companies were in global specialization system, it also analyzed the interaction between vertical-horizontal market power and innovation. This makes the function of innovation to the forming of companies' market power clear. At last, the dissertation pointed out the general idea how to make domestic CIT companies realized the interaction of market power and innovation in global competition, that is, "Integrating the global factors to realize interaction between vertical and horizontal market power; cultivating the entrepreneur to impulse the interaction between market power and innovation". On the basis of this, the dissertation brought out some countermeasure such as "Integrating channel, enforcing brand strategy" and "Finding market niche, creating differentiation advantage" etc.