Dynamic Analysis Of Product Innovation And Process Innovation Of Upstream And Downstream Enterprises Based On Negative Externality

Innovation can enhance the economic efficiency of enterprises and even the international influence of the country,which is crucial in the development of enterprises and countries.Product innovation helps improve product performance or tap potential demand to increase market share,and process innovation reduces production costs by optimizing production processes.This paper links the upstream and downstream enterprises through negative externalities,and analyzes the optimal investment level of product innovation and process innovation under the two situations of independent decision-making and integrated decision-making in the upstream and downstream enterprises by means of microeconomics basic theory and dynamic optimal control theory.Then analyze the mechanism of mutual influence,and compare the optimal pollution discharge amount of upstream enterprises when the upstream and downstream enterprises make individual decisions and integrate decision-making.Research shows that when upstream and downstream enterprises make individual decisions,the increase in investment in process innovation by upstream enterprises increases the amount of pollutants discharged,and the investment in product innovation does not affect the amount of pollutants discharged.The product innovation and process innovation of upstream and downstream enterprises are complementary,and the growth rate of product innovation investment and process innovation investment growth rate increase or decrease simultaneously.When upstream and downstream enterprises make integrated decision-making,the investment of upstream enterprises in process innovation will increase pollution emissions,and the investment of downstream enterprises in process innovation will reduce pollution emissions.The investment of two enterprises in product innovation will not affect the amount of pollutants discharged.In the integrated decision-making,the optimal pollution discharge of upstream enterprises is always smaller than the optimal pollutant discharge when making individual decisions.The integration strategy can realize the internalization of externalities.The government can achieve the same effect by building an ecological park,and guide green innovation and strengthen supervision to achieve sustainable economic development.