The Effect Of Buyer Power On Upstream Firm's Innovation

With the rapid development of economic globalization and technology, technology innovation has become important ways to promote the competitiveness and sustainable development of enterprises. The enterprise's technology innovation mode selection and investment decisions is not only concerned with the industry stage of development, but also be affected by its scale, profitability and market competition situation. Among them, the market power largely determines the technology innovation activities profit realization and distribution of interests, and then affects innovation decisions. The incentives of technology innovation activities come from the combined action of demand-side and supply-side of innovative products, whether enterprise is committed to improve process innovation or product innovation is not only concerned with seller's market competition strength, but also influenced by the guidance and restriction of buyer market power. Especially for the strongly vertical industrial connecting industry, the buyer power becomes more important. So buyer power should be considered in research of relationship between market power and technology innovation, in this way, technology innovation decision factors is more comprehensively analyzed.Process innovation and product innovation are main modes of firm's technology innovation, R&D decision under different modes depends on buyer power. The heterogeneity influence of buyer power on process innovation and product innovation of upstream firms is explored. The results show that the stronger the buyer power, the less the process innovation intensity of the upstream firm, the more product innovation intensity of the upstream firm. The market power of sellers is positively correlated with product innovation in this industry, while is uncertain about process innovation. Buyer technological capabilities have a positive impact on product innovation through transmission mechanism and have a negative impact on process innovation. And then, this paper takes statistics of large and middle-sized enterprises in Chinese manufacturing industry as samples to empirical test, the empirical findings are consistent with theoretical hypotheses, the parameter estimation of interaction term shows that unequal countervailing power promotes upstream process innovation, while equal countervailing power is a main driver of upstream product innovation.