Study On The Relationship Between Market Structure And Technology Innovation

In today's knowledge economy era with rapid development of science and technology, the competitiveness of an enterprise mainly depends on the strength of technology innovation, which is vital to the survival and development of enterprises. While Innovation works as a behavior or a kind of performance, it is closely related to market structure. Market structure is dominated by market concentration, firm size, product differentiation, entry and exit barriers and other factors. Since Schumpeter's Hypothesis that monopoly power and large-scale enterprises are conducive to innovation was raised, research about market structure and technology innovation has been the focus of economists, and this subject has lots of theoretical and empirical literature. However, most studies assume exogenous market structure, and mainly discuss the influence of market structure on innovation ignoring the reaction of innovation on market structure. While in the real life, market structure and innovation interact each other.This paper first theoretically analyzes the interaction mechanism between market structure and technology innovation, and then analyzes the impact of market structure on innovation from market structure morphology and market structure element, and concludes that monopolistic competition market is most conducive to innovation, and not the highest market concentration but moderate concentration is conducive to innovation. While innovation will react market structure by low cost, product differentiation and patent protection.Based on theoretical analysis, this paper assumes that market structure and technical innovation are mutual endogenous. Then based on existing studies, this paper establishes simultaneous equations model which includes technology innovation equation, market structure equation and the industry scale equation to make empirical analysis with large and medium-sized industrial enterprises as the research object, and concludes that Market Structure (measured by HHI index) and technology innovation(measured by sales revenue) does interact each other. Statistical analysis further verifies the empirical conclusion. But the market concentration and technology innovation are negatively correlated, that is, the higher the market concentration, the less the innovation, this conclusion doesn't support Schumpeter Hypothesis. And innovation will increase competition. Industry scale(measured by industry output value) and innovation shows significant positive relationship.The conclusion can provide theoretical guidance for our industrial policies about promoting market demand-oriented innovation:To encourage competition in industrial policy and also provide a new perspective about the innovation study.Considering data limitations and my poor econometrics, this study needs to be further improved. With the improvement of data, I believe that to establish simultaneous equations model based on long-panel data to study the dynamic relations between market structure and innovation, and use the high-tech industries as research object will become the future focus of this topic.