Research On Dynamic Decision Making Of Firms' Innovation In Industries With Network Externality

Firms' technological innovation not only acts as the driving force of national or regional industrial structure adjustment and industrial transformation and upgrading,but also plays an important role in leading national scientific and technological progress and economic development.Firm technology innovation can be divided into product innovation and process innovation,the former one refers to the improvement of the products' quality(diversity)and the latter one refers to the reduction of the marginal production costs of the products.At present,many studies have been carried out to explore the firms' product and process innovation strategy,which not only enrich and develop the innovation theories,but also provide theoretical supports for firms' innovation activities.However,the referring research mainly focuses on the conventional products' product and process innovation.In those situations,the consumer demand function depends on the quality and price of the product.With the rapid development of network economy,network externality covers more and more products in the industries.Typical firms with network externality include: companies providing computer software and hardware,such as Apple and Microsoft;telecom operators providing network infrastructure,such as China Mobile,China Unicom and China Telecom;firms providing P2 P data transmission technology platform,such as Thunder and Very CD.Compared with the externality of conventional economy,the network externality has its unique characteristics.The network externality has significant impacts on the consumer demand of the products.Therefore,firms must consider these impacts and make adjustments in their innovation and operation decisions.Researches on the firms' product and process innovation decision making problems with network externality not only have important theoretical significance,but also act as the key factor of improving the products' quality(diversity)and reducing the products' marginal production costs for the firms.Using dynamic optimal control theory and method,this paper studies the product and process innovation strategies under the network externality and examines the impacts of reference quality,reference price,price regulation and products' advertising-based goodwill.The main features of this study are:(1)the demand function of consumers not only depends on the product price,but also depends on the product quality,market size and network size;(2)the demand function is revised according to the impacts of reference quality,reference price,price regulation and products' advertising-based goodwill.The contents of four parts of this paper are related to each other.The third chapter analyzes the demand function with the network externality,studies the relationship between product and process innovation and the two kinds of innovation strategies under the network externality.In addition,steady state equilibrium,stability analysis and sensitivity analysis under monopolist optimum and social planner optimum with the network externality have been involved.Considering the influence of reference quality on consumers' demand function,the fourth chapter studies the relationship between firm product and process innovation and the two kinds of innovation strategies under the network externality.What's more,steady state equilibrium,stability analysis and sensitivity analysis under monopolist optimum and social planner optimum with the network externality have been mentioned.Introducing the reference price factors and the effect of goodwill,the fifth chapter establishes the firms' dynamic control model of innovation and advertising investment and studies the relationship between the advertising and innovation and the investment strategies of innovation and advertising.Moreover,steady state equilibrium,stability analysis and sensitivity analysis under monopolist optimum and social planner optimum with the network externality have been discussed.Finally,the sixth chapter studies the relationship between product and process innovation and the two kinds of innovation strategies when the government regulation is considered under the network externality.Furthermore,this chapter also analyzes the steady state equilibrium and system stability and parameter sensitivity analysis.The main conclusions are: under these four conditions,(1)there exist admissible parameter constellations such that the steady state equilibrium is a saddle point equilibrium;(2)when the varying trends of firms' produce and process innovation investments are same(opposite),these two kinds of innovations are complementary(substitutive);(3)compared with the social planner optimum,the firms present to be underinvestment under the monopolist optimum;(4)products' prices move to the opposite direction with quality(goodwill),but to the same direction with the marginal production costs,this rule is reversed when considering the price regulation;(5)under the network externality,the innovation investments' instantaneous changing rates are decreasing with the network externality parameters?;(6)considering the reference quality,the innovation investments' instantaneous changing rates are increasing with the reference quality;(7)considering the reference price and goodwill,the innovation and goodwill investments' instantaneous changing rates are decreasing with the reference price;(8)considering the price regulation,the process innovation investment's instantaneous changing rate are increasing with the price regulation parameters and decreasing with the network externality parameters.