Research On Innovation Incentive Of Parts' Manufacturing In Modularization Industries

The appear of modularization solves the problem and makes the parts' manufacturing firms more and more important in the development of products. The innovation of the parts' manufacturing firms is a kind of "back to back" competition. At the same time, the parts' manufacturing firms can't decide how to innovate all by himself, they had to according to a "visible role" while innovate. The feathers of innovation make market structure and the relationship with assemble firms the important affecting factors of their innovation.When analyzed the affect of market structure on the incentive of parts' manufacturing firms to innovate, we compared the incentive under monopoly and duopoly market to show the affect of increasing in competition on incentive to innovation. Then we studied as the competition become stronger, what would happen to the incentive to innovation. We find that at the beginning, competition between the parts' manufacturing firms can weaken the restriction of assemble firms and stimulate the innovation. However, it can also lead to spillover effect and lower the status of parts' manufacturing firms when negotiating with assemble firms. Hence only proper competition can stimulate the incentive to innovation of the parts' manufacturing firms.The relationship of the parts' manufacturing firms with the assemble firms can be divided into loose and tight. When compare the incentive to innovate under the two situations, we find that the tight relationship can lead to "relation specific investment" and "hold-up" problem which embarrass the innovation. However, the loose cooperation between the parts' manufacturing firms and the assemble firms can make them exchange information and core resources in time, reduce the opportunity cost of innovation and accelerate the innovation. We use PC manufacturing and mobile manufacturing as the examples to verify our results of study.