Firm Size, Market Structure and Innovation: A Reexamination of Two Schumpeter Hypotheses

Abstract

Abstract: On the basis of distinguishing whether firms participate in innovation and innovation performance, based on the micro-matching data of Chinese industrial firms and authorized patents from 1998 to 2013, the Heckman two-stage model is used to estimate the impact of two competitive factors, firm size and market structure, on firm innovation decision and innovation output. Study found:firm size and market structure of China's industrial firms were significantly positive influence on decision making and innovation output, and the effect is more obvious in foreign-funded firms, state-owned firms, export firms and coastal, which means the two Schumpeter hypotheses that large firms and a certain degree of monopoly may be more conducive to innovation are both valid in Chinese industrial firms. The results indicated that the scale expansion of firms and the moderate concentration of industrial market structure generated by normal market competition can not only make more Chinese firms participate in innovation competition to improve the probability of R&D success, but also break through the technological blockade and improve the core competitiveness of firms by improving the innovation output of firms.

Key words: market structure, firm size, firm innovation, schumpeter hypothesis

CLC Number:

F207

YU Jiang, XU Zifeng, YE Lin. Firm Size, Market Structure and Innovation: A Reexamination of Two Schumpeter Hypotheses[J]. Journal of Guizhou University of Finance and Economics, 2023(03): 60-70.

References

[1] Roberts P W. Product Innovation, Product-Market Competition and Persistent Profitability in the US Pharmaceutical Industry[J]. Strategic Management Journal, 1999, 20(7):655~670.
[2] Damanpour F. An Integration of Research Findings of Effects of Firm Size and Market Competition on Product and Process Innovations[J]. British Journal of Management, 2010, 21(4):996~1010.
[3] 聂辉华, 谭松涛, 王宇锋. 创新、企业规模和市场竞争:基于中国企业层面的面板数据分析[J]. 世界经济, 2008(7):57~66.
[4] Schumpeter J A. Capitalism, Socialism, and Democracy[Z]. 1942.
[5] Pavitt K, Robson M, Townsend J. The Size Distribution of Innovating Firms in the UK:1945~1983[J]. The Journal of Industrial Economics, 1987:297~316.
[6] Baumann J, Kritikos A S. The Link between R&D, Innovation and Productivity:Are Micro Firms Different?[J]. Research Policy, 2016, 45(6):1263~1274.
[7] Fang X, Paez N R, Zeng B. The Nonlinear Effects of Firm Size on Innovation:An Empirical Investigation[J]. Economics of Innovation and New Technology, 2021, 30(1):48~65.
[8] 叶林. 企业规模与创新技术选择[J]. 经济评论, 2014 (6):138~148.
[9] Ozturk E, Ozen O. How Management Innovation Affects Product and Process Innovation in Turkey:The Moderating Role of Industry and Firm Size[J]. European Management Review, 2021, 18(3):293~310.
[10] Noori J, Bagheri Nasrabadi M, Yazdi N, et al. Innovative Performance of Iranian Knowledge-Based Firms:Large Firms or SMEs?[J]. Technological Forecasting and Social Change, 2017, 122:179~185.
[11] Holmstrom B. Agency Costs and Innovation[J]. Journal of Economic Behavior Organization, 1989, 12(3):305~327.
[12] Hung S W, Li C M, Shen M Y. Does a U-shaped Relationship Exist between Performance and Ssize Threshold:The Evidence from Taiwan Biotech Industry[J]. Technology in Society, 2019, 58.
[13] Li M, Chen X D, Zhang G P. How does Firm Size Affect Technology Licensing? Empirical Evidence from China[J]. Scientometrics, 2017, 112(3):1249~1269.
[14] Gilbert R J, Newbery D M. Preemptive Patenting and the Persistence of Monopoly[J]. The American Economic Review, 1982:514~526.
[15] Arrow K J. Economic Welfare and the Allocation of Resources for Invention[J]. The Rate Direction of Inventive Activity:Economic Social Factors, 1962, 609:615.
[16] Porter M E. The Competitive Advantage of Nations[M]. 1990.
[17] Beneito P, Rochina-Barrachina M E, Sanchis A. Competition and Innovation with Selective Exit:An Inverted-U Shape Relationship?[J]. Oxford Economic Papers, 2017, 69(4):1032~1053.
[18] Bas M, Paunov C. The Unequal Effect of India's Industrial Liberalization on Firms' Decision to Innovate:Do Business Conditions Matter?[J]. 2018, 66(1):205~238.
[19] Igami M. Estimating the Innovator's Dilemma:Structural Analysis of Creative Destruction in the Hard Disk Drive Industry, 1981~1998[J]. 2017, 125(3):798~847.
[20] 刘慧宏. 非水平行业中企业创新行为分析[J]. 阅江学刊, 2016, 8(4):63~69.
[21] Aghion P, Bloom N, Blundell R, et al. Competition and Innovation:An Inverted-U Relationship[J]. The Quarterly Journal of Economics, 2005, 120(2):701~728.
[22] 彭薇, 李起铨, 熊科. 地方政府财政补贴的选择策略与偏向——基于企业异质与 Heckman 两阶段模型的检验[J]. 华东经济管理, 2019(2).
[23] Heckman J J. Sample Selection Bias as a Specification Error[J]. Econometrica:Journal of the Econometric Society, 1979:153~161.
[24] Artés J. Long-Run Versus Short-Run Decisions:R&D and Market Structure in Spanish Firms[J]. Research Policy, 2009, 38(1):120~132.
[25] 贺炎林,单志诚,钟腾.创新补贴政策促进技术创新的有效性研究——融资约束的视角[J].经济经纬,2022(4):128~139.
[26] 李晓翔,汝秋怡.金融资源视阈下资源认知对企业创新的影响[J].兰州财经大学学报,2022(6):98~109.
[27] Sharma R, Paswan A K, Ambrammal S K, et al. Impact of Patent Policy Changes on R&D Expenditure by Industries in India[J]. The Journal of World Intellectual Property, 2018, 21(1-2):52~69.
[28] Dhanora M, Sharma R, Jose M. Two-way Relationship between Innovation and Market Structure:Evidence from Indian High and Medium Technology Firms[J]. Economics of Innovation and New Technology, 2020, 29(2):147~168.
[29] Shi J, Sadowski B, Li S, et al. Joint Effects of Ownership and Competition on the Relationship between Innovation and Productivity:Application of the CDM Model to the Chinese Manufacturing Sector[J]. Management Organization Review, 2020, 16(4):769~789.
[30] Tirole J. The Theory of Industrial Organization[M]. MIT press, 1988.